How Big Corporations Are Becoming Startup Accelerators
Often we think of startups and mature corporations as potential competitors and adversaries. Whether it’s Amazon disrupting retail or Uber upending the taxi industry, we’ve come to think of startups as major threats to the status quo and to successful companies that have been around for decades or more.
But there’s a surprising trend in the business world that’s bringing together these would-be enemies. Established corporations are teaming up with early-stage companies and actually supporting them by becoming startup accelerators.
Accelerators are entities that provide startups with mentoring, capital, and access to investors in return for an equity investment.
Normally, we think of venture capital firms and angel investors as traditional startup accelerators. But major corporations are increasingly getting involved by housing startup accelerators in at least one of their business units.
In fact, according to Boston-based consultancy New Markets Advisors, over half of Fortune 500 companies now have some kind of accelerator in-house. In total, there are more than 700 corporate-based accelerators in the U.S., according to the Brookings Institution.
These aren’t incubators designed to develop new ideas within the existing corporate structure and spin them out. Instead, accelerators work with outside startups to provide marketing and product development assistance, recruiting support, infrastructure, financing, and fundraising advice.
Innovation begins outside the corporation, with a startup, but they’re brought inside the corporation through the accelerator and then returned to the outside economy. Some programs use third parties to manage them, such as Techstars, which manages accelerator programs for Amazon, Barclays and Cedars-Sinai medical center.
Startups apply to participate in corporate accelerator programs and typically seek investment and assistance in exchange for 5 to 10 percent of their equity.
The big incentive for startups is getting access to funding, manpower, infrastructure, advice and marketing. Established corporations with greater resources, experience and brand recognition can help them open doors, grow faster, and avoid failure. Given that 90% of all startups end in failure, the value of this help can’t be overstated.
In return, corporations get a small ownership stake in the startup, as well as limited control of its innovation assets during its participation in the program. Corporations are also able to engage with startups; learn and benefit from their creativity; leverage their agility to test new innovations at minimal risk; choose projects to extend and amplify their own products and services; and even form new entities in their own image.
Ultimately, these programs leverage the biggest competitive advantages that corporations have over startups, which include having more capital, more product developers and personnel, existing structures and processes, and more strategic alliances and brand presence.
Those can all go a long way toward leveling the playing field for startups while still benefiting bigger companies. But help from corporate accelerators doesn’t have to come exclusively from within the corporation.
Many major corporations are now turning to on-demand consultants to scale up their in-house teams and address personnel shortages, and the same channels can be used to meet the same needs at startups they’re accelerating.
At SpareHire, we connect many major corporations, startups and investment firms with top-tier business experts and talent, giving them access to a network of over 5,000 pre-vetted and highly qualified consultants in marketing, product development, finance, IT and more.
Our clients use our elite professionals to fill crucial knowledge gaps, lead important product development projects and launches, build out new systems and processes, and much more.
Our success stories involve mature companies and firms ranging from NEC, Sephora, Danaher and Sequoia, to young startups such as Plated and Rothy’s. We’ve served businesses of all sizes, with talent to support both in-house innovation and startup acceleration.