4 ways startups can get the most out of a corporate accelerator

Startups need to think strategically before deciding to work with corporates / Image credit: Pexels

In recent years, startup accelerator programs have been sprouting up all over Asia. This isn’t surprising, given the amount of funding activity that has been taking place across the region. In Southeast Asia alone, investments in startups hit a record-breaking US$7.86 billion in 2017, according to Tech in Asia’s data.

Big numbers aside, some questions remain unanswered. Have these accelerators brought any value to the ecosystem? Are they are sustainable as businesses? The shuttering of Singapore-based accelerator and incubator JFDI in 2016, for example, was partly due to its inability to “recirculate risk capital fast enough.” (Risk capital is another term for venture capital.)

Unlike independent accelerators, corporate accelerators are seemingly in a better position because of the vast resources of their parent companies. However, such programs are often viewed as a public relations and marketing play by corporations that want to appear like they’re keeping up with the times.

To be fair, though, the inner workings and outcomes of corporate-backed accelerator programs are usually kept behind closed doors. This makes it difficult to definitively assess if they’re successful or not, and whether startups should take the plunge and join them.

Such was the landscape that energy giant Shell entered when it launched its own accelerator program called IdeaRefinery in late 2017, focusing on energy-related startups. At the conclusion of the 20-week program, Shell brought together ecosystem players – startups, corporates, government representatives, investors, universities, and more – to discuss how they could gain more from the corporate accelerator space. Moderated by Imran Khan, Tech in Asia’s head of agency relations, the panel included:

• Geert van de Wouw, Vice President, Shell Ventures
• Arnaud Bonzom, Venture Partner, 500 Startups
• Nimantha Baranasuriya, CEO, Ackcio

Based on that discussion, here are four ways that startups can get the most out of a corporate accelerator program.

1. Be clear about what the ultimate goal is

It’s important to remember that corporate accelerators are not charities. Within the organization, there’s considerable pressure on the program’s managers to deliver financial returns. Startups that want to apply to such programs need to realize this, and they should be ready to step up to the challenge.

“If I don’t return money […] a couple of years down the road, a new leader will stand up and say, ‘Hey, what are these guys doing here?’” explains Van de Wouw.

Equally important is the fact that corporate accelerators tend to team up with venture capitalists to co-invest in startups. Good deal flow, according to Van de Wouw, often relies on these VC firms. As such, the only way to make money in this scenario is through an exit.

“And if we are not totally aligned with them with regards to maximizing exit value, we lose them as our investors, and they will not push good deals to us in the future,” he adds.

2. Understand the corporates’ commitment level

Corporate accelerators tend to be operated by staff who have other day-to-day responsibilities in the parent company. Some of them can spend 20 percent of their working hours to do accelerator-related tasks, says Bonzom.

“If you only have 20 percent of your time to go out and scout [for] the best startups, it will be very difficult because you’ll be competing against people who are running an accelerator full time,” he explains. “Those people can stay even after the company closes at 5:00 pm. They can even stay until midnight to discuss things with an entrepreneur because that is their only goal.”

Going in, startups need to find out how much time the corporate will actually devote to their accelerator program, and then figure out whether that would be worth their while.

Coca-Cola’s reach is extensive, so marketing distribution is a key asset that startups ought to identify if they want to work with the beverage giant. / Image credit: Pexels

3. Know the assets corporates can offer

Generally, corporates have a tremendous amount of resources at their disposal. Startups deciding whether they should join a corporate accelerator program should consider how they could leverage its assets for maximum benefit.

“We thought working with such established companies would help us shorten our research and development efforts,” recounts Ackcio CEO Baranasuriya. “Being startups that are not super well-funded […] we need to use our cash in an intelligent manner.”

Bonzom uses beverage makers Coca-Cola to illustrate how this might work. “If you look at Coke, one of the main assets would likely be their marketing distribution, because cans of Coke reach everywhere in the world other than North Korea,” he points out.

In the same way, corporates need to be upfront about what assets they can offer – an easy way to attract promising startups.

“For Coke to give that distribution channel to a startup, it will cost nothing,” observes Bonzom. “If you look at Shell, a key asset they have is their petrol stations. From a retail perspective, they have a pretty good footprint in high-density areas […] and you don’t need to be an oil or gas startup to tap into that distribution channel.”

Case in point: Van de Wouw reveals that a German last-mile optimization startup that Shell is incubating has recently developed an app focused on the supply chain for retail outlets. “We’ve started testing the software with our retail stores around Manila […] and it’s working really well,” he shares.

4. Find the right people to champion your cause

On the flipside, the sheer size of corporates can mean that it can be very difficult to gain access to their decision-makers.

As a previous employee of a service-based company selling to Shell, Van de Wouw can attest to how challenging this process can be. “This is one of the reasons why it is typically harder for startups in the energy domain to mature than a piece of software for the consumer market,” he explains.

As such, he believes that it’s important to know people within the corporate structure who can help startups navigate the system and tell them which efforts to prioritize. “Time is limited, and you may only have one or two salespeople, so you need to be very focused,” Van de Wouw adds.

Shell does this by identifying “champions” within their organization – asset managers or project managers – who can assist startups with the qualification process.

Baranasuriya strongly advises against a “bottom-up approach,” pointing out that “the guys at the bottom don’t want to try anything new [which might make them] lose their jobs.” He contends that it’s far better, to find a champion inside “who would like to try what we’re working on […] and allow us to talk to the right people.”

According to Baranasuriya, one way to do this is to check out the corporate’s website or LinkedIn profile and look for people who work in the research and development or innovation departments. “Those guys are more welcoming of new, crazy ideas and would help us,” he observes.

Making the leap

Clearly, joining forces with a corporate can give startups major advantages, such as furthering their goals and mission. However, like any other decision that time-strapped startups make, it’s important that they do the research and think things through before jumping in.

Shell IdeaRefinery is looking for energy startups to join their accelerator program. Check out Shell’s website to sign up.