Future Asia Ventures Corporate Accelerators: A Growing Force

Page 1Copyright 2015

Corporate Accelerators: A Growing Force

August 2015


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Research Methodology

This research focuses on trends in accelerator launches, their program design and impact on the start-up ecosystem. Regional differences, sector level dynamics and forward looking perspectives are provided based on analysis of the interviews and information obtained from primary sources. Financial metrics and other financial information related to accelerators and their investments was intentionally not part of the research design.

The research was undertaken by identifying key players in the accelerator and start-up ecosystem. Interviews were conducted in person, over the phone and via email exchanges. Information was collected from primary sources, except where noted. To maintain confidentiality, participants were assured that answers would not be linked back to them or their company, except where the participant provided directly quotable statements.

Over 25 interviews were conducted with individuals at accelerators, venture capital firms, innovation advisors and start-ups. Participants were based in Australia, Germany, Hong Kong, India, Israel, Italy, Singapore, and the United States.


AcknowledgementsI would like to thank everyone who participated in the interviews and discussions leading up to this report. This report could not have been produced without the cooperation and participation of many corporations, entrepreneurs, advisors, and venture capitalists.

Participants include:

Fahrenheit 212Microsoft VenturesPaperClip HKRocketSpaceRoute 66 VenturesSandro OlivieriTargetTechnogym

AIABlueprintBlume VenturesGolden Gate VenturesCitrix SystemsDeloitteDeutsche TelekomFlorian Heinemann

Venturetec AcceleratorWorkbenchTripod Advisors

Finally, I would like to thank Stephen Case who served as an editor for this report. His attention to detail and timely suggestions were invaluable to this project.

Report research and authoring by Falguni Desai.


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Table of Contents

• Executive Summary

• The Corporate Accelerator Defined

• The “Gold Rush” is On

• Dynamics by Region & Sector

• Key Considerations for the Entrepreneur

• The Future of Corporate Accelerators


Executive SummarySimilar to seed accelerators, corporate accelerators provide a structured program and financial support for start-ups to build their businesses.

The corporate accelerator count is rapidly growing. 69 corporate accelerators have been launched worldwide, since 2010. More than 40 of those launches happened in just the last 18 months.

The threat of disruption from start-ups is leading large, multinational corporations to setup corporate accelerator programs. Large companies are more aware of their vulnerabilities than ever before. Corporate accelerators provide a fast and structured format for companies to experiment with start-ups and make investments in disruptive business models which might become core to their business down the road

The financial, media, telecom and technology sectors have the highest number of corporate accelerator programs worldwide. Regionally, corporate accelerators are launching near their corporate headquarters, however, a few Asia Pacific hub cities are attracting cross border corporate accelerator launches.

Corporate accelerators are still in their early days and many are changing their programs to become more strategic. The introduction of various innovation formats, in addition to the accelerator, are helping companies to engage participants and innovators through the right channels. Looking ahead, more companies are likely to launch corporate accelerators, along with other innovation formats. Companies will also begin to focus on clarity of goals and transparent reporting on accelerator achievements.


The Corporate Accelerator Defined


What is a Corporate Accelerator?

Corporate accelerators are programs launched by corporations that provide pre-seed stage equity funding, typically in the amount of $20,000 to $100,000, to start-ups. Accelerator programs generally admit a small batch of start-ups and provide some form of mentoring and business coaching over a fixed length of time, ranging from 3 to 6 months. At the end of each program, the start-ups present their businesses to venture capital firms at a “demo-day” or “pitch-day” event, with a aim of receiving seed investment to continue operations.

Corporate accelerators follow a model which was established by seed accelerators, the first of which was Y Combinator. Seed accelerators are generally backed by venture capitalists or angels, that invest in and mentor start-up companies in order to realize a return on their investments.

Corporate incubators are different from accelerators, in that they generally take a larger equity stake and the start-up or founder is given a longer period of time (1-2 years) and greater resource support from the corporation to develop their product or business.

Corporate venturing programs are also distinct from corporate accelerators. Corporate venture arms generally invest substantial equity capital in start-up entities from a designated fund set up by the corporation. Typically these investments are made after a Series A round and involve $10m or more per investment.


What Benefits Do Accelerators Provide?

Core Accelerator Program Elements

Capital in the form of a grant or investment is a defining characteristic of most programs. Amounts are small and fixed, with very little negotiation. Corporations who invest capital typically take 6-10% equity in the start-up.

Mentoring either by company executives or a combination of company and other sector executives is a standard part of accelerator programs. Mentoring is offered in the form of “office hours” or one-on-one meetings with selected experts.

Free office space is a critical element in the accelerator program. As office rent can be one of the highest expenses after salaries, it is viewed as a very meaningful part of the benefits that accelerators provide. Office space also provides the added benefit of interaction with other entrepreneurs and a “community” feel which entrepreneurs often undervalue at first but later realize is a necessary element in success.

Other Elements

• Events and speaker series are viewed as interesting community building and educational opportunities but can also take focus away from execution

• Formal training programs offered by some accelerators on business topics such as marketing, sales, accounting, finance and so forth are valuable to founders who may have no finance or business background but are also viewed by some investors as too “coddling” or elementary

• “In-kind” services such as website development, free advertising space and other administrative and IT support are highly valuable to entrepreneurs and provide true acceleration to their businesses. These services can be an expensive offer, but a differentiator for corporations looking to attract the best start-ups into their programs.


Why are Companies Launching Accelerators?

InnovationExposure to new business models, new technologies and new ideas is the most commonly cited reason for launching an accelerator. Many believe that interacting with start-ups is the most effective way to innovate.

CSR (Corporate Social Responsibility)A few companies have launched accelerators as a way to support a societal or charitable cause. These accelerators act as a donor or investment arm into initiatives which share their mission. Some have even housed the accelerator inside their corporate foundation to create stronger alignment.

BrandWhile brand image was not stated as a main reason for launching the accelerator, many companies mentioned that having an accelerator created a new brand experience for certain stakeholders. Accelerators helped some companies to attract a new talent pool and clients as their brand took on a more “tech savvy” image.

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The Threat of Disruption

While most corporate accelerators take an equity stake in the start-ups that join their programs, the investment and its ROI are not the focal point. Start-ups have a high failure rate and the ones that succeed have, on average, a 7-to-10-year exit horizon. Corporate accelerators are a strategic play, similar to corporate venturing, but at a far earlier stage in the start-up’s life cycle. The fact that one of these start-ups might become a multi-billion dollar “unicorn” is a (very unlikely, but fortunate) by-product of the accelerator model.

Corporate accelerators create future options for growth strategy and new lines of business. Accelerators provide visibility and a faster entry into new products and services. Without accelerators, most large companies lack the necessary risk-taking culture and are structurally not incentivised to enter new markets which don’t immediately scale.

Companies launch accelerators because a “wait and see”, attitude may mean that a disruptive, nimble, start-up will emerge in their sector and erode their revenues.


The “Gold Rush” is On


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2010 2011 2012 2013 2014 YTD 2015

2013 marks the start of the “Gold Rush” as the number of annual launches reaches double digits. In the last 3 years, over 50 new corporate accelerators have been launched.

Number of Corporate Accelerators Launched Each YearWhy Now?

Large multinationals are under pressure to innovate as a new class of disruptive start-ups threatens existing business models

Following the credit crisis, companies accumulated large cash balances. A rise in business confidence has driven M&A activity alongside organic growth and innovation programs

As pre-seed or angel funding rounds have become smaller than they were a decade a go, a new set of pre-seed investors is participating in start-up funding

Source: Company Websites and Florian Heinemann Accelerator website www.corporate-accelerators.net

The Corporate Accelerator “Gold Rush” Has Begun


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About Future Asia VenturesFalguni Desai launched Future Asia Ventures in 2015. She has over 15 years of experience working globally at the intersection of the financial services, software, fin-tech, and media sectors. She works with multinational corporations and private investor groups on accelerator program strategy, innovation, growth strategy and corporate development. Falguni holds a BS in Economics from The Wharton School of the University of Pennsylvania.

Media & Business Inquiries:Falguni DesaiNew York, [email protected]

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Future Asia Ventures Corporate Accelerators: A Growing Force