Written for the 18th edition of Mobile Marketing Magazine. See the full issue here.
Since the launch of Y Combinator back in 2005, the business accelerator space has truly come to life, with 2013 marking a record year for new programmes opening their doors. Y Comb’s first cohort included one of the internet age’s most interesting success stories – online news platform Reddit– as well as mobile location startup Loopt, which was bought for $43.4m in 2012. The world’s first tech accelerator also gave early backing to Airbnb and Dropbox, now both multi-billion dollar companies.
SEE-DB, created to profile each new and hopeful innovation hub, lists 227 programmes worldwide in 2015, which have supported 4,274 business, celebrated 245 exits totalling $3.4m, and seen $7.2m raised. And they admit that’s probably not even the half of it. Competition for certain accelerators can be high, Telefónica’s Wayra has received more than 29,000 pitches worldwide and has an admission rate of just 1.6%, but in an increasingly crowded accelerator space, most new programmes are now going down the specialist route. Female Propeller for High Fliers in Dublin only accepts female-led startups, while the EyeFocus Accelerator in Berlin is dedicated simply to innovation in eye care.
Many of the UK’s highstreet brands are now flocking towards this kind of innovation as an alternative to things like in-house R&D or M&A activity. Companies are using the accelerator model to help with technological innovation, or build an ecosystem around a specific product, like the Nike+ Fuel Lab. Some, like Disney, have opted to sponsor existing programmes, in this case, TechStars, while brands like John Lewis, Barclays and Telefónica, have all put their name above the door on their relevant offerings.
In January alone, a new accelerator has been launched in London by delivery firm DPD, in partnership with tech fund L Marks, to help it innovate around logistics and fulfilment. As the cost of doing business in the digital age drops, starting an accelerator and supporting startups looks like an increasingly resource-efficient strategy. And if you’ve attracted and interviewed the right teams, you may have a new supplier, or even a new business unit in your midst.
But, there are risks, and unanswered questions around the model: how do you distinguish the unicorns from the donkeys? How do you make strategic decisions about your direction given the little data there is on offer? Are accelerators too focused on companies that offer the clearest, short-term hope of success, meaning more complex areas are left untouched? And how do you actually turn a profit? Y Combinator took five years to start making money – perhaps that’s why Tesco set up its Rainmaking Loft as a co-working and events space, rather than an accelerator programme.
What differentiates your accelerator is becoming increasingly important, whether that’s by mission – are you for good or for profit? – whether you have a specialism, or how the project is funded. The quality of learning resources or mentors, along with the time and equity commitments, are also key considerations for startups that are looking to get involved. And accelerator owners are still ultimately trying to understand what success looks like for them, and how they measure it.
Founded: May 2014
Specialism: B2B marketing programme working with Unilever marketers through partnership with Collider accelerator in the UK, plus more worldwide
Length of programme: 3 months
Funding structure: No equity taken. Unilever pays 50% of pilot project cost, with the remaining 50% paid on delivery. Following this, the project may be taken on for investment by Unilever Ventures.
Projects: Unilever creates briefs for its existing brands across different geographies, asking relevant companies to apply to solve a specific business problem. As of July 2014, five Collider startups had signed revenue-generating deals with Unilever brands.
Founded: March 2014
Specialism: Retail technology accelerator with dedicated space within the Level39 fintech hub at Canary Wharf.
Length of programme: 15 weeks
Funding structure: £12,500 investment for 4% equity. The winner of the JLAB programme receives up to £100,000 investment and a chance to supply John Lewis.
Projects: Five projects made it into JLAB 2014, giving them access to John Lewis’ retail infrastructure, plus internal and external mentors. Location-based tech provider Localz, which uses iBeacons to send relevant information to smartphone users while shopping, won the first JLAB.
Founded: 2011, March 2012 in the UK, totalling 14 established across Latin America and Europe
Specialism: Looking at areas including cloud services, financial services, M2M, digital security, e-health, mobile applications, social networks and e-learning
Length of programme: 9 months
Funding structure: up to $50,000 for 10% equity, with $23m already invested
Projects: Wayra has accelerated nearly 450 companies across 20 different industries, which have gone on to raise more than $70m from other sources. 80 of the programme’s alumni are now working with Telefónica in selling, pilots or trials.
Founded: July 2013 in California, September 2013 in New York
Specialism: Looking for products and services that can enrich the lives of consumers. The startups do not have to make their products exclusively for Samsung.Length of programme: There is no fixed duration
Funding structure: There is no fixed amount. “We understand each product has different timelines and resource requirements, and we work closely with our entrepreneurs to determine what they need to succeed,” Samsung says.
Projects: Samsung does not have an application process or deadline, instead offering experienced entrepreneurs the opportunity to approach them with their idea. The programme has kicked off in the US, where all of its current projects are in stealth mode, with a goal of getting them to market within one to three years.
Founded: California in June 2013, now operating across 7 countries including China, India and Israel
Specialism: From coding to gaming, advertising to online dating, Microsoft is simply looking for great ideas and skilled teams.
Length of programme: 3 months
Funding structure: London applicants receive up to £75,000 prior to entering the programme. Microsoft takes no equity and offers free workspace, mentoring and access to its business ecosystem.
Projects: Globally, 80% of the 240 graduates across 7 accelerators have raised an average of $1.9m in funding within 1 year of finishing the programme. London-based alumni Caribu got a mention during Apple’s recent keynote event.
Founded: April 2014
Specialism: Builds on the work done through the 2013 Nike+ Accelerator program, developing digital services for the 28m-plus people that use FuelBand, plus expanding its audience by partnering with companies like MyFitnessPal.
Length of programme: 12 weeks
Funding structure: $50,000 per team
Projects: Although the company announced after 18 months it would stop selling its FuelBand fitness harware, it continues to work on the software ecosystem. It’s not clear where the project has got to.
What the brands say
“As part of our 150th anniversary celebrations last year, we launched our first ever technology incubator, JLAB,” says John Vary, IT Innovation Manager at John Lewis. “We have been ahead of the game in omnichannel retailing and our JLAB incubator was designed to help nurture the next generation of technology startups, while helping ensure we remain on the cutting-edge of retail change.
“We had five finalists but the overall winner was Localz, a startup business specialising in micro-location technology. Their technology gives customers the opportunity to take advantage of some enhanced services using their smartphone based on their precise location. For example, it could automatically offer to trigger a customer’s Click & Collect order to be picked as they enter the shop. We’re going to start trialing this solution very soon before rolling it out more widely if it’s successful.”
What the participants say
“We chose Wayra because they are a global accelerator with offices around the world with an excellent reputation,” says Daniel Reina, CEO and co-founder of app discovery startup Tappx. “They offer investment support, offices, metrics, mentors, legal and financial support, and internships. You also benefit from a close working partnership with Telefónica, and a wide network of advisors. It was a strategic decision for us, mobile app discovery is a global market and we needed a global partner.
“You have to be able to juggle multiple things at the same time, pitch at a moment’s notice and do a lot of networking. Being part of an accelerator means you have more work and responsibilities to meet the expectations of those supporting you. In return, you have a wider network, which is an invaluable resource to a company that needs to grow rapidly, but you are always busy and need to work hard. We also learn from the other companies participating in the programme, it’s its own intensive MBA.”
What are the other options?
So perhaps the corporate accelerator isn’t right for every brand – but what are the other options?
The Pop Up Agency
“We solve briefs in 48 hours,” says Zlatko Corluka, co-founder of The Pop Up Agency, which came out of work done by the team at career accelerator Hyper Island. “The client is not expecting a fully functioning app or a website after this time, but something that you can start implementing or producing the next day.
“Innovation is almost always the factor and they often come to us to try new ways of working. We could be called in to accelerate a project, to think of new markets for an existing product, to create or launch a new product, and much more. Before settling down in London, we did a world tour where we worked with everyone from Facebook, to Coca-Cola, and some startups in Berlin. From this we got great knowledge of how different markets and industries around the world work, something that clients really appreciate.
“Often our clients already have one or more agencies working on their communications, but they’re not always happy with what they get. From what we have seen and heard, the value of the end product isn’t matching with the time and money spent on it.”
EY Startup Challenge
Some large companies, like Ernst and Young, have opted to create short competitions in order for them to engage with startups around a specific business problem, in this case, the ‘right to be forgotten’.
Sedicii has developed and patented a technology that eliminates the transmission, storage and exposure of private user data during identity verification. They won the six-week EY Startup Challenge from a shortlist of seven tech startups.
“We wanted to work with EY because they are focused on delivering real commercial outcomes for their customers that use new innovations that startups can provide,” says Sedicii’s global commercial director Richard Coady. “From this programme and working with the EY team, Sedicii benefited from having access to and engaging with EY clients in verifying our solutions and introducing them to our innovative technologies.”