Working with startup accelerators is fun, exciting, and energizing. You get to see new technology stewarded by undaunted entrepreneurs up close and personal.
The zeal from the startups is alluring, admirable, and addictive. In addition, it can truly help a corporation achieve its strategic objectives when finding the right technology at the right time. Who would not want to work with startup? Doing so however, takes an honest look at the organization’s innovation capacity, a willingness to embrace uncertainty, and how to redefine success and expectations for this engagement to bear fruit. And it takes energy and savvy to navigate the corporate traps to bring a startup in to a large corporation.
Challenges
Should corporations work with startup accelerators? The answer is a resounding yes. But it’s not always as easy as it seems on the surface for startups to work with corporations. There are timelines, politics, egos, approved vendor lists, and budgets at large companies. Not to mention the purchasing department, the legal department, supply chain, and the IT department that you must successfully navigate. And if that isn’t enough, you must align your solution to current strategies or solve a big enough problem that a champion, influencer, or a decision maker will even get behind and support. Yikes!
However, there are also challenges for the corporation when engaging startups. Does the startup have insurance? How much? Will it pass the legal team concerning intellectual property ownership, indemnification, and pilot constraints?
Can the startup’s solution scale for a large company and its customers? Can it support this solution once it is approved to the level of satisfaction that a large company will expect? Are there other solutions the IT department already has which may work better?
Is there budget for this solution? How can it be socialized so the executive team is behind the effort? What strategic pillar does this fall into and who will own the project if successful? What problem is the corporation aiming to solve? How will it define success for something so nascent for a Fortune 500 company to accept the inherent risk?
Despite the challenges for both the startup and corporation there are significant benefits in working together.
Technology Scouting and Due Diligence
The benefits of working with a startup accelerator are numerous. For large corporations, it is critical and essential to not only understand the current landscape of technology, but also various scenarios where potential technologies can disrupt its business in the future.
Most corporations will take a global approach and scout technology around the world that is applicable to its current business operations, help extend a current business unit’s reach, or provide a new opportunity in an adjacent market. Startup accelerators are an efficient mechanism for identifying applicable and complementary technologies. They offer an insider’s look with a one stop shop advantage. They allow the R&D and Strategy teams to be more effective in evaluating new technology before it is in known in the mass market – in short it provides a competitive advantage over its peers who don’t see the top of the funnel technologies from around the world.
Accelerators bring the ability to access hundreds of startups that can help with due diligence for markets, technologies, channels, business models, and talent. Startup accelerators are a natural fit for the strategic planning process.
Talent Identification and Development
Another benefit a startup accelerator offers corporations is identifying talent for not only internal innovation opportunities but also for future business endeavors. The skills necessary for success in the entrepreneurial world translate well for new business units and shifting corporate culture. Entrepreneurs are excellent at problem identification and solving, making decisions, moving faster than the speed of the market, and dealing with ambiguity.
Many large corporations want its associates and executives to have these skills which are difficult to grow from scratch. By partnering with a top tier accelerator, corporations have access to find the best talent that can be leveraged to develop its own team.
Associates and executives can mentor the startups and these yields results in several ways. Mentorship allows individuals to see new business models, technologies, and businesses while seeing how startup executives make decisions.
These interactions are invaluable for all involved, but it is especially useful for the executives in evaluating startups for investment, acquisition, partnering, piloting, or a specific project. The pattern recognition and the ability to compare various businesses helps develop an eye for success. At some point, we have all seen startups brought forth from an executive that was not adequately vetted leading to wasted time and resources resulting in poor outcomes.
Networking
Startup accelerators provide a plethora of meaningful engagements to network with startup founders, other partners, and mentors. These individuals are executives, venture capitalists, lawyers, professors, serial entrepreneurs, and even scientists.
At MassChallenge we have over 100 of the Fortune 500 as partners and over 1,000 thousand mentors around the world. This is in addition to the over 2,300 alumni and roughly 300 companies going through a MassChallenge program each year in Boston, Rhode Island, Switzerland, Mexico City, Texas, and Israel.
Events and Prizes
Corporations can engage the startups by hosting events including informal social gatherings, happy hours, and lunch and learns where startups will learn about a particular part of the business of the large company. These interactions give the executives a chance to immerse themselves in the startup culture and come to understand the challenges startups face as it goes through the startup lifecycle.
The corporations can also sponsor prize money for solving a particular problem which attracts the types of companies it may be interested in building a relationship with. This is one of the most effective tools to find the right technology for its needs.
Despite the challenges of working with one another, corporations should embrace startup accelerators as an extension of strategy, R&D, and human resource departments.
Accelerators are an affordable and cost-effective resource to help large companies identify promising technologies that solve critical problems while helping its workforce learn an implement innovation mindset. These learnings help executives become more proficient in the acquisition, investing, piloting, partnering, or project-based work with startups.
We believe the benefits outweigh the risks for corporations to engage with startups. It is a necessary part of the innovation ecosystem that needs to be refined over time to make an innovation hub thrive. We need corporations and startups to both succeed. Corporations need a competitive edge but we to train the startups on how best to engage with large companies. The best way to accomplish these goals is to build meaningful pathways so all the parties can easily work together in mutually beneficial way.
