Big corporations have long understood the need to be present (and acquire) new startups to either eliminate long-term potential competitors or get technology that are not able to develop fast enough.
Another way corporations are starting to play a crucial role in the startup world is by funding so-called corporate startup accelerators. These are pretty much the same as the usual startup accelerator, but in addition they:
- Are owned or sponsored (+50%) by one or more corporate entities, which have nothing to do with startups
- Have (apparent) different interests than the sponsoring/parent company
Usually, corporate startup accelerators pretend lower than usual equity in the startup invested or are able to offer higher initial investments. Some other of these programs offer a “no money no equity” deal, which pretty much translates into mentoring and guidance.
According to Corporate Accelerators Database, at the moment there are 71 active programs worldwide.
While all this seems like a nice fairy tail, it’s always good to keep an eye open and listen to different sides of the same story. I have experienced first-hand how an accelerator program can actually hurt your business instead of helping it.
Are Corporate Startup Accelerators Good?
While doing some research and filtering out all the promotional content that there’s online, I came across a very interesting video shared on Facebook by TheFamily, an incubator in France.
Corporate accelerators are evil and should not exist.Posted by TheFamily on Friday, November 25, 2016
The message is clear.
When Oussama Ammar was asked whether it’s a good idea or not to join a corporate startup accelerator, he replied quite frankly with a “No. Corporate startup accelerators are evil and should not exist!”
He goes on and states that “It’s like asking right-wing people to rap. You sound fake. You cannot“.
After all, we start a startup, because we want to be pirates. We want to disrupt old industries, where all these corporations are making billions and blocking innovation. We don’t want to work for the navy. As Ammar says, if you want to join the navy, do that from the very beginning.
Startups should understand what are the real reasons corporates want to get in the startup game. As a startup founder, you should not get in partnership with someone that is way bigger than you are (and will have control over you as a result of that partnership). If you do that, you’ll get a giant in your cap table. They will make your life impossible for “reasons you don’t even understand“.
It’s easy to complain about something. Very easy. But Ammar gives a real-life example that should make all founders think very careful about such decision.
He was involved as a board member in a startup that joined Telefonica accelerator. The startup founders, then, received an offer by one of Telefonica’s competitors for acquisition. Guess what? Telefonica did everything possible to stop the acquisition to happen. They had 6% in the startup (no investment made) but still blocked the possible transaction.
Ammar can hear your complaints, though. You are thinking that this makes no sense, after all, we are in business. Interests are aligned. If we get bought, why would Telefonica (or any other major corporate) interfere? They would also make money. The reality is that for them a 6% of a potential 100M acquisition (and we are going very high here) means nothing. Nada! Zero!
You are now part of a (bigger) political problem in which you have no influence. You are now part of Telefonica, one of their employees, “a great position to be in. An employee with no salary and no benefits“.
As startups became more accessible to everyone, and more and more people want to escape the everyday job to follow their dreams, external validation becomes more and more important.
Being accepted in a startup accelerator is a victory. It can also become a milestone. I had that in my startup pitch. I got accepted in an accelerator, it means I am doing something good. Sometimes, however, I thought about it “I got money with a 10 slide presentation and an idea. There is more money to grab around”, and then you end up attending every single startup competition or event and waste your time on what it seems to be working, but instead it’s just networking and you forget to build your dream.
External validation became more important that the actual work.
This 4 minutes video is very important for anyone out there thinking about getting in a startup accelerator. Think about why you want to join one and what value they really bring to your startup. Think carefully before deciding. The wrong decision can have long-term consequences.
Have you had a difference experience with corporate startup accelerator? Was your program able to give you a real added value?