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.