Where do Corporate Accelerators come from?

There are 60 Corporate Accelerator programs around the world — just five years after the first one was launched in 2010.

While the exact reason for the emergence of such corporate programs remains unclear, several sources draw parallels to the cyclical patterns of Corporate Venture Capital (CVC) funds. On the non-corporate side the substantial reduction of Venture Capital after the internet crisis in 2000 and after the financial crisis in 2008 led startups to look for other sources of funding: Venture Capital funds did not only reduce their investments but also moved up to later-stage startups. The emergence of Accelerator programs partially filled that gap by making funds available to early-stage startups^{1 2}. More so, an Accelerator’s function of aggregating and filtering early-stage startups³ was particularly valuable during a period of low Venture Capital spending. However, rather than disappearing during the recent recovery of Venture Capital investments, Accelerator programs survived and have established themselves as a new fixture in the funding ecosystem⁴. This was further fostered by the simultaneously decreasing cost to launch a new business thanks to advancements and cost reductions in the computer sector which have made the comparatively low investments of Accelerators more attractive than in the past⁵.

With the recent upturn of both Corporate and non-corporate Venture Capital investments, Accelerators funded by corporations emerged as a new phenomena. Hochberg³ and Crichton⁶ speculate that companies are more eager than in the past to be close to early-stage entrepreneurs to increase their own innovation potential.

Another factor could be the record-level corporate cash reserves in the U.S. especially when considering that high cash reserves have been linked with stronger corporate acquisitions in the past^{7 8}. Acknowledging that the current levels of cash are unprecedented, Corporate Accelerators could be a way for firms to diversify their spending on external businesses. Techstars’ Jon Bradford⁹ seemed to imply as much by describing Corporate Accelerators as just another outlet for companies to fund early-stage firms triggered by the recent rise in CVC.

This would also fit well with the historic sequence of events: The first non-corporate Accelerator (Y Combinator) appeared in 2005 but the concept gained only widespread acceptance a couple of years later during a time when CVC dried up again due to the global financial crisis around 2008. Considering that companies pulled their money even from their established venture funds, it would be no surprise if they might not have wanted to experiment with the so far in the business world unproven concept. The economic recovery might have lessened these concerns.

Lastly, several sources see strong ties between Accelerators and Venture Capital funds where the former are providing a funnel for the latter¹⁰. If companies were to understand the corporate equivalents as similarly integrated one would expect that the rise of CVC would make a strong internal case for an organization to also launch a Corporate Accelerator as well. Indeed, comparing data of CVC funds¹¹ with our database of Corporate Accelerators there is a significant probability (p<0.01) that the overlap between them is not only due to pure chance.

Looking back at the last five years, Corporate Accelerator programs have been growing exponentially. Will they continue to do so?