Corporate Accelerators: A Study on Prevalence, Sponsorship, and Strategy

Mon, 10 Aug 2015 11:20:43 +0000

I just published my full Master’s thesis about Corporate Accelerators and their recent growth on my personal website. It covers the recent macro-level trends and dives into the types of companies that are sponsoring such programs. In addition, I address the strategic aims of the sponsoring firms.

Where do Corporate Accelerators come from?

Mon, 22 Jun 2015 11:20:43 +0000

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 startups¹ 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 past⁷ 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?

Hoffman, David Lynn, and Nina Radojevich-Kelley. 2012. Analysis of Accelerator Companies: An Exploratory Case Study of Their Programs, Processes, and Early Results., 8 54. ↩
Bliemel, Martin J., Ricardo G. Flores, Julien Hamilius, and Henrique Gomes. 2013. “Accelerate Australia Far: Exploring the Emergence of Seed Accelerators within the Innovation Ecosystem Down-Under.” SSRN Scholarly Paper ID 2422173. Rochester, NY: Social Science Research Network. http://papers.ssrn.com/abstract=2422173. ↩
Hochberg, Yael V. 2015. “Accelerating Entrepreneurs and Ecosystems: The Seed Accelerator Model.” In . Washington, DC. http://www.nber.org/confer/2015/IPEs15/Hochberg.pdf. ↩ ↩²
Ernst & Young. 2013. “EY G20 Entrepreneurship Barometer 2013.” Ernst & Young. https://webforms.ey.com/Publication/vwLUAssetsPI/The_EY_G20_Entrepreneurship_Barometer_2013/$FILE/EY-G20-main-report.pdf. ↩
Kerr, William R., Ramana Nanda, and Matthew Rhodes-Kropf. 2014. “Entrepreneurship as Experimentation.” Working Paper 20358. National Bureau of Economic Research. http://www.nber.org/papers/w20358. ↩
Crichton, Danny. 2014. “Corporate Accelerators Are An Oxymoron.” TechCrunch. August 25. http://social.techcrunch.com/2014/08/25/corporate-accelerators-are-an-oxymoron/. ↩
Harford, Jarrad. 1999. “Corporate Cash Reserves and Acquisitions.” The Journal of Finance 54 (6): 1969–97. doi:10.1111/0022-1082.00179. ↩
Sánchez, Juan M., and Emircan Yurdagul. 2013. “Why Are Corporations Holding So Much Cash?” The Regional Economist, January. ↩
Bradford, Jon. 2014. “Corporate-Run Startup Accelerators: The Good, the Bad and the Plain Ugly.” Tech.eu. March 14. http://tech.eu/features/779/corporate-run-startup-accelerators-good-bad-plain-ugly/. ↩
Dempwolf, C Scott, Jennifer Auer, and Michelle D’Ippolito. 2014. “Innovation Accelerators: Defining Characteristics Among Startup Assistance Organizations.” SBAHQ-13-M-0197. U.S. Small Business Administration. ↩
CB Insights. 2015. “The 2014 U.S. Corporate Venture Capital Year in Review.” CB Insights. https://www.cbinsights.com/reports/2014-corporate-venture-annual-report.pdf. ↩

What are Corporate Accelerators?

Mon, 15 Jun 2015 11:20:43 +0000

Based on an intensive literature review we use the following definitions throughout this site.

Accelerator

Help early-stage startups through various means but at least mentorship and connections to potential investors
Have management objectives that are often monetary
Are fixed-term with durations of max. 12 months
Are cohort-based
Have a selective application process
Typically provide stipends
Typically take a non-controlling amount of equity

Corporate Accelerator

Corporate Accelerators are Accelerator programs which exhibit in addition the following criteria:

They are either owned or sponsored to more than 50% by one or several corporate entities which main business is not work with startups
The program’s objectives are derived from the parent’s interest

Corporate Accelerator DB

Corporate Accelerators: A Study on Prevalence, Sponsorship, and Strategy

Where do Corporate Accelerators come from?

What are Corporate Accelerators?

Accelerator

Corporate Accelerator