We have run 26 different collaboration programs in the past. And in many of them, we helped financial institutions run a corporate accelerator. Because of that, I often the get asked if “we are an accelerator”. And no we’re not: we have expertise in that area, but we are far from that.
In fact, because of those moments, I’m starting to hate the word “accelerator” a little.
But there’s an even funnier part. I often realize that people are confused about what accelerators are. So let’s take a step back, and start there.
A bit of history: where do accelerators come from?
Ok, accelerators haven’t been around for that long. They’ve been around enough for everybody to have heard the word. But they haven’t been around enough for us to have a shared understanding of what they are.
Y Combinator started in 2005. They’re often pointed out as the first accelerator. And their model has been the basis to what many consider the current definition. Accelerators have batches of startups. They have programs that run for a few months. They give startups support – some call it educational content, but there’s more – and some funding. And they tend to end up in a Demo Day where the startups pitch to investors and a broader audience.
Ever since many have copied parts of that model. And many more have rethought that model, to fit their context. During the last years we’ve seen a tremendous growth of accelerators. Some call it “the accelerator phenomenon”.
There’s also another explanation of why accelerators have become so popular. It also has to do with how they fit in the way startups grow. Pulling through the first months of a startup with little funding has become easier. It also became easier to raise big amounts of capital for later rounds, with a validated product. But this creates a tough situation: what about the middle ground? What about the early growth? This is a gap that accelerators have filled during the last decade.
The abundance of accelerators (some estimate thousands) also means that the space has started to get a bit crowded. Programs have to compete for the same startups. And startups have a difficult time telling apart the great programs from the ok or bad ones.
Accelerators, incubators, corporate accelerators, sponsorships, “accelerators”… what does all that mean?
Ok, so accelerators have batches and mentorship. But I’ve see accelerator X, and they do something different.
The more people use a term, the more its meaning gets perverted. And that has happened to the word “accelerator”.
For starters, during the hype many incubators decided to call themselves accelerators. When something is a trend, everybody wants in the bandwagon. The concept of incubators existed long before Y-Combinator. And they fit a particular need. A common definition is: flexible working spaces, that include value–added services. For example, centralised legal or marketing support.
Incubators are great for encouraging company creation. They help the entrepreneurs take their first steps in building the business. They take away some of the complexity of starting a company. And they prepare the entrepreneurs for the tough world outside.
Accelerators have the opposite attitude. If something doesn’t work, it should break right away. The best way of putting it is through metaphor. Incubators help startups walk, while accelerators help them run faster. That’s why incubators tend to be popular e.g. among universities. In those cases, an accelerator is not likely to increase the number of companies that come out. And alternatively, accelerators are better to get you through the funding gap. Startups might event want to go to one or more of each!
“But I’ve heard that big corporations are behind accelerators. Do they do it as a form of charity?”
We deal with collaboration between financial institutions and startups. Because of the value that corporations can get from startups, one use we encounter a lot is corporate accelerators. It also has become very popular, as accelerators try to reach out to corporations for sponsorship. Because of this, it can mean very different things:
- Sponsored startup accelerator. It’s a regular accelerator as per the definition above. It supports the startups in their development. The corporation provides a sponsorship and is generally passive. The main goal for corporations in these accelerators tends to be to see what’s out there.
- Matchmaking accelerator. It supports the startups, and also introduces them to people in the corporation. Corporations provide sponsorship and allocate time from employees to understand the startup. The main goal for corporations in these accelerators is to explore partnerships.
- Renewal accelerator. It supports both the startups and the corporation. The emphasis is on getting the partnerships to work. I’ve often said that in renewal accelerators we speed up the collaboration itself. The typical time to get a deal between startups and financial institutions is between 1 and 2 years. With this type of accelerator, this number comes down to a few months. The main goal for corporations is to get more innovations and improve the company.
Unfortunately, it gets more complicated than that. People use the word accelerator for many other things. After all, accelerator literally means anything that causes something to happen/develop faster. Metaphors are public domain.
So people use the metaphor the way they want. They use the word accelerator for bootcamps, sales channels, matchmaking services, etc . For each accelerator out there, you need to look at the fine print to see what it really is. And probably it accelerates something. Or not. Many people (including us) constantly experiment on what works best. And some people call all of those things accelerators (disclaimer: we use other terms).
Where do you (Nestholma) come in?
For some of our partners in the past, we have indeed helped them in building their own accelerator. We have a model that has proven to work well, for them to maximize the innovations and learnings. We help them take it and apply it, and we provide them with the missing bits, the things that corporations are not good at, and need to improve.
Why accelerators? Because it’s often the best way to start the process of working with startups. By working with a batch of startups, you clearly see what the corporation needs to improve on.
And innovation is probabilistic: you don’t know what will work and what not. Which means that collaboration with startups is a numbers game. If you try working only with one, you might get lucky, or not. If you try collaborating with a few, some of them will work, and will make the whole effort worthwhile.
For many other corporations, accelerators might not be the way to go.
If you´re already active in working with startups, your way to improve the organization might not be to pump more startups in there. You might want to refine your processes or business cases better. You might want to fish your startups from a bigger pool of startups. Or you might want to focus on preparing your employees better.
The magic sauce is in not in the accelerator itself. It’s not even in the match-making. It’s actually in the deal-making. At Nestholma we’re experts in collaboration. We’ve seen a lot of collaboration cases, and we’ve learned from the ones that worked, and from the ones that didn’t. We know how to get you to do actual business with your partner.
For financial institutions, we help you become more startup-ready. You’ll be surprised by what you’ll find out when we push the limits. You’d be surprised how many things people overlook, even when they’re paying attention.
For startups, we help you be corporation-ready. We help you navigate the organization. We help you understand the financial institutions (and their sales cycles). And we help you get in front of the right eyes (spoiler, it’s often not the people you think).
On our last program, I made a promise to both the startups and the employees of the corporation. I told them that I would make them uncomfortable at least once during the program. And that they would thank me afterward for that. We need to break patterns that are holding us back, and that creates moments of discomfort.
This brings me to one of the key values that we bring. We are a “neutral” party, that only wins if both the financial institution and the startup win. We can make the startup a bit uncomfortable. They know that we want the best for them (especially if we’ve invested in them!). We can make the employees a bit uncomfortable. They know our job is to make their organization better. And that we’ve seen these situation many times before.
Startups and corporations: pick your focus
All in all, like many things in life, there’s no better or worse option. It depends on what you’re trying to achieve.
Startups need to pick their priorities. And then do a bit of background check. One funny stat: startups who join a corporate collaboration program are more likely to a second one. Study your options well. What is the best option depends on what your focus is at the moment.
Corporations also need to decide what they want. Do you want to be the cool hip corporation that hangs out with startups? Do you want to do business and transform your organization? Did you read too fast and thought those questions are at all similar?
You need to know what you want to get, and what’s in it for your organization. Working with startups is not a charity: it’s business. And as you might know, we’re happy to sit down with you and discuss about different alternatives any day.