Over the past decade, corporate startup accelerator programs have gained significant popularity as a means for established companies to tap into the innovation potential of startups. 

These programs promise to foster collaboration between startups and corporations, allowing both parties to benefit from each other's strengths. 

However, despite the initial enthusiasm and potential benefits, many corporate startup accelerator programs fail to achieve their intended outcomes and are often costly and counterproductive failures - creating a culture of fear around innovation and doing things differently. 

In this article, we will delve into the various reasons behind these failures, shedding light on the pitfalls that companies should avoid when launching accelerator initiatives.

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Casting a Narrow Net

Do you really expect the love of your life to just knock on your door one day and introduce themselves?

Of course not.

But when I speak with corporate executives about partnering them with strategically-aligned startups, I often hear that they get emails from startups all the time so they're OK in that department. And they apply a similar approach to their startup accelerator programs - sometimes casting a net as narrow as their hometown.

But here's the thing.

They're unlikely to fall in your lap or come from your city.

Like a suitable partner, the best-fit for purpose startups often need chasing too.

This is why most venture capital funds track thousands of startups annually, meet with hundreds, and only invest in five to ten.

If your organization is serious about open innovation and partnering with strategically-aligned startups to drive innovation, you need to do the same.

As you might with finding a romantic partner:

1. Cast a very wide net.

2. Make your approaches.

3. Evaluate fit.

4. Sell yourself if you're interested.

5. Finally, find a way to make it work.

Don't settle.

In addition, a narrow net is often cast around the diversity of ideas, technologies, and industries. Some startups that could have provided valuable insights and solutions might be excluded due to overly stringent selection criteria. 

• Overemphasis on Fit: Focusing solely on startups that align perfectly with the corporation's current business model can stifle disruptive innovation.
• Ignoring Outliers: Innovative ideas often emerge from unexpected places. Ignoring startups that don't fit the conventional mold can lead to missed opportunities.

Do this instead

Cast a wide net both geographically and in terms of the diversity of ideas. The best fit-for-purpose startups might be on the other side of the world. Unless you have a good reason - such as local data privacy regulations - you should work with the very best startups regardless of where they are based if you want your program to create legitimate value. 

Not only that, but don’t assume that because you are a big corporate with resources that the best startups will fall over themselves to work with you. The best founders know that working with corporates is a tricky proposition and are reluctant to engage. As such, you will need to make a compelling case to the very best startups about working with you and investing time and energy to participate in your program. They need to be confident that there is likely to be some gold at the end of the rainbow and not just death by committee.

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Targeting Idea-Stage Startups

Choosing to work exclusively with idea-stage startups can also contribute to program failure. While nurturing early-stage ventures might seem appealing, these startups often lack the experience, traction, and validation required to create meaningful collaborations post-program conclusion.

• Execution Challenges: Idea-stage startups might struggle with translating concepts into viable products, making it difficult to achieve tangible outcomes during the program.
• Limited Resources: Accelerators require time and effort. Idea-stage startups might lack the necessary resources to fully engage in the program, leading to dissatisfaction and subpar results.

Do this instead

Have a bias towards selecting startups that have at least raised a seed round and have money in the bank, a committed team, and a product of some kind - preferably with revenue and customer success stories to speak of. 

Alternatively, idea-stage startups run by experienced founders with runs on the board are also preferable. 

Misalignment of Values and Strategy

A misalignment of values and strategic goals between the corporation and the participating startups can undermine the effectiveness of the accelerator program.

• Conflicting Objectives: Startups are driven by agility and innovation, while corporations often prioritize stability and risk mitigation. Misaligned objectives can create tension and hinder collaboration.
• Cultural Clash: A disconnect in company cultures can lead to misunderstandings and hinder effective communication between corporate mentors and startup founders.
• Startups are often driven to raise capital, grow, and at some eventual point, exit. However, some self-interested corporates exhibit territorial behaviour towards startups, preventing them from working with other corporates in the same industry, setting unfair investment terms, and ultimately stifling the growth of startups. 

Poor Quality Service Providers

Choosing the wrong service provider or partner to manage the accelerator program can be detrimental to its success.

• Lack of Expertise: Inexperienced program managers might struggle to provide startups with the guidance and resources they need to thrive.
• Insufficient Support: Inadequate program management can result in startups feeling neglected and unsupported, diminishing the value they derive from the program.
• Principal-Agent problem and misaligned incentives: Large accelerator programs often fall victim to this, and salespeople are more interested in hitting their KPIs than driving outcomes for clients. 

Not only that, but some service providers have bloated teams and are capital-inefficient. As a result, many providers are charging upwards of US$1M to run an accelerator program - which means that anything short of home run success looks like a costly exercise is self flagellation.

Poor Due Diligence

Inadequate due diligence when selecting startups can lead to the inclusion of ventures that are ill-suited for the program.

• Lack of Viability: Startups with weak business models or unrealistic goals can waste resources and divert attention from more promising participants.
• Limited Growth Potential: Selecting startups that lack scalability can limit the long-term impact of the accelerator program.
• Venture capitalists evaluate early-stage startups using a comprehensive set of factors to assess their investment potential. These include the startup's market opportunity, unique value proposition, competitive landscape, scalability potential, traction, team expertise, technology innovation, business model viability, customer acquisition strategy, revenue projections, product development stage, intellectual property protection, go-to-market plan, user engagement metrics, customer feedback, founder's commitment, capital efficiency, exit potential, alignment with current portfolio, and overall market trends. 

Each factor contributes to the VCs' decision-making process, enabling them to make informed investment choices that align with their investment thesis and growth expectations.

You or your service provider need to do the same. 

Poor Quality Program Curriculum and Mentors

The curriculum and mentors provided in the accelerator program play a crucial role in shaping the startups' growth. Ineffective resources can hinder the startups' development.

• Irrelevant Content: A curriculum that doesn't address the unique challenges of startups or the industry they operate in can fail to provide actionable insights.
• Inadequate Mentorship: Inexperienced or disengaged mentors can deprive startups of valuable guidance and networking opportunities.

Oftentimes, we see people with absolutely no experience whatsoever in startups plucked from the obscurity of some back office role at a big corporate providing ‘mentorship’ to startups. It’s a case of the blind leading the blind and it doesn’t end well. 

Lack of Post-Program Support and Network

The end of the accelerator program shouldn't mark the end of the collaboration between corporations and startups. However, this is a common pitfall.

• Limited Access and Engagement: Without continued access to and engagement with the corporation's resources and networks, startups might struggle to capitalize on the momentum gained during the program.
• Missed Funding Opportunities: Lack of ongoing support can hinder startups' efforts to secure funding post-program, diminishing the overall value of the accelerator.

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Ineffective Approach to Post-Program Collaboration

Successfully driving mutual value after the program conclusion requires a thoughtful approach that many corporations overlook.

• Lack of Integration: Failing to integrate successful pilot projects or solutions developed during the program can result in lost opportunities.
• Misaligned Expectations: If the post-program collaboration is not well-defined and mutually beneficial, both parties can feel let down.

Lack of Buy-In from Key Stakeholders

Without buy-in from corporate leadership and business unit heads, the accelerator program can lack the necessary resources and support to thrive.

• Resource Allocation: Without commitment from key stakeholders, the program might suffer from budget cuts, limited staff, and inadequate infrastructure.
• Strategic Alignment: When top-level executives aren't invested, it can lead to misalignment between the accelerator's goals and the corporation's overarching strategy.

Misaligned Incentives

Misaligned incentives between corporations and startups can erode the collaborative spirit that underpins successful accelerator programs.

• Focus on Short-Term Goals: Startups might prioritize quick wins and securing funding over building long-term relationships with the corporation, hindering meaningful collaboration.
• Conflict of Interest: If the corporation's primary goal is to acquire or license startup technologies, startups might be wary of sharing proprietary information.
• Brand focus: Oftentimes corporations might run an accelerator to bolster their brand as a progressive and innovative company, and drive talent acquisition - but this harms program outcomes and startups most of all. 

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Conclusion

Corporate startup accelerator programs hold tremendous potential for fostering innovation and collaboration between established companies and startups. However, these programs often stumble due to a range of challenges, from poor selection criteria to inadequate post-program support. Recognizing these pitfalls and addressing them proactively can increase the likelihood of success, ensuring that both corporations and startups can truly reap the benefits of their partnership. By casting a wider net, fostering diverse collaborations, and nurturing a culture of mutual value, corporations can unlock the full potential of their accelerator initiatives.

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Need Help Running Your Accelerator Program?

Want help designing and running your accelerator program? Collective Campus has been running corporate startup accelerator programs for organizations such as Microsoft, Allens Linklaters, Charter Hall, Village Roadshow and many more since 2017, incubating 98 startups along the way that are today worth more than US$1BN.

Get in touch to learn more about what an accelerator program might look like for your organization.

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