Corporate Accelerator Design
Duration, Location, Focus, and Learning
Overview: Corporate accelerators can either "move fast and break things" or run “long and lean.” There is no one size fits all. The design of a corporate accelerator, rather, should depend on the needs of the organization and its goals. Broadly speaking, though, the components of the design are basically four-fold:
How long should the accelerator run?
Where should it be based?
Is the accelerator sector-specific?
What is the learning curriculum?
Long and Lean or Short and Keen?
With respect to duration, Y Combinator and Techstars, for example, use three-month programs, because they want to introduce the dynamics of time constraints. This period was the unintended result of student schedules (with students generally having less than three months available in the summer to devote to an accelerator).
Other accelerators have followed suit in large part.
Organizations, however, should design their programs according to the type of product they are building and the amount of capital they have available. In Jed D. Christiansen’s MBA dissertation called Copying Y Combinator, he advises against blindly following in the footsteps of other incubators.
It’s also important when setting program duration to distinguish between seed accelerators (which typically have no allegiances to a corporation) and corporate accelerators (which act in the interests of the sponsoring organization). The corporate accelerator must be designed around the needs and goals of that host organization.
The product being designed is another component to be considered when setting the accelerator length. A three-month window may be ideal for web or mobile applications, which typically have low capital requirements and short prototyping durations, but if a startup must build a physical product, it may need more time.
As Christiansen notes, most of the funded startups at Y Combinator are unable to launch in the three-month window before Demo Day, but the accelerator sticks to that length to introduce an element of urgency. According to Y Combinator co-founder Paul Graham, "We kept the three-month cycle because it is a good length of time to build a version 1… Some startups may not be able to launch in such a short time, but they should all be able to build something impressive."
The three-month timeline creates pressure, for sure, but it also brings other benefits. Limiting the duration of an accelerator controls costs and can release more resources for other accelerator projects. Spreading the wealth can increase the likelihood that one of the projects will get to market, improving accelerator profits.
There are dissenters, however, to the three-month window. Brad Feld, who co-founded Techstars in Boulder, Colorado, looks to a much longer horizon in most cases. According to Feld: “If you think that it takes two or three years to create a company, it’s foolish. It takes 20 years to create a company.”
Accelerator Location – Silicon Valley or Sleepy Town, Alabama?
According to Feld, "A good accelerator can be run in any city in the world for $500,000." Others disagree. Y Combinator's Michael Seibel, for example, has said: “We think it's just ridiculously important to have YC in the [Silicon] Valley. I don't think we're ever going to launch an international chapter of YC.”
Accelerators rely heavily on inputs from those in their immediate physical ecosystem. According to Seibel, Silicon Valley offers “money and good valuations, we can introduce them to tons of other companies that can be mentors and customers, and we can introduce them to the pace of the Valley — the speed that you have to operate. We can't do that anywhere else."
There’s also the issue of convincing a tech startup that it would be happier among cowboys in Kentucky than among fellow coders in California. That might be a tough sell.
But the question of location could become irrelevant if David Cohen, CEO of Techstars, is right in his prediction: “Every major metro area in the world will eventually be able to support an accelerator."
Accelerators might be more successful when they're part of a thriving ecosystem, but that doesn’t mean that entrepreneurs cannot create their own. Practically speaking, corporations are generally constrained to the areas where they already operate and, before moving forward with any accelerator plans, corporations should assess their city's innovation and startup potential – specifically, whether the ecosystem provides the necessary external networks and resources.
Accelerator Programs by Metropolitan Statistical Areas (2015)
The following resources provide general insights into existing and emerging accelerator hot spots:
Top 10 Cities for Corporate Innovation: Innovation Leader magazine's ranking of cities based on ecosystem for supporting corporate innovation.
TechCities 1.0 Report: Cushman & Wakefield look at the big player tech cities in the United States for 2017 and those to watch in the future.
Global Cities 2017: Leaders in a World of Disruptive Innovation: This analysis by A.T. reports the world's most influential cities.
Map: Emerging tech hubs and specialization: Marketplace's coverage of cities that have the potential to become the next Silicon Valley.
The 2017 Kauffman Index of Startup Activity: The Kauffman Institute investigates startup activity by analyzing the rate of new entrepreneurs, the opportunity share of new entrepreneurs, and the startup density of a region. Reports are organized by city, state, and nation.
Beyond Metropolitan Startup Rates: Regional Factors Associated with Startup Growth: This paper from the Kauffman Institute reports on entrepreneurship activity in 356 U.S. metropolitan areas with a focus on the startup rate for all industries, the startup rate for high-tech sectors, and the rate for high-growth firms.
Measuring an Entrepreneurial Ecosystem: The Kauffman Institute offers 12 indicators for measuring the outcomes and vibrancy of a local entrepreneurial ecosystem.
Can You Buy a Silicon Valley? Maybe: Paul Graham offers a less technical overview of how a city can transform into a tech hub.
To date, two industries have dominated corporate accelerator growth: technology and media/telecom. Half of the corporations that have launched accelerators are in one of these two sectors; one-quarter are in financial services. All these industries are being transformed by digital technologies.
It seems obvious that a corporate accelerator is well-advised to focus on one sector because doing so allows specialization. Knowledge and expertise is shared among networks of the like-minded and among global investors, partners, industry experts, and entrepreneurs who are active in a knowledge field but are outside corporate boundaries.
Focusing on the vertical can create niche opportunities that have not yet been realized, whereas the generic market is saturated with incumbents that are firmly in control. For example, Y Combinator graduates in the Fintech vertical include Stripe and Zenefits while ZenPayroll and Coinbase emerged from Finovate.
In any industry, focusing on a sector correlates with startup success. A 2015 global survey on best practices in incubation and acceleration by Unitus Seed Fund and Capria Accelerator Fund found that 70 percent of startups in the top quartile of success have “a deep sector focus.” Of startups in the second and third quartiles, only 50 percent had a sector focus and, in the lowest quartile for success, only 10 had a sector focus.
Which leads to the next question: Is your sector ripe for disruption? Below are two resources for insights into industry and sector trends.
Industry Market Map Landscape: CB Insights' market maps and unbundling/disrupting graphics covering a variety of industries.
Mary Meeker's Internet Trends: A state-of-the-industry report by the Kleiner Perkins venture partner.
An accelerator is akin to immersive education. An accelerator is a period of intense, focused attention that provides the opportunity to learn at a rapid pace something that might otherwise take years. But who is learning from the accelerator? Ideally, everyone.
Accelerators transform not only startups but the corporate founders themselves. The learning dynamic within accelerators is complex. To keep their heads above water, founders must learn to move quickly. Susan L. Cohen's How to Accelerate Learning: Entrepreneurial Ventures Participating in Accelerator Programs lays out a learning framework based on the structural elements of the accelerator. The framework includes directors, mentors, cohorts, and teams as actors and explains how time constraints can affect learning.
To optimize the learning dynamic, accelerators must plan an education curriculum. The methods vary, as do the topics covered, the time devoted to classroom learning, and cohort size. But the interesting thing is that, for many startups, it’s a case of going back to the basics.
A study of 15 Village Capital programs by the Global Accelerator Learning Initiative (GALI) – entitled “What’s Working in Startup Acceleration” – gleaned insights into programs run in different sectors and regions around the world. The study found that high-performing programs spent less time on finance, accounting, and formal business plan development and more time on presentation skills, communication skills, networking, organization structure, and design.
Accelerators need to focus on the practicalities of innovation – communication and synergies that transfer and share knowledge – not the intricacies of double-entry bookkeeping. Many promising entrepreneurs don't have access to resources because they don't have the right networks. They didn't go to the right schools or don't speak the same language as emerging market investors.
So, while understanding financials is necessary for investment readiness, it’s not what the innovators need to be worrying about. When planning the education curriculum, there should be less concern with the output and more focus on perfecting what goes into creating output that has value.
According to a Whitepaper by Impact Accelerator, startups most request courses on user experience, digital marketing, and SEO optimization.
Not surprisingly, less is more when it comes to the classroom. When there's teaching to be done, it's tempting to sit students down in a classroom and show them what they need to know. But GALI found that programs where entrepreneurs spent a lot of time in the classroom listening to guest speakers or to teachers had inferior outcomes.
Indirect learning, however, which focuses on the student's inquiry and exploration rather than the teacher's instruction, allows entrepreneurs to learn while working on their business plan and product.
The authors of a research paper, Do Accelerators Accelerate? The Role of Indirect Learning in New Venture Development, suggest that accelerators should “provide opportunities for indirect learning that help entrepreneurs correct known and unknown flaws and gaps in their initial business plans and identify unexpected possibilities for improvements.”
Examples of such learning opportunities are identifying target customers, refining a product design, planning the path to market, identifying the necessary technology resources, or gauging consumer appetite. These are all value products with greater utility where innovation is concerned than perfecting financials that show a less than perfect ROI.
Accelerators should design curricula around tasks entrepreneurs can do remotely that serve the dual function of teaching valuable lessons and helping advance the startup. Time on site is better used in building relationships.
Some accelerators are beginning to blend online education with the accelerator experience. This allows founders to spend more time building both networks and products. But there is a danger that such courses could detract from the startups’ achievements and partnerships, because they impose an additional and significant demand on the accelerator cohorts.
Furthermore, the location of the accelerator and the number of entrepreneurs it serves will influence the design of the curriculum. According to Christiansen, in areas that lack a history of entrepreneurship, a more comprehensive educational program might need to be considered unless the cohorts are experienced. The more experienced the cohorts, the more tailored the education curriculum can be.
Here are some examples of general entrepreneur education curricula aimed at larger, industry-agnostic cohorts.
Additionally, the smaller the cohort, the more specialized and individual the teaching can be. But all entrepreneurs require some education that is tailored to their startup.
Up next in corporate accelerators, Accelerator Talent - Startups and Mentors