Different Strategies Adopted by Corporate Accelerators

Research Paper Title:

“Accelerating strategic fit or venture emergence: Different paths adopted by corporate accelerators”

Authors:

Raj K. Shankar (Nord University)
Dean Shepherd (University of Notre Dame)

Background:

Existing corporations often struggle to embrace entrepreneurial practice because of their need to balance entrepreneurship and strategic management behaviors. Corporate accelerators (CAs) are one way corporations are stepping outside their organizational boundaries for innovations. CAs are company-supported programs that support cohorts of startups during the new venture process via mentoring, education, and company-specific resources. The Microsoft accelerator, one of the earliest CAs, accelerated 647 startups that ended up raising $3 billion – one example highlighting the importance and impact of CAs. This research explores how corporations design and run CAs, the factors that influence the form of CA used, and the resulting effect.

Methodology:

Sample: corporate accelerators in India with the following criteria: (1) each was a short-term fixed-duration program attempting to scale a startup; (2) the program was backed fully by a corporation; (3) each had at least two batches, or cohorts, of startup graduates (4), the CA team was a clearly identified organizational unit, and (5) the program had an education, mentoring, and networking component
Sample Size: Four corporate accelerators
Analytical Approach: axial coding using NVivo software

Research Questions:

(a) How do corporations structure and run CAs to become more entrepreneurial

(b) what factors (if any) influence the form of CA used, and

(c) to what effect?

Results:

Although most CAs were similar, this study revealed distinctions between two types of CAs – those accelerating strategic fit and others accelerating venture emergence. Two CAs focused on selecting ventures that had strategic fit with one or more of the parent corporation’s existing business units. The other two CAs in the study emphasized that their primary purpose was to enable ventures to sharpen product-market fit, focus on specific target markets, attract users and customers, and build investor readiness. Various dimensions were found to describe the processes of corporate acceleration to enhance entrepreneurialness. CA3 and CA4 took an adapt-to-the-future approach to sense industry disruptions while CA1 and CA2 assumed a reserve-the-right-to-play posture. For example, CA3 is a large retail chain and they identify startups that can help their retail business directly through new product launches on their online portal, supply chain, or trying the product in their physical store. Venture emergence CAs with a reserve-the-right-to-play approach posture had a portfolio approach to their CA engagement. One CA in this group took an equity stake and the other increased the number of users on its platforms.

Conclusion:

Depending on the type of CA, the selection criteria for ventures was different across the four stages entrepreneurial ventures go through: ideation, problem-solution fit, product-market fit, and scaling. The analysis conducted in this study revealed that the four corporations invested a significant amount of resources (cash and non-cash) into their CAs. The researchers found that one set of CAs had a short to medium term investment time horizon while the others aimed at long term returns. One of the unique aspects of the venture emergence CAs was the composition of their venture selection committee. Since the focus for these CAs was on product-market fit and potential growth of the venture, they relied on experienced venture capitalists and entrepreneurs to help identify ventures. This study identifies multiple factors (sourcing approaches, selection criteria, jury composition, features influencing acceleration, etc.) leaders can use to make CA design decisions to reach their desired outcome. An interesting area for future research is investigating how running CA programs influences the sourcing of outside innovations (open innovation), the sourcing of external ventures (corporate venture capital), internal venturing, and corporate R&D.