The apprehensive dance leading to a prospective match between startups and corporates can feel uncomfortably akin to the murky realm of online dating. When evaluating which corporate has the most to offer and the clearest pathway to bring a new product to fruition, startups are always wary of being fed a line.
Another element in play that resembles the dating scene is a nervousness to commit. Startups have “a natural fear that if they take investment from one corporate, it locks out the rest of the competitive space, not just on an investment basis but on an actual license basis," says Michele McConomy, senior vice president and general manager of RocketSpace's Corporate Innovation Services. That's why many startups prefer to take investments from venture capitalist firms instead of corporates — just so they can keep their options open.
This fear makes a lot of sense, because although the matching process between startups and corporates is often described as a kind of corporate dating, the ideal outcome is not a one-on-one relationship, but partnerships with multiple corporates.
“No great startup that sees itself as changing the world ever wants to put its flag on one mast," McConomy says. “An exit strategy with an accelerator program with one corporate is a B-grade opportunity. Most startups want to be able to play the field and see what's the best opportunity for them."
Open collaboration is an effective method for finding the right partners. Accelerators that bring many different corporates from a variety of industries to the table around a particular area enable a startup to gauge which corporates have the most pressing issues that its product could solve. Most importantly, the open collaboration process helps them identify which companies are most likely to expedite getting a product to market.
Beware of red flags
Startups seeking a relationship with corporates should be on the lookout for these signs of trouble ahead:
Rigid Corporate Structure
“Corporations are typically risk adverse — and for good reason — because they have a lot to protect. As a result, they have rigorous processes in place to minimize risk. But having only that rigorous structure in place prevents you from moving fast and achieving the speed you need to scale innovation with startups," says McConomy.
Big companies need to be willing to unwind the policies, procedures and other barriers that prevent them from testing and experimenting with a subset of their customer base so they can assess whether a startup's product is a worthwhile investment suitable to take to the next level.
Startups need to ensure they can communicate effectively with corporate sponsors and that sponsors clearly understand their vision. Most corporates need to work on being humble, McConomy says. As the big dog, they often feel they should be listened to instead of engaging in constructive communication.
Unclear Commitment from Corporate Mentors
Before entering an accelerator program, startups need to take a careful look at the program's track record and get as much feedback as they can from other entrepreneurs that have gone through that specific program, advises Matt Gardner, CEO of California Technology Council, which hosts the California Business Incubation Alliance.
For its recent study of the state of innovation in the accelerator space, the Alliance, collaborating with Kauffman Fellows Network, surveyed 50 entrepreneurs who had graduated from various accelerators and found several who described the program they went through as “a very busy calendar of expert speakers coming in to visit that had nothing to do with my business." That suggests that some accelerator programs are more focused on pushing a lot of startups through rather than helping each one get the mentoring and market expertise it needs to develop its specific business.
Sometimes, too, corporate mentors parachute in for occasional check-ins rather than make a real commitment to be involved and share meaningful advice with a startup. An objective scoring system by an independent research provider could help startups make more informed decisions about accelerator programs before entering them, but none have emerged so far, says Gardner. Even the Seed Accelerators Ranking Project, established four years ago, lacks “a fixed set of objective criteria that everyone understands," he says.
In the meantime, asking for recommendations from other entrepreneurs is the best way to assess if an accelerator is right for your startup.