It is a well-known fact that the lifespan of companies on the S&P 500 (duration on S&P 500) list has been shrinking over the years. In 1965, it was 33 years; by 1990, it was 20 years; it is projected to go down further to 14 years soon. A few decades ago, a fundamental business model or technological innovation could build a moat and buy a corporate a few decades of stability and room to innovate and build on their differentiator. But now, technologies and their applications can and are being disrupted from unforeseen directions. As the lifespan of differentiators has shrunk, so has their ability to generate sustained top line and bottom line growth that a publicly listed company is expected to deliver to its shareholders.
One of these ‘unforeseen directions’ is obviously startups, who more often than not, will be solving the problem from a completely different angle that incumbents are hard pressed to do. Not surprisingly, large corporates have woken up to this fact and have over the years, started engaging with startups in a myriad of ways. Global In-house Centers (GICs) in India many of whose parents are part of S&P 500, and many Indian corporates have initiated various startup programs, ranging from basic interactions all the way to corporate investment arms.
Over the past few years, numerous accelerators (140+ in total as of end-2016) have sprung up in India (over 20 in 2016 itself at 40% YoY growth) and more are on their way in the coming years. Based on my interactions and consulting with them, I’ve noticed that most startup accelerators go through a learning curve, and make similar mistakes. Here’s a list of such mistakes that if avoided, can save resources, trouble, and most importantly, time.
- Having the right champions and supporters for the program: This is the overarching umbrella enabler that will define the way the program will go in the coming years. An ideal champion is a senior executive (usually at headquarters) who is not directly involved in the program (her belief carries more weight precisely because she’s not directly involved) but is a big believer in its intrinsic value. And supporters are the BUs / horizontal functions that will have to work with the chosen startups later on. Their buy in too has to be co-opted before or during the program conceptualization rather than seeming to force it down their way later on.
- Being unclear on startup selection criteria: Are the startups being chosen to solve problem statements that are currently being dealt with internally? Are they being evaluated based on specific use cases that are the organization’s focus in the coming 18 months? Can these be any startups working in the same industry, even if there is no immediate visible connect to the business?
- Good PR does not equal good application funnel: A new corporate accelerator gets launched in a snazzy event with luminaries speaking on stage and the team evangelizing the benefits and features of the program. That is covered in most media outlets the next day. The buzz dies down in a week. The problem with this approach is that it does not reach all the influential constituents of the ecosystem who can ensure great applications to the program. PR and launch is but a tiny portion of the hard work required to attract good startups to the program.
- Taking in startups that don’t align with parent / group interests: Most accelerators ask me this when conceptualizing their program – should we treat this accelerator program as a financial investment or strategic investment? The problem with treating it as a financial investment (usually broad & sector agnostic) is that the organization will not have the domain expertise internally, and may not be willing to invest in getting external experts consistently year after year. So if it does not align with the parent or the conglomerate interests, it is hard to sustain interest to truly add value and make them successful over a 5-8 year horizon, especially when the day job takes most of the available bandwidth. Find startups that have a strategic fit with the organization business lines to ensure long-term success of the program.
- Taking in startups at different maturity levels: This has a huge bearing on how the accelerator curriculum is structured. If the startups are at different stages in their growth curve, it is harder to find the lowest common denominator of mentors, activities, workshops and other enablers that apply to all cohort startups. While it may not be possible to find all startups at exactly the same maturity, it makes sense to find a common upper limit – maybe mostly Series A ready (post product market fit) startups like Microsoft Accelerator does, or maybe only early stage (angel funded) startups who have initial traction but no product market fit.
- Not focusing enough on partnerships: The most underrated, yet probably the most important strategic key imperative is to build partnerships with different ecosystem players for various stages of the accelerator program – application sourcing, curation, business & technology mentorship, customer connect, fund raising, marketing. No accelerator program ever succeeded working in isolation
What do you think? Are there other mistakes that are made as per your knowledge? Have an idea on a related topic of interest? Share in the comments below.