Everyone knows the innovators dilemma. As companies grow they lose the ability to innovate. The odds are stacked against them as shareholders tell the management team to stick to the knitting. All desire to take risk evaporates and suddenly they find they have been disrupted by a nimble startup. Just look at what Airbnb has done to transform the travel sector, or Uber in transport.
More and more big corporations are beginning to recognise how important it is to get involved with early stage tech startups. Big names such as Telefonica and Barclays have started to build collaborations between themselves and startups with the very clear strategy of exploring new technologies and innovative business models.
MassChallenge produced an interesting report that shows a shift in the dynamics in the behaviour of corporates towards embracing startup culture in the U.S. The same trends are perceptible in Europe and in particular the UK and we have clearly identified a number of corporate strategies happening here :
The ‘GodFather’ approach: Google operates a whole building to nurture startups – Campus London has 5 floors of event space, free and not so free co-working places, plus offices for a couple of London accelerator funds. A sort of micro silicon valley ecosystem on the edge of the City of London.
The ‘ Getting them early’ approach’: Early stage accelerators are quite a popular model for big corporates. They increasingly focus on niche market segments rather than generic technology and only take the startups that have a direct value to the corporates. They usually partner with large strategic players and they take equity in exchange for subsidence capital. A recent example is the last fashion tech accelerator by Asos , who is partnering with Wayra.
The ‘Lets see what happens’ approach is an interesting model that is taken mainly by financial institutions or players with deep pockets, sometimes resulting in non-equity accelerators. These nurture startups, usually from a specific niche, such as Fintech. The main goal is to keep an eye on what’s happening and potential make an investment in the future. They try to build goodwill by giving a lot of value in the form of free office, mentoring and PR. A good example is Winton Capital, that have recently put through their first cohort of ‘big data startups’.
Most corporate accelerators are roughly based on the Y-Combinator model. This involves picking limited size cohorts and providing light mentoring for a set period of time. The goal is usually to introduce the startups to investors at a ‘demo day’ at the end of the programme. Common problems in running accelerators include; poor picking of startups, bad mentoring and lack of investor interest at the end of the programme.
Dreamstake is able to draw on a community of over 2,000 startups reaching across Europe through a virtual ecosystem. We also bring 10 years of startups experience which we are willing to share with corporate clients looking to harness the potential of early stage technology.