Accelerate this... The rise and rise of Tech Accelerators

Tech Accelerators are all the rage – so what’s the big idea

This month, Barclays Bank in the UK, launched its sponsorship of a new London based FinTech Accelerator.  Barclays has, according to its own PR machine, again proved itself a leader in innovation.   Barclays is in the vanguard of the major UK Banks who are looking to utilise a Tech Accelerator to help them build a meaningful relationship with those innovative creative types who have the big ideas required to revolutionise the Banking industry.  However, they are not alone, as according to Sally Davies of the FT, there are now at least 4 FinTech Accelerators based in London alone.  http://www.ft.com/cms/s/0/112c6932-bf37-11e3-a4af-00144feabdc0.html#axzz355VyuFLh

And it’s not just Finance organisations that have gone Accelerator crazy, there are also MedTech and CleanTech Accelerators.  So, is this love of the Tech Accelerator the start of a beautiful and productive partnership between Big Business and Tech Start Ups or is it as likely to succeed and be as shortlived as a Britney Spears Vegas wedding?   This blog attempts to get under the skin of the Tech Accelerator craze and get a sense for why they are the “must have” accesory for any self-respecting industry heavyweight in 2015.

What is a Tech Accelerator?

A Tech Accelerator is usually found in the following format.  A collection of small entrepreneurial start ups and/or entrepreneurs who are bought together (sometimes following a selection/competition process) in an environment where they are provided with some or all of the following in an effort to accelerate their business development: seed funding, premises, access to private networks, mentoring and exposure to new markets.  In return the start ups give up some or all of the following:  percentage of equity, sole rights to IP and preferential purchase rights to the Tech Accelerator’s sponsors in order to bring proprietry innovation to the sponsor’s business.

Why do Big Businesses want one?

Simple – they are desperate to find relevant digital innovations that they can incorporate into their businesses. They are convinced that they have neither the skills nor culture capable of generating enough innovation at the speed required.  In essence, the disruption that is being wrought by the digital revolution has scared the pants off most established businesses - even a passing glance at the turnover of businesses in the FTSE 100 or Dow Jones 100 is enough to make any vaguely competent CEO aware of the fragile and transitory nature of their business.  This maelstrom of digitally driven change and uncertainty creates a voracious demand for the type of rapid innovation required to ensure a big business keeps up with an ever changing marketplace.  Big businesses see start ups as a rich source of disruptive thinking and innovation and they want in.  There is also a nice additional pay off for the brand of the big business through their association with cool Start Ups.

                 

Why do Start ups want to participate?

Simple – cash flow, access to markets and a sense of kudos.  For Start Ups cash is like oxygen to fuel their creative fires.  It doesn’t take much but it does take some to keep them stoked and they are happy to take what’s on offer.   Access to markets is also hugely valuable as it can support more rapid customer acquisition and a sense of kudos is important as there aren’t many entrepreneurs known for their lack of ego.   What’s interesting is that the Start Ups are also bombarded with other goodies that they probably don’t realise the value of at first glance.  These extras such as business mentors and guides, access to Start Up networks etc are often what can make the difference for the Start Up but its not generally why they join a Tech Accelerator.

Why are Tech Accelerators the hot cool thing now?

What is fascinating is that Tech Accelerators are a relatively new phenomenon and its interesting to figure out why they are proliferating now.  Here’s my view.   Essentially big businesses have an insatiable demand for digital innovation that it can’t meet itself.   Big Demand.  On the supply side there are now more entrepreneurs and Start Ups than ever before.  It appears that the cool kids graduating from Uni no longer want to be consultants, bankers or lawyers.  Now according to the Wall Street Journal they all want to be entrepreneurs.   Consistent Supply.  http://blogs.wsj.com/atwork/2014/03/17/m-b-a-s-want-instant-entrepreneurship-gratification/

So pervasive is this love of the entrepreneur in modern culture that Barbie recently launched a new version of Barbie – specced out as an entrepreneur.  http://www.independent.co.uk/news/business/news/barbie-means-business-as-mattel-launches-entrepreneur-doll-9549148.html 

So there is both big demand and consistent supply.  However, the two elements (big business and entrepreneurs) do not make easy bed fellows.   So what has enabled this profusion of Tech Accelerators to spring up?   There seem to be a few key requirements:

Viable Brokers:  Big Business and Start Ups speak a very different language and have very different needs.  When left to their own devices the coupling just doesn’t work.  As a result a series of brokers have sprung up to facilitate the coming together.  Some are bespoke organisations (TechStars et al) others are the big consultancies (Accenture et al).    These brokers enable the two parties to cooperate effectively and create and manage the Tech Accelerator “Deal” that the two parties sign up for. 

Worthwhile Packages:  What the brokers have been able to do is to create a “Deal” that appeals to all parties.  This includes the necesities of funky location, decent funding, suitable share holding and excellent access to new markets as well as the non-tangibles such as maintaining control of decisions and creative direction and the provision of relevant and credible business mentors.

Credible Partners:  At the best of times entrepreneurs are generally allergic to big business so it is important that the sponsoring partners are credible and have at least some sense of innovation about their history. 

Focussed Accelerators:  Finally of major importance is that the Accelerator has a focus e.g. FinTech, MedTech etc.  This allows the Start Ups to feel relevant and the innovation to be meaningful to the sponsor.   Much as it would be amusing for Barclays to sponsor a Tech Accelerator that created another interesting digital way of booking a restaurant table it is highly unlikely to be of use to either party.  To facilitate the set up of a relevant Tech Accelerator it is of vital importance that the brokers can a) help the sponsors identify and articulate their key issues in a simple and meaningful way and b) help the sponsors select and recruit an appropriate cadre of suitable Start Ups to participate.

So what’s next for the Tech Accelerators?

I think we have only just seen the start of what is likely to be a profusion of Tech Accelerators.  As big business becomes more transparent and therefore more prone to disruption I think we are going to see the launch of more and more Tech Accelerators.  So as well as more FinTech, MedTech and Clean Tech Accelerators stand by for ProfTech Accelerators (focussed on professional services), EnergyTech Accelerators (focussed on the energy markets) and GovTech (focussed on innovation in government).   It should be a lot of fun.