Accelerators and Incubators are becoming strangely mainstream in tech, and FinTech especially. Hooking up small names with funding and opportunity, accelerators seem like a great win/win/win situation for backers, creators, and consumers. Of course, like everything in business, there is always a dark side. When tech startups get in bed with big banks and corporations to succeed, who really wins? Does that relationship support progress, or undermine it?
Big brands and banks are notoriously unable to get with the times. Due in part to their sheer size, it is far from easy to implement innovative new ideas. Preoccupations with their “legacy” technology, thinking, and processes, often leave them unable to implement the great, new tech that has us drooling. What are big brands to do when they can’t beat startups? The answer:
Incubate and Accelerate
Accelerators and Incubators were created to lend office space, funding, and valuable mentoring to startups at varying levels of development. Those in charge get a small stake in the startup, and the startup team gets the chance to connect, develop, and succeed. Corporate incubators and accelerators take this to a new level: they want these startups to not just succeed, but to bring something good back to the parent company.
The Pros of working with corporate pro’s
There are weighty pros that accompany teaming up with big brands. Apart from the great knowledge, money and opportunity, they have perks that can only be given by a major company. They specialize in clearing international red tape, simultaneously easing the many headaches of a startup, and giving them a leg-up on competition. They may realize that your startup is absolute gold, and buy, invest, or send customers your way.
Complete our SAP x Data Natives CDO Club survey now, and help us to help you
Moreover, folks don’t trust random designers in an office, but they do trust international household names. Corporate accelerators and incubators offer trust and credibility—traits that are beyond vital in the financial industry. In the end, a corporation ties itself to a startup because they hope an invention will work within real company goals. For startups, this can be a god-send. That corporation doesn’t just want you to finish a product, they want it to succeed.
The Cons, along with a dose of skepticism
There is a vital piece of information FinTech startups should know: banks need you. This has even been said by Rhydian Lewis, CEO and founder of the peer-to-peer lender RateSetter.
Even the most genuine of corporate accelerators carry baggage. As discussed earlier, large companies cannot simply change and innovate at will. It is the very nature of their business structure. Mentors and advisors impart not only their own specific corporate objectives, funnelling you into whatever direction may most benefit the head company, they will share the same style of business thinking. Rather than an array of business sizes, types, and styles, they will be strikingly similar. There’s no other word for this than indoctrination, no matter how accidental it may be. When you’re learning from one company, you aren’t going to see all of the options.
Many early startups might also feel invigorated just to be eyeballed by a major company. They may be willing to forego steps a later stage startup would take. For example, being wary of tying an impartial startup to a big name. What happens if your startup parts ways with their accelerator company, or you simply continue innovating in different directions? Other corporates may be wary of taking on a company that is associated with a competitor’s name, processes and ideas.
Bigger is not better for innovation
Large companies inspire ideas of stable work and funding, but that is hardly the case. Rather, their fickleness stems from their position as slaves to the market. They make changes and decisions based on necessity.
Furthermore, choosing a corporate accelerator is almost harder than choosing an ordinary one. With big shiny corporate names and connections attached, it seems like a dream. It’s hard to say “no” to Wells Fargo, Disney, Samsung, or Sprint. It’s also unnecessarily easy for such corporations to set up and back accelerators and incubators. The amount of money and marketing invested doesn’t mean the given accelerator is any good. And these quickly created accelerators may close as quickly as they began.
Conflict of Interests
Startups, you have the power. Thanks to the grassroots phenomenon, people are falling head-over-heels with the startup culture. But what happens when innovation doesn’t mean real profit?
Non-corporate accelerators have much more in common with startups than their corporate counterparts. Both are looking for real, cutting-edge, disruptive innovation that will make money. They aren’t tied down to a massive corporate brand or established needs that inherently stifle progress. Droves of startups running to corporate accelerators hurts these independent accelerators. Though working with early stage startups and fostering outside innovation isn’t a core value in big companies, they’re able to coax and rope creators thanks to their money and name.
Lastly, even when a company finds your tech useful, that doesn’t mean they’ll be using it. One participant in a Shellbacked accelerator found that ties to the parent company was not only useless, but hurtful. Matt Bell of Houston based GeoDynamics found that other companies were put off by Shell’s slow integration of Bell’s work. When the parent company doesn’t use your technology, potential buyers are left wondering why.
Image and Branding Problems
What do consumers think about startups and corporations partnering up? If you aren’t worrying about “selling out” by working with a big company, you may worry about public perceptions of your company. Startups hold an allure that is all their own. When Simple, a beloved “anti-bank” banking system, was acquired by one of the world’s larger banks, the biggest fear was losing customers and engineers who loved Simple specifically because it wasn’t tied to big corporate agendas. The story of Simple is complex and merits an article all its own, but it reminds creators how important branding is. Describing their own corporate accelerator, Coca-Cola VP of Innovation and Entrepreneurship, David Butler, states “we need teen engagement in our brands or we’re done,” hence bringing in outside entrepreneurs and startups. Big companies can consume genuine and lovable brands in a heartbeat. This begs the very real question: if corporates are desperate to enlist hip startups, why hand over that power?
People of all backgrounds and intentions are founding tech accelerators. As a startup, it’s vital to understand what these accelerators want from you. The goal of many FinTech startups is to be integrated into big corporate systems; they want to work with established companies, and corporate accelerators will let them do just that. However, that is not a blanket answer to the funding question. Plenty of startups will succeed under the watchful eye of their corporate accelerator. We mentioned Barclays in our list of top accelerators, because they’ve had great results and successes. Still, corporate accelerators and incubators should not be seen as elusive golden tickets.
Big companies need disruptive startups. Big banks need FinTech innovators. Without outside brains, many of these companies are done for. Don’t undervalue your startups and innovations.