Offering startups workspace, mentoring and funding is a good start. But it’s not nearly enough for startups that want to sell their products to a company, says Daniël Horn. The traditional accelerator model is changing and this is good news for B2B start-ups.
The challenge can be summed up with that familiar cliché: ‘I just don’t feel the same about you.’ Many startups are still developing technology that does not solve any real problems. Startups (and even established businesses) have learnt a lot from the likes of Eric Ries and Steve Blank, founders of the Lean Startup Movement. Remember, for example, client appreciation and the idea to start small to upscale fast. Yet, I still come across startups with interesting technology but whose focus is on the wrong product-market combination.
Accelerators, focused programmes that speed up the growth of a startup through mentoring, housing and funding, play an important role in the ecosystem. They can attract international teams and spur the growth of the startups. Well known accelerators are Y Combinator, TechStars and Rockstart. Y Combinator is the most famous of these accelerators; more than eight hundred startups have participated in its ninety-day programme, which has attracted companies like Airbnb, Dropbox and Reddit. Amsterdam-based Rockstart has a longer programme of 150 days for startups to fine-tune their businesses and prepare for upscaling. Alumni include Peerby, Owlin and Cupenya.
Even though these programmes offer enterprise-focused startups a robust foundation, one important element is missing: a clear demand. In the proof-of-concept phase, startup founders spend a lot of time looking for a client with a clear need for their solution and the risk appetite to spend their budget on a startup. It is fairly common for startups to have a great initial meeting with a company’s innovation manager, which is then not followed up through a lack of interest. The problem is that the innovation manager, who is responsible for maintaining good relationships with the startup ecosystem, wants to create the impression of an open culture within the organisation and is a startup enthusiast by nature. However, the business is already overburdened with its own challenges and can only be distracted by a solution that fits its exact needs.
How much easier would it be, if we started by identifying the problems that these corporates face? If we know what large organisations want and need, it should not be hard for a bright startup to develop solutions to fit this purpose. Or identify technology that is already 80 per cent usable. What if we added scale to this approach, and build an accelerator founded on specific organisational challenges? An accelerator that already has a client base even before the start-ups join the programme?
Challenge-driven accelerators work from a corporate’s perspective. They connect startups and corporates to help them gain mutual benefits. Startups get access to corporate clients while the corporates can use the open innovation to tap into the startups’ capabilities. Using startups’ existing technological solutions, corporates can apply lower risk against lower costs while enabling rapid experimentation and supporting a creative mind-set. One of the first accelerators to work this way is The Bakery. It specifically targets the advertising industry to transform its business model.
This new type of accelerator could be applied to other sectors like energy, financial services or health. The challenge-driven accelerator uses a set of elements that are inherent to its success. The Bakery first focuses on a specific challenge that arises on the corporate side. This ensures that there is demand for the innovation, that the client is already involved and that there is a clear objective. Second, the programme is short: from the first meeting to the solution in only ten weeks. Finally, The Bakery ultimately also benefits from the deal because it receives part of the deal that the startup closes with the company. Instead of shares, the accelerator takes a performance-related commission once the solution goes to market.
The Bakery was founded in 2013 and has already acquired clients such as BMW, Unilever and Virgin. The model seems to work for companies in the marketing and advertising world, but has not yet found its way to other industries. Other existing or new accelerators may want to consider adding elements from the challenge-driven accelerator business model to their current model to gain a competitive advantage on the congested accelerator market. This can create a new wave of accelerators in the ecosystem and perhaps also disrupt this sector. KPMG Innovative Startups is currently also in the process of developing a challenge-based programme.
KPMG bridges the gap between corporates and start-ups. One of its activities is to design and run an innovation engine that can generate products from successful ventures. The developed products and services can help create future-proof or new business models. KPMG’s experiences include supporting the blueprint of Holland Fintech (the Dutch Fintech community), setting up and managing Energise, the largest energy accelerator in Asia-Pacific, and Fintech Hub Stone & Chalk in Sydney, Australia.
Author: Daniël Horn, founder of KPMG Innovative Startups