This morning Virgin Media joined the ranks of Telefonica/O2, Barclays, BBC Worldwide, John Lewis and hundreds of other corporates with their own business accelerator programme, lending a helping hand to the new generation of tech-savvy businesses.
In return for a 6% stake, startups will receive £13,000 of funding (with more on offer in return for further equity) and a 3 month programme of mentoring delivered by TechStars, a global accelerator that already works with Barclays in the UK.
Just 5 years ago you could count the number of tech accelerator programmes in the UK on one hand. Today they number hundreds and the trend shows no sign of slowing down.
More than vanity projects
Behind the corporate gloss lies the real reason big corporates are falling over themselves to launch these programmes: innovation.
It is no secret that many FTSE100 companies have struggled to keep up with the pace of technological change around them. One can only imagine if TalkTalk had even just one smart startup within its walls, perhaps its cybersecurity disaster could have been avoided.
If successful, these programmes offer leaders the chance to tap into talent and bring rapid change to slow-moving big business. For every pound a corporate puts in, even the smallest efficiency gains have the potential for millions of pounds of savings off their giant balance sheets, which could be great news for their share price.
What’s in it for the startups?
Virgin Media’s announcement comes just days after the inaugural Wayra Corporate Accelerator conference, which the The Memo took part in, chairing a panel titled “How can startups work with big corporates?“.
Jon Bradford, former MD of Techstars UK, was bullish about the future for accelerators. During the panel Bradford said:
“This is just the tip of the iceberg. Accelerators are here to stay, we’re only just getting started.”
Startups have a lot to gain too. Those that take part in accelerators are more likely to succeed thanks to mentoring programmes and access to their first big clients.
Gary Stewart, Wayra UK’s head, shared success stories where companies on his programme have won multimillion dollar contracts with Telefonica subsidiaries across the world.
Lessons to be learned
In the early days the accelerator market in the UK could be described as a bit Wild West, and the panel shared some warnings for anyone thinking of launching their own today.
Bradford lamented the trend for “startup tourism”, describing one well-known glass-walled startup office provider as “a petting zoo”, with the free beer tap there to help lure startups out.
The key is finding the right mentors to guide the young entrepreneurs. The panelists agreed careful vetting was essential to ensure the businesses get the right advice and the most out of the programme.
If conducted carefully, the prizes are up for grabs for both startups and big corporates alike. The figures speak for themselves, with startups on Wayra and Techstars programmes raising billions of dollars and boasting above average success rates.
As Bradford put it, this is just the beginning. Accelerators are here to stay, and the smart CEOs like Richard Branson are rightly putting their money behind them.
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