The New Ecosystem of Innovation: Startup Weekends, Hackathons, Incubators & Accelerators
From the Kickstarter projects that populate our social media feeds to the business associate who has a great idea, to the venture capital fund with a new offering, innovation is all around us.
Successful startups seem to be everywhere, and everybody is looking for the next ‘unicorn’ (ie. billion-dollar valuation), trying to solve the biggest global concerns, or imagining a whole new way to do just about anything.
But how do you get started? How do you choose which projects to commit to? And how deeply do you engage with the innovation projects: hands off? (simply transferring funds) hands on? (through ideation, incubation or acceleration programs). Should you join the Startup Community, and if so, how?
Very large organizations have been leveraging the power of incubators and accelerators for years. Offering a more forgiving risk/reward balance than fully internal or external R&D, more companies are starting to see the potential for their organization. As the startup ecosystem has matured it is a more accessible path than ever, even for medium sized companies.
Depending on how you engage with the startup community some of the possible benefits are:
Equity stake: the most common driver: the lure of getting a stake in a successful business at a discount.
Direct access to creative innovation & idea generation. This is particularly useful in industries that are going through a period of rapid change, or for organizations that do not have a culture of innovation.
Leadership in your sector
Developing internal managers though their mentoring of management/leadership skills
Understanding the segments of the startup ecosystem lets you identify areas that might work for you to ignite your inner innovator.
The Startup Ecosystem
There are several places to the startup ecosystem that offer access to startups, from hackathons and startup weekends to incubators and accelerators. Often competitive, hackathons involve outside assistance from participants and are intended to solve a challenge within the mentoring company. Startup weekends, such as that run by Techstars, are designed to give aspiring entrepreneurs an opportunity to find out if their idea is viable. Although these events are short they are very effective testing grounds for startups. Funding at these events often comes from angel investors.
As the startup moves from concept to reality, incubators offer functional space and other resources and often provide support to the startup for months or even years.
As the startup continues to evolve, and becomes a functioning business, an accelerator can help with the full transition to the marketplace. Accelerators are designed to speed up the development of business by helping the startup to clarify goals, prepare the more formal planning and structures that will be required, improve the product/service, and build connections. Mentoring is a key feature of this stage.
The average length of an accelerator is about 12 weeks and culminates in a “pitchfest” in which each participant is expected to deliver a quick pitch (usually 1-5 minutes) to an audience of venture capitalists, angel investors, potential customers and other interested parties, in the hope of procuring capital and customers. When it goes well, the startup comes out of the accelerator with a solid business model and good market access. Sometimes, however, a startup goes through the accelerator process and realizes that their business model isn’t viable or scalable. This ‘fail-fast’ has an important benefit to the founders: they can ‘pivot’ or change strategy and sights onto the next thing sooner rather than wasting time or money on something with limited market potential.
From the perspective of the startup, they gain more than just the funding:
Introduction to the corporate contacts, opening the door to potential customers and investors
Improved market assessment, financial plans and marketing plans and processes
Mentoring of the management team
Focus & clarification of business goals/purpose
Peer motivation/comradery
Is a corporate accelerator for you?
There are organizations who run accelerators, but corporations have seen benefits from operating their own accelerators. Involvement in an accelerator can link external opportunities with improved internal innovation within their own company. At the end of 2016 over 70 corporate accelerators were operated globally, in an effort to drive innovation and growth.
For large corporations, which are often slowed by their own bureaucracy, working with an accelerator can bring the nimbleness and fresh ideas of startups to the more the more traditional techniques of research and development labs. Less costly and complex than mergers and acquisitions, a corporate accelerator is a controlled way for large companies to involve themselves in innovative technologies and ideas.
FAB Agribusiness and Innovation
Inherently conservative, agribusiness is seen as a sector that is behind the curve in innovation. It has been slow to take up digitization, and social media has brought challenges from consumers who want to know where their food comes from, how it is produced, what the environmental impact is, if it’s fair trade, etc. Although “agvocates” can be found on Twitter, Facebook, Instagram and other social media, they are not influential enough to push back on a considerable and vocal prosumer movement.
But the image of agribusiness as resistant to innovation should be re-examined. There is strong growth in the ag-tech startup ecosystem all over the world: Israel alone has more than 400 ag-tech startups. Accelerators such as Village Capital, the Yield Lab, Thrive and Terra have sprung up to help startups transform agriculture. And a closer look at the food, agriculture and beverage sector (with the wonderful acronym ‘FAB’), indicates a vibrant involvement with the startup ecosystem. Alltech recently commissioned a survey of 250 companies in the FAB sector, assessing the level of innovation based on their involvement with hackathons/startup weekends, incubators, accelerators and venture capital (VC) funds. The companies surveyed ranged from leading grocers and supermarkets, to the world’s biggest producers of meats, poultry and fish, equipment manufacturing, animal health and crop production. All companies had in excess of one billion dollars in sales.
Based at the consumer end of the sector, food and beverage firms had interesting differences in how they are approaching the startup ecosystem. More than half of the food companies had an affiliation with a hackathon/startup weekend, nearly two-thirds run some type of incubator or accelerator program, and half had some form of venture capital funds. By comparison the beverage companies were much less involved with startups: 30% participated in hackathons/startup weekends, 20% in incubators, 16% in accelerators and 14% had a VC fund.
On the other hand, while the agriculture sector was not as involved with hackathons/startup weekends (just 19%), and incubators (17%), a quarter of the companies had hosted an accelerator and more than a third operated a VC fund.
Of the entire survey, 16 companies utilized all four methods, with a further 18 of them used three of the four. Interestingly, a whopping 76 companies hadn’t been involved with any of these programs.
IGNITE Innovation
Accelerators are increasingly working with medium sized companies, in tailored programs that work with the specific strengths and goals of the sponsoring company. If you are considering working with an accelerator, IGNITE pulls lessons drawn from direct experience into a handy tool for developing and running a successful program:
Intention – Define your intentions and decide if an accelerator is right for your company.
Group – Create a special group or team to design and oversee the program.
Neighborhood – Provide the cohort with an off-site neighborhood locale for uninhibited focus.
Independence – Ensure the startup engagement is independent of day to day commercial efforts.
Transparency – Be transparent with the cohort on the goals and opportunities of the program.
Expertise – Recruit the best experts and specialists you can, internally and externally to run the program and mentor startups.
Of course, there are risks for both sides in an accelerator. For the startup company, corporations can be too dominant or directive, and the startup can be pulled into office politics or bureaucracy.
From the sponsoring company’s perspective, an accelerator can be a drain on resources (financial, human, operational). Reputational risk has to be considered: bad publicity or even scandal in the small startup can reflect on the corporate sponsor.
On the other hand, there are risks for not being involved with startups: missing the opportunity to be in touch with market shifts, or of seeing where the technology trends are heading.
Corporate accelerators are a viable way for agribusiness companies to gain access to new ideas, innovations and technologies. While there is a lack of published articles to provide guidance, the IGNITE acronym provides a six-point tool that can help effectively develop and implement an accelerator program.
Case Study: The Pearse Lyons Accelerator
Given the strength of Alltech’s inhouse research team, and the company’s reputation for innovation it might seem odd that the company created an accelerator. For Alltech, the choice had more to do with staying ahead than catching up with change. To embrace areas of innovation in which they did not have expertise, and to gain access to upcoming new technologies and ideas, Alltech decided to run its first accelerator.
In partnership with Dogpatch Labs (Dublin, Ireland) a cohort of 10 companies was selected from 183 applicants, representing 38 countries. Each company had a proven technology and a scalable business model and had on average already raised $3 million. Each participating company received a €15,000 stipend and a workspace in Dogpatch and mentoring from multiple perspectives (strategists and CEOs in agriculture, technology and business). The accelerator ended with a “pitchfest” style presentation at Alltech’s annual conference, putting the startups in front of an audience of 3,000 FAB professionals. The ten startup companies accessed 28 new markets and collectively achieved more than US$60 million in qualified sales leads.
The program received significant press coverage (more than sixty major articles were published within the first few months, featuring either Alltech or one of the participating startups), equivalent to nearly $500,000 in advertising space. An unexpected benefit was the personal and professional development of the 10 mentors who had worked with the startups.
A post-program evaluation, called a Net Promotor Score, grades programs between -100 and 100; a score of +50 is considered excellent; +70 is ‘world class’. For Alltech the startups gave the program a +55.56 NPS, while the mentors ranked it at +70.00 NPS.
The success was such that program was run again the following year, with similar results. Overall, the company has found that the program has reinvigorated the entrepreneurial spirit within the company, a challenge for all companies as they grow.
The acronym described above is designed to serve as a tool for agriculture, food and beverage companies interested in growing a corporate agribusiness accelerator. It is taken from an original paper “IGNITE your corporate innovation: insights from setting up an ag-tech start-up accelerator,” published by IFAMA and Wageningen Academic Publishers.
Many thanks to Dr. Kate Phillips Connolly and Alexa Potocki for their contributions in writing.
