From Silicon Valley to Silicon Roundabout, the proliferation of start-up accelerators has seen brands such as Google, Nike and Telefónica provide financial and non-financial incentives to give emerging companies a push towards achieving their ambitions, but what do both parties gain?
The financial boost may seem like the number one reason for start-ups to work with major brands and corporations but it is the added benefits that come with the programmes that hold greater value.
“There’s no doubt funding is important but usually the funding that accelerators provide is minimal,” says Eze Vidra, Google’s head of Campus (a space in East London which provides seven-floors of co-working space for start-ups).
Vidra adds: “The non-monetary value is very high and it gives certain start-ups, especially first-time founders, a leg-up when it comes to making the right choices and focusing on launching a product. The value is in the mentorship, skills, education and inspiration, and in many cases the value comes from being selected. It’s like a form of validation.”
It works both ways, as mentors working with start-ups are given access to the frontline innovators in their industry sectors, knowledge that also helps in their roles.
Red Bull Music is the latest company to arrive on the start-up accelerator scene with the launch of Red Bull Amplifier last month.
The brand claims to ‘redefine’ the model by helping innovative music start-ups take the next step by giving them access to its global channels and international network of music properties and events.
In effect, Red Bull is giving its fans the latest in new products and services that aims to enhance their music experience while the start-up is able to work in partnership with a big brand and its networks.
Like all start-up accelerator programmes, the first step is applying. In the case of Red Bull, applicants are screened by expert judges including Mercury-nominated Ghostpoet, Red Bull Music Academy’s Davide Bortot, Venturebeat’s Ciara Byrne and SoundCloud’s vice-president of business development Dave Haynes.
Wayra, Telefónica’s business incubator that operates 13 academies across 12 countries, aims to help digital start-ups with funding, mentoring, access to legal and financial advice, new technologies and premises (see Q&A, below).
In March, Wayra helped cyber security start-up PixelPin secure the maximum investment of £150,000 through Seedrs, an FSA-regulated crowd-funding platform for start-ups. PixelPin’s software replaces traditional passwords with pictures that are unlocked by tapping specific points on the image.
Charmaine Eggberry, academy director at Wayra UK, says: “That word acceleration is something we take seriously so this isn’t just a case of giving start-ups a tiny bit of capital or a few mentors and walking away; we actively want to help them become the success that we believe they truly can be.”
Meanwhile, Turner Broadcasting, which operates CNN and Cartoon Network, started its San Francisco-based Media Camp accelerator programme in 2012 and recently expanded to Los Angeles. It offers start-ups the opportunity to work with Warner Bros executives to develop technology and products for the entertainment industry via a 12-week mentorship programme and $20,000 in funding, with potential for commercial agreements.
Turner originally started Media Camp because of the increasing reversal in media companies becoming tech-focused and technology companies becoming media-focused.
Brian Sathianathan, senior director of emerging technology at Turner Broadcasting, says: “We thought about how Turner will innovate and how it will provide thought leadership in this environment.”
Turner capitalised on a need in the media ecosystem for brands to provide an acceleration capability for companies that are providing technological solutions in the media space.
The value for Turner lay in status and knowledge as it can be seen as thought leaders and can become quickly aware of leading technologies in the industry. “Start-ups innovate really fast. It’s opportunistic because we can supply solutions to the brand faster with some of the solutions that the start-ups bring in,” adds Sathianathan.
The value of mentors is also stressed at Media Camp. Each start-up is paired with a senior-level executive mentor working at Turner, who becomes a champion in bringing their start-up companies into the brand.
Last month, Nike announced its first Nike+ Accelerator programme, based in Portland, US. It will host 10 companies for a three-month mentor-driven accelerator, which aims to support the existing Nike+ platform to create products and services that inspire athletes.
Nike UK & Ireland communications director Ryan Greenwood says: “Mentors play an important role in delivering a high-quality experience. Nike is providing company leaders to mentor and work with the companies. In addition, our partner TechStars is activating its global partner community to help support these start-ups.”
The Nike mentors are made up of Nike executives, industry leaders, entrepreneurs and investors, including Stefan Olander, Nike’s vice-president of digital sport and Naveen Selvadurai, co-founder of Foursquare.
At Google’s Campus, inspirational talks are given by the likes of Google’s executive chairman Eric Schmidt, chief financial officer Patrick Pichette and head of social Brad Horowitz. Although it does not have its own accelerator, it holds educational programmes to help start-ups.
This occurs through weekly mentoring programmes where every Friday ‘Googlers’ mentor start-ups on different topics, for example advertising and monetisation or product management. In almost a year, more than 350 start-ups have been mentored by over 200 experienced Googlers.
Google’s Vidra says: “It’s a not-for-profit activity for Google, so the value is not in generating cash, we don’t necessarily intend to buy the companies at Campus, which was a conspiracy theory, we didn’t need a building to find companies to invest in or buy. The value for Google is creating a strong start-up ecosystem in London and broadly the UK, which eventually will benefit not only Google but the entire industry.”
As with any brand activity, the spend needs to be accounted for in the return on investment. Turner’s Sathianathan says: “In any company, justifications have to be there. Our goal in this scenario is to internally see the value in terms of new technology that it brings to the company as well as creating that experience of Turner being a thought leader. That’s the biggest value for us.”
For Telefónica, this is a simple conversation. Eggberry says: “It’s a relatively straightforward conversation when you can show the return on investment from these businesses. We are making an investment on a capital level into those businesses and we play a very active role in ensuring those businesses become successful.”
Marketing Week (MW): What is the value for Telefónica in Wayra, its start-up accelerator?
Charmaine Eggberry (CE): It’s a manifestation of the strategy that Telefónica is pursuing to be at the forefront of technology.
By making early-stage investments, as we are, there is a direct link [between us and the start-up] and this is a physical way of showing that Telefónica is serious about a strategy and is committed to executing that. In this way we are also able find out what our consumers want through these businesses.
We are also making a direct contribution to the economy and feel that we are giving something back by trying to accelerate and invest in the start-up community and in entrepreneurialism as a whole.
MW: How are the financial resources required for Wayra justified to the Telefónica board?
CE: It’s a relatively straightforward conversation when you can show the return on investment from these businesses. We are making an investment on a capital level into those businesses and we play a very active role in ensuring those businesses thereafter become successful. We have them here in our building, we actively manage – so we have reporting mechanisms that show the return on investment. Whether they are here or if they leave and become alumni, we continue to play an active role in helping them be successful.
MW: Are start-up accelerators the best way to get the latest innovation and ideas in the industry?
CE: It certainly does put you right at the forefront. These are businesses from all walks of life, the thing that they have in common is that they are digital businesses so they are talking directly to their consumer base every day. I believe that we are able to understand what our consumers want, see what kind of technology they respond to and we are able, on a very practical level, to get ahead of the curve.
MW: How important is it to include non-financial rewards such as mentors?
CE: It’s vital. We have an ethos at Wayra that makes us slightly different to other accelerator programmes in that we passionately believe that it takes both great people and great ideas to be successful. To that end we really focus on ensuring the board advisers and the network of people that we offer the start-ups have to be world-class and the mentors that we provide them have to make an enduring difference to their business. We all understand as business people that a great idea only takes you so far, you need great people to execute that idea.
MW: It’s been over a year since Wayra launched in the UK. How successful has it been so far?
CE: I just finished exit interviews with the organisations. The very real and sustainable difference that has been made to those businesses over the period of time they have been here is phenomenal and they will all attest to that. That is something that sets Wayra apart, this great passion for what has been achieved here and what we can go on to achieve.