Whether and How to Invest in Startups Through Corporate Accelerators

University essay from Högskolan i Jönköping/IHH, Företagsekonomi; Högskolan i Jönköping/IHH, Företagsekonomi

Abstract: Background: For the past decade, large companies have discovered the high value andpotential to invest in external startups, not only for the financial returns but also moreoften for strategic benefits. Today's corporations boost their innovation in many differentways, and the most successful companies use several different sources of innovation, suchas open innovation, corporate venture capital, incubators and accelerators. One of theinnovation tools, namely Corporate Accelerator (CA) is a relatively new phenomenonthat has gotten much attention lately. An accelerator distinguish itself from otherinnovation tools partly by its deeper focus on business development, which aims atdeveloping startups by providing education within several relevant topics such as finance,marketing, management, mentoring, training program and networks. Accelerators alsodiffer from other innovation models in the way that they are more focused on individualor angel investors as future investors, and less on venture capitalists, and they also oftenbegin with a pre-seed investment in the exchange of equity. Purpose: Due to the limited research made within this field, most studies have relied onmedia and self-collected data, rather than, already developed and existing scientificliterature. The vast increase of use in these territories makes it relevant to explore to gaindeeper insight regarding how CAs can and should be designed. We aim at finding outmore about how different designs of CAs are related to successful investments andthereby provide further directions for corporations, startups, investors and future research.Our focus lies within if a CA is a successful way of investing in startups, and if so, howshould a corporation invest. Method: Empirical data was gathered through semi-structured interviews with differenttypes of accelerators and startups that have participated in accelerator programs. Theauthors have been using grounded theory with an internal realism and positivismapproach. The collected data was analyzed and compared with previous research, but alsothe foundation to answer the research questions. Conclusion: For now, there is limited knowledge about CAs in terms of how they shouldbe designed to reach a certain goal, adopted to the needs of the participants and what aCA really want to accomplish. We can see how previous research tries to distinguishdifferent types of CA by its characteristics, designs, approaches and objectives. Inconclusion, we provide a suggested model of how to invest in startups through corporateaccelerators in consideration of hosting your own or joining a third party CA. Our modelshows when a corporation initiates the decision of being a part of an accelerator, it canchoose to host their own or join a third party. The choice includes several trade-offs.

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