Corporate accelerators have become an integral part of the startup ecosystem, offering resources, mentorship, and networking opportunities. However, the real question remains: do corporate accelerators genuinely benefit startups, or are they primarily designed to serve the interests of established corporations? Andrea Lo Verso (2022) provides an empirical analysis of how corporate accelerators impact startup performance, specifically differentiating between vertical and horizontal corporate accelerators.
This article analyses corporate accelerators and their effect on startup performance, making it relevant for both founders and corporate strategists. This post represents a series of articles related to a research and dissertation called “Are corporate accelerators springboards for startups: a performance analysis of the Microsoft’s and Google’s accelerated startups“.
Understanding Corporate Accelerators
Corporate accelerators are defined as company-supported programs that help startups develop their businesses through mentorship, education, and company-specific resources. These programs are categorized into two main types:
Vertical Corporate Accelerators: Industry-Specific Support
Vertical corporate accelerators focus on startups that align closely with the core business of the corporate sponsor. These programs provide industry-specific mentorship, funding, and access to networks that facilitate rapid integration into the corporation’s existing operations. Startups selected for these accelerators benefit from guidance tailored to their sector, ensuring they receive insights relevant to regulatory challenges, technological developments, and market positioning.
One of the most significant advantages of vertical corporate accelerators is their ability to streamline the innovation pipeline for corporations. Since these accelerators select startups that align with their industry, the collaboration is highly synergistic, enabling startups to scale efficiently within an established corporate structure. The corporation, in turn, benefits by staying ahead of market disruptions through early-stage investments in promising startups that complement their existing business models.
However, startups entering vertical accelerators may face strategic limitations due to their dependency on the corporate sponsor’s vision. While the resources and industry-specific mentorship are invaluable, startups may find themselves constrained by the corporation’s long-term goals rather than having the freedom to explore independent growth trajectories. This can lead to acquisition rather than expansion into broader markets.
Horizontal Corporate Accelerators: Broad-Based Innovation and Networking
Horizontal corporate accelerators, in contrast, take a more open-ended approach. These programs welcome startups from various industries, providing broad-based knowledge, general business mentorship, and diverse networking opportunities. Unlike vertical accelerators, horizontal accelerators are not limited to one industry, allowing startups to develop more versatile business models and explore a variety of market opportunities.
One of the key benefits of horizontal corporate accelerators is the opportunity for cross-industry innovation. By bringing together startups from different backgrounds, these programs encourage knowledge exchange, collaboration, and the development of novel solutions that might not emerge within a single-sector environment. This diversity fosters creativity and allows entrepreneurs to approach problems with fresh perspectives that integrate insights from multiple industries.
Despite these benefits, horizontal accelerators may lack the depth of industry-specific support that vertical accelerators provide. Startups in these programs must be proactive in seeking specialized mentorship and building industry-specific connections on their own. Additionally, corporations sponsoring horizontal accelerators may not have a direct stake in any particular startup’s success, which could limit the depth of engagement and long-term strategic partnerships compared to vertical programs.
Key Findings from Lo Verso’s Study
The research conducted by Lo Verso (2022) presents a data-driven examination of how these different accelerator models influence startup performance. Three key performance metrics were analyzed:
- Total Equity Funding Amount – The total investment attracted by startups post-acceleration.
- Acquisition Status – Whether the startup was acquired post-acceleration.
- IPO Status – Whether the startup went public post-acceleration.
Impact of Vertical vs. Horizontal Accelerators
| Performance Metric | Vertical Accelerators | Horizontal Accelerators |
|---|---|---|
| Total Equity Funding | Higher funding due to industry alignment | Moderate funding due to diverse investment opportunities |
| Acquisition Status | Increased likelihood due to corporate synergies | Lower likelihood of acquisition |
| IPO Status | No significant impact | No significant impact |
Key Takeaways
Vertical accelerators provide startups with stronger financial backing, which significantly enhances their ability to secure funding and scale operations. This financial advantage also increases the likelihood of acquisition, as these startups are often well-integrated into the corporate sponsor’s industry. The alignment with established businesses ensures that startups receive the necessary resources and strategic guidance, making them attractive targets for mergers and acquisitions.
On the other hand, horizontal accelerators offer startups greater exposure across various industries, allowing them to establish connections beyond a single corporate network. This broad-based approach encourages innovative collaborations and diversified business opportunities. However, due to their industry-agnostic nature, horizontal accelerators may not provide the deep-rooted sector expertise or direct corporate backing that could lead to acquisitions. Startups in these programs must work harder to identify suitable industry partners and funding sources on their own.
Interestingly, neither vertical nor horizontal accelerators have been shown to significantly impact a startup’s likelihood of going public. While accelerators offer mentorship and networking benefits, they do not inherently prepare startups for an initial public offering (IPO). The factors influencing a startup’s IPO trajectory are often broader, including market conditions, investor interest, and the startup’s long-term financial performance. Thus, while accelerators play a vital role in early-stage growth, they are not necessarily a direct pathway to public market success.
Do Startups or Corporations Benefit More?
One of the critical discussions in Lo Verso’s research is whether these accelerators are truly designed for startup success or if they primarily serve corporate sponsors.
Benefits for Startups:
- Access to funding and mentorship
- Industry-specific networking opportunities
- Higher chances of acquisition for vertical accelerator participants
Benefits for Corporations:
- A pipeline for acquisitions, enabling corporations to acquire innovative startups aligned with their strategic goals
- Exposure to emerging technologies without internal R&D investments
- A competitive advantage by integrating disruptive innovations into existing business models
This dynamic suggests that while startups do gain from participation, corporate accelerators may be strategically positioned as scouting programs for corporations rather than purely growth enablers for startups.
Conclusions and Final Thoughts
Lo Verso’s study provides critical insights into how corporate accelerators shape the startup landscape. Vertical accelerators offer more tangible benefits to startups, especially in terms of funding and acquisition opportunities, while horizontal accelerators provide broader but less targeted support.
However, the question remains: Are corporate accelerators a win-win model, or do corporations gain disproportionate advantages? While startups can benefit from resources and funding, the overarching structure of these programs suggests they are designed to serve corporate innovation strategies first and foremost.
By analyzing the insights from Lo Verso (2022), it becomes evident that while corporate accelerators provide advantages to startups, they are strategically positioned to serve corporate interests first. Startups must carefully evaluate whether these programs align with their long-term growth strategies before participating.
FAQ
While they provide essential resources, their effectiveness varies. Vertical accelerators tend to be more beneficial in securing funding and acquisitions, whereas horizontal accelerators offer broader but less industry-focused support.
Yes, particularly those in vertical corporate accelerators due to alignment with corporate sponsors’ business interests.
No significant correlation was found between participation in corporate accelerators and IPO likelihood.
It depends on the startup’s goals. If alignment with a corporate sponsor is beneficial, a vertical accelerator may be ideal. Otherwise, independent accelerators might provide more flexibility and diverse funding opportunities.
To some extent, yes. These programs allow corporations to integrate innovative startups into their ecosystem, often leading to acquisitions rather than fostering independent startup growth.
References
- Lo Verso, A. (2022). How do corporate accelerators influence the startups’ performance? An empirical analysis of vertical and horizontal corporate accelerators. Entrepreneurship Research Journal. Università degli Studi di Palermo.
