The Strategist

What's so exciting about nurturing startups?

06/24/2016 - 16:45

British retailer John Lewis has joined ranks of startups investors. Until now, such investments have been made mainly by technological or financial companies. Among them are Microsoft and Barclays - they have been up for startups incubators for years. Now, their example has been followed by companies from unexpected sectors, including retailers Topshop and Asos, betting house William Hill and even frontal glass repairer Autoglass.

Dennis Skley via flickr
Dennis Skley via flickr
Business accelerators and incubators train entrepreneurs - founders of start-ups. Often, creators of the incubators provide startups with offices and opportunities for investment (usually up to 200 000 pounds sterling), or enter into contracts for cooperation with them. 

European corporations now support as much business accelerators as government organizations do. Thus, they can compete with traditional programs to attract venture capital. According to OpenAxel program funded by the European Union, corporations finance 27% of accelerators, while 32% is supported by venture capital.

John Lewis received hundreds of applications after opening of its JLAB accelerator. Among the 25 projects that John Lewis has got this month were an online service that helps women to rent clothes for a monthly subscription fee, and a software developer for prediction and detection of crime, created on the basis of artificial intelligence.

Fears that large companies can exploit inexperienced startups laid a foundation of a skeptical attitude to accelerators, funded by corporations. However, owners of accelerators say that startups do not hesitate to contact them, especially in conditions of a lack of alternative financing.

"The quality of applications received under the program shows that we receive really bright start-ups", - said Stuart Marks, the board chairman of L Marks, a company specializing in innovation. L Marks helped Topshop, John Lewis and Belron develop their business incubators programs. "The opportunity to work with your target customer during a few weeks is a very valuable experience, so we believe that we are doing a great thing for a beginner business", - he added. 

Wayra, registered in the UK, first was an accelerator of Spanish telecommunications group Telefonica. Wayra has helped companies such as Asos and American manufacturer MSD medicines hit the market. Cooperation with Lockheed Martin aerospace group allowed Restoration Partners bank to create VTC Group - a network to connect start-ups and multinational corporations.

The question is what added value such incubators create for corporations. OpenAxel’s recent study has shown that "vast majority" of the accelerators cannot adequately assess impact of its activities on the founder company. The rapid growth of such businesses, and warnings that an "accelerator bubble" may emerge mean that companies will have to focus on return on investment. "Many programs are to find the next breakthrough technology or work on a technology as exciting as blockchain is, but nobody tells how they are going to earn money", - comments General Director of VTC Auriol Stevens.