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May 27, 2015

Why don’t we see more corporate accelerators in Canada?

As we move forward on a major project evaluating the business accelerator and incubator landscape in Canada, one of the interesting findings is the lack of a Canadian corporate accelerator scene. This is in contrast to a wide range of corporate accelerators found across industries in the US and Europe.

Take for example the following examples –

In food and beverage: The Chobani Food Incubator was launched in late 2014 in NYC with a budget of $2 million to fund a first cohort of up to 10 companies. Chobani will provide participants with test kitchens, office space, mentorship, and access to company staff and experts. In December 2014, Marriott International launched CANVAS,  a food and beverage incubator that offers up space and mentorship at 6 Marriott locations in the US, Europe and UAE. Along with space comes up to $50,000 in capital investment. Coca Cola Founders offers a slightly different model insofar as the group funds not companies but individual entrepreneurs. By engaging them in Coke’s ecosystem, the company hopes to find solutions to its and other major problems. Launched in 2013, the initiative has spawned 9 companies so far.

In financial services: In August 2014 Wells Fargo launched its acceleration program aimed at fintech startups. The first cohort of 3 companies (detailed here) receive up to $500,000 in funding with the long-term goal of becoming part of the company’s supply chain. A different model in the fintech space is the Barclays Escalator program . The 13-week accelerator program is run by TechStars in New York and London and offers 10 spots at each location. Participants receive up to $120,000 in funding in exchange for between 6-10% equity. TechStars, and not Barclays, takes the equity stake in the companies and offers the programming. Barclays provides mentors and access to data and technology.  TechStars runs a series of similarly collaborative accelerators with other corporate giants such as Disney, Microsoft, and Sprint.

In manufacturing and design:Nike offers 10 companies per year the chance to participate in its FuelLab accelerator. The company seeks out later stage startups who are likely to be able to launch a product to market thanks to the 12 week program. Nike takes a 3% equity stake in participant firms. In 2012 Volkswagen launched an accelerator out of Plug and Play in the Valley aimed at transferring technology from a variety of industries into automotive. Participants receive 3 months of space at Plug and Play, access to Volkswagen mentors and expertise, as well as vehicles, to help dream up the next connected car.

 

Now, to be sure, it’s not quite accurate to say there’s no Canadian activity. Retail giant Canadian Tire and financial services players TD Canada Trust and Manulife have physical presences at innovation hub Communitech. These setups however see employees seconded to these offices where, through immersion and interaction with other startups and entrepreneurs, they hope new innovations will spring. This is very distinct from the model seen elsewhere that funds external expertise working on related but not necessarily directly tied products and services.

It’s worth asking why we don’t see this type of innovation relationship in Canada. Are big Canadian players less willing to invest and risk in these spaces? Or are they content in being able to access the relevant ideas and the entrepreneurs that emerge from publicly-funded accelerators through collaborative partnerships or lighter forms of engagement?

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