I visit perhaps the biggest business ‘accelerator’ in the world and ask what it does and how it does it.
Telefonica, an international telephony company, comparable in size to Vodafone, and owner of O2 among other international businesses, has committed itself to establishing an international network of the latest form of incubator – out of concern that it was becoming dependent on Silicon Valley for it new products and at the lack of available support for the growing number of innovative start-ups in South America. London’s Wayra Academy is its tenth such accelerator, and its largest so far; and after London, three more will open in Europe. Wayra claims to have had some 12,500 project proposals for places in its academies, and to have started 172 new businesses from its global accelerators so far. And I ask what are the advantages and the disadvantages of size.
The generous terms are likely to have attracted high quality candidates. Both the teaching and the learning from one another will be more diffuse than in smaller ‘accelerators’; and the mentoring will be more difficult to manage; but the big throughput and the possible benefits to the sponsor will be enhanced, though the investment is substantial.
In London, in March 2012, a thousand applicants were whittled down to 33, who presented their ideas or proposals to a sort of Dragons’ Den, from whom sixteen were selected to join the incubator in June. To selected businesses, Wayra’s offer is:
An investment of up to €50k
Six months in state-of-the-art workspaces
Expert support and mentoring
A global network of entrepreneurs
In exchange for 10% equity
and right of first refusal of products.
Each team (teams are between 2 and 5 members) has an area partitioned off from the others, around the outside of an enormous single-floor area in a central London building; and in the middle of this area are recreation facilities (eg table tennis, darts etc), informal meeting and sitting areas, and an ‘Agora’ – a large open space where meetings of all kinds can be held. Teams are guaranteed a six month ‘tenure’, which might possibly be extendable for a further three months, but is very unlikely to exceed twelve months.
Support provided includes Board Advisers, personal mentoring, lectures and masterclass sessions and networking – which will depend on Telefonica’s connections in the UK, and collaborative knowledge sharing.
This is big – in four respects: it is probably the best offer yet made to aspiring businesses; the six months tenure offered to participants is the longest duration so far on offer (and six months is very much in line with that latest thinking for IT accelerators); the London incubator is the largest of its kind so far; and Telefonica’s international network of incubators is the largest in the world so far. So can size work? There are advantages and disadvantages: but it seems to have attracted some businesses with potential for both parties.
The large size of the incubator enables a high throughput. It makes it possible to start two cohorts of say a dozen new businesses per annum for their six months tenure, and still have some accommodation for one or two start-ups from previous cohorts that may benefit from an extra month or so in the incubator.
Twenty new businesses (there is space for 20, though at present there are only 16) in the incubator (rather than say 10) may enhance the range of opportunities for learning, (and for begging, borrowing or stealing) from one another, but it makes it that much more difficult to find something useful from one another: informal contact with other teams is more diffuse – in these larger team areas and with no sign of kitchen areas, so valuable chance encounters are that much less likely.
Formal learning exchanges (at present each week only one incubatee team may present their learnings) are more time-consuming, and where facilitated by intranet contact not necessarily of the same quality. And formal learning events are less easily targeted where the audience’s learning needs are more varied (in order to deal with this, University College London has started to run several streams, each with a different emphasis). Semi-formal support – mentors, advisers etc, which needs moment-to-moment management, is less easy to tweak to the changing needs of the incubatees.
The large incubator management team – boss and deputy running the programme, plus two technical people with contacts into O2 and Telefonica makes for very effective technical support and for potential benefits to the parent business – in the form of new products; and the generous terms are likely to be helpful. And the worldwide network of Telefonica’s incubators provides potential opportunities for learning from other incubators about the running of incubators themselves, and more practically making it possible for teams to be relocated for periods of their tenure in other countries. It also makes it easier for Telefonica to adapt new products from one market to another market and to scale up potential winners globally.
The two teams I met both had IT products with evident benefits, but in a sector of hyper-invention their technical and commercial development is never without competition or uncertainty; you never know what will happen.
The €50k contribution to each team is a generous contribution to (and valuation of) the selected incubatees, and is likely to be a significant factor in attracting applicants, even though the requirement of a 10% stake in their equity in return exceeds the size of the stake required by the managers of any other incubator.
Telefonica’s initiative entails a commitment for investment of perhaps
€1.6mn pa for businesses in the London incubator alone aside from the cost of providing support and running the incubator or any share of the cost of setting it up; and for a total investment of perhaps €16mn pa for its investments in all those incubators completed or planned so far, let alone follow-on costs.
Whatever else it is, it is a dramatic investment in innovation. But Telefonica emphasises that ‘the rules are not yet written’!
* Springboard – a new ‘Accelerator’ programme for early-stage ventures (See http://goo.gl/7zr9J)
* Accelerator Learning Programmes – for very early-stage venturers (See http://goo.gl/44KKq and links to examples.)
* Tracking innovations in the development of innovations:
Nesta’s work on Accelerators (The Startup Factories, see http://goo.gl/XKjbK)
· Bioscience incubators: I visit the huge new purpose-built Incubator and Accelerator beside GlaxoSmithKline’s building – in an industry whose innovation cycles are notoriously long; and BioCity in Nottingham.
· And I visit the National Theatre’s Studio, one of whose activities is that of helping playwrights and directors to develop their ideas into new plays.
You can find my scribblings at www.nesta.uk/blogs/john_whatmore and at whatmore.posterous.com