Hotbed of innovation.

How incubators and accelerators get businesses moving.

‘Incubatio’ is Latin for when a bird sits on an egg. An 8 cm long Cape white-eye sits on its eggs for around ten days, the common ostrich for six weeks. To stay with the metaphor, companies can become beautiful and highly successful winged beings – but they take time to hatch. They are constantly at risk of missing out on the advances of evolution because their offspring take too long to take flight. Sometimes nothing short of a miracle is required. Incubators and accelerators are precisely such miracle-workers that aim to give wings to the offspring of innovation, ingenuity and entrepreneurialism.

Aiming high with a plan.

New start-ups sprout daily from the ground – especially in Silicon Valley. They supply new materials, technologies and services, as well as ground-breaking business models, and open up as-yet unknown markets. Most of them have one set of circumstances in common: hardly any capital, no customers, a lack of experience in managing business – and almost total obscurity. So before getting liftoff like Dropbox and Instagram did, start-ups need help. They congregate at hackathons, conferences and funding competitions, promoting their business ideas which often sound suicidal – rather like a bird leaping from the nest for the first time.

What is an accelerator?

An accelerator is a short-term funding scheme for early-stage start-ups which gives company-founders a boost for a few months. The start-up is usually offered five-figure seed financing, and the founders are given office space as well as expertise, networks, and some PR channels. In exchange for all this, many start-ups give the companies involved a say and shares in what they are developing.
The ten biggest accelerators active in Germany areAxel Springer Plug and Play Accelerator, Telekoms hub:raum Accelerator, Telefónicas Wayra, Berlin Hardware Accelerator, ImmobilienScout24s You Is Now Accelerator, Startupbootcamp, Microsoft Ventures Accelerator, ProSiebenSat.1 Accelerator, German Silicon Valley Accelerator and Seedcamp. Generally speaking they focus on particular areas – Plug & Play on digital business ideas, hub:raum on the Internet of Things, security and health, StartupBootcamp mainly on digital health, mobile and fintech applications.

The accelerator strategy has proven successful. The joint venture between Axel-Springer-Verlag and Silicon Valley-based Plug & Play Accelerator has already assisted more than 1,200 start-ups. Its list of digital acquisitions is long and ranges from the Runtastic sport app to start-up magazine Axel Springer has spent a total of €3.4 billion on digital businesses since 2006. They most recently bought property platform Immowelt, as well as tech conference Hy! and vacation platform @Leisure.

What is a corporate incubator?

Incubators such as Germany’s Rocket Internet bring the operative expertise of founders on board for ideas that have been developed previously in-house. The scope for start-up financing is significantly greater with these ‘company builders’, and the networks, mentors and coaching provided for founders usually go on for longer. Dovetailing these two innovation strategies is nothing new. For companies it can be a lucrative prospect to combine the best ideas from outside – business models developed in accelerators – with the best ideas from inside – newly discovered business fields inside the company – and to develop them for the company and make them usable.
BMW uses this model in collaboration with Munich Technical University. In UnternehmerTUM, young developers and engineers are given the opportunity to develop their projects. Only when an idea has reached a certain level of maturity does BMW begin to work with them by providing access to data, test equipment, PR activities, business management coaching and so on. By collaborating in this way, BMW gives itself an innovation boost in the fields of automation and robotics, fintech, electronics, Internet of Things, Industry 4.0, Big Data, industrial software, insurance solutions, mobility and wind power. Instead of purchasing shares in external companies, BMW demands the exclusive right to be the first to use the new technology. As an example, BMW has benefited from the smart parking system ‘Park here’ – giving itself a quite significant competitive edge.

Knowledge – the raw material of the future.

For proof that this kind of innovation strategy can bear fruit, look no further than the success enjoyed by the previously almost written-off technology group Motorola. Since launching its own Early Stage Accelerator, more than 20 of its own start-ups have reached market maturity either as products in their own right or as components. This scheme has been so successful that it has now been extended from the USA to Motorola’s locations in India, China and Israel. Jürgen Kluge, Director for Germany at Management Consultancy McKinsey, explains what makes company building so valuable: knowledge. In a game based on knowledge, the winner takes it all.

Ideas are a scarce commodity.

In today’s global world, ideas are a scarce commodity and the people who come up with them are rarer still. When such people appear, everyone wants to work with them. Idea developers, knowledge professionals and manufacturing specialists for whom thinking outside the box is second nature either have to be reared in-house or lured by means of special working environments. The dual strategy of incubator and accelerator does both. The bureaucratic effort required by staff is negligible, hierarchies are flat, constructive criticism is a given, and a fail-fast culture is freely available just like at Google X.
The intrinsic drive of an incubator associate is to penetrate and optimize processes independently. Instead of conveyor belts and check clocks they need flexible working hours and dynamic working environments. Collaborative creativity involving robots and 3D printing, intelligent process management – that is digital sustainability. It is important to keep them within the company by collaborating with them on an equal footing before they emigrate to Silicon Valley and innovate there, or found their own start-ups.

Let the games begin.

As well as just breeding ideas, it is important to create spaces in which ideas can flourish from hatchlings into true high-flyers. It isn’t about working out the perfect idea. It’s about understanding the perfection of an idea and harnessing it for your business. To find out how Daimler Business Innovation gets the most out of its combination of incubators and accelerators, watch our blog.