StartEngine goes corporate with Accenture partnership. Will an “Innovation as a Service” program turn off entrepreneurs?

By Michael Carney , written on March 27, 2013

From The News Desk

The job of a startup accelerator is to take ambitious teams of entrepreneurs and shepherd them through the process of turning ideas into businesses. But this is easier said than done. Some programs choose to only accept teams with a prototype built and early market traction. Others, including industry heavyweight Y Combinator, occasionally accepting teams with “napkin ideas” or even no idea at all. But regardless of their circumstances entering a program, many of these teams pivot to entirely new business models – often multiple times – before ever launching to the public.

StartEngine, one of Los Angeles’ more prolific accelerator programs, began noticing this trend over its first four classes of startups and late last year began looking for ways to preempt the process of finding product market fit. The new approach is more transactional in that it’s about finding out if anyone wants to use technology as it’s being developed, rather than building something first and seeing if it gains traction later.

Today, StartEngine announced a partnership with Accenture Digital Services and the launch of its “Innovation as a Service” program – insert groans here – that will pair founding teams with established companies looking for an infusion of disruptive thinking and energy.

In October, StartEngine accepted its first team of entrepreneurs in residence (EIR), in what was then just a pilot program. The accelerator began pairing that team with several of its more than 250 mentors for guidance and idea generation. The result of this process was Ember, a machine learning-based video advertising platform launching earlier this month that was developed as a direct response to the stated needs of its end-customers. That’s one way to hack product market fit.

StartEngine repeated the process a few months later with DreamShare, a yet-to-launch B2C Web app marketplace focused on serving entrepreneurs. In both cases, the companies identified ideas, established customer relationships, and laid the groundwork for future strategic investment or acquisition all prior to building a product.

Accenture is known more for writing the word “innovation” in PowerPoints, than for actually disrupting anything. But the tie up has the potential to jumpstart early corporate clients. StartEngine has a roster of some 250 mentors, and founders Howard Marks and Paul Kessler have their own rolodexes, but there’s a natural limit to each. Accenture is a multi-billion dollar global consultancy with access to companies around the world in nearly every industry. As much as StartEngine is trying to pair its founders with interesting mentors and corporate partners, Accenture is always looking to help its clients gain an advantage in business. By marrying these two pursuits via the “Innovation as a Service” program, both things are possible – at least in theory.

Also, Accenture Digital Service will be available to work with startup teams and corporate partners on idea generation, market analysis, and execution. It’s unclear how these resources will be provisioned, and how these enterprise grade services will be incorporated into the “lean startup methodology.” But access to smart people with a global perspective should hold at least some value to companies in the formation stage.

StartEngine will continue go through its regular application and admissions process. But now, as it vets teams, it will invite those whose resumes it likes but whose ideas it doesn’t believe in, to enter the EIR program. These companies will still get the same commitment of $20,000 and 90 days of mentorship and office space in exchange for 10 percent of their eventual company, but will spend the first 30 days in idea generation mode with outside corporations.

Marks anticipates that eventually 50 percent of StartEngine companies might follow this path. The process remains flexible and up to adjustment, including extending the 90 day timeline and in some cases even investing additional capital to sustain a promising idea.

I have to admit, that it’s a surprisingly intriguing concept that could be a positive for all parties involved. I say “could,” because mixing the bureaucracy and anti-innovation DNA of established companies with “move fast and break things” startup teams has pretty much never worked as advertised. Corporate VC firms, accelerators, and skunkworks labs have all been tried in the past with little evidence that the corporate association adds value, let alone don’t take value away, from their independent counterparts. This is to say nothing of the thousands of botched acquisitions in Valley history – where companies wind up crushing the value of the very thing they spend millions – or billions – on.

What’s more: Most great entrepreneurs don’t really like building companies “on spec” as if it’s client work. They prefer to build out a vision – or at least a minimum viable product as they envision it – and then see if there’s a market fit. It’s hard to see StartEngine getting the best of the best in this program.

StartEngine and Accenture will have their work cut out for them to maintain the risk tolerance that makes startup investing worth the gamble, and the commitment to challenging widely held assumptions that leads to world changing companies.

The companies wouldn’t talk about the structure of their partnership, including whether any money or equity is changing hands. But if you hated the phrase “Innovation as a Service” – avert your eyes here. The tie up is strong enough that the accelerator will hereafter be known – regrettably – as “StartEngine: Powered by Accenture Digital Services.” God that mouthful reminds me of the similar tongue twister that came out of Redmond recently, namely, “The Microsoft Accelerator for Windows Azure, powered by TechStars.” At least StartEngine got to put its name first. I wonder how similar the process was to selling the naming rights of a stadium.

Again, given the overall waning enthusiasm on accelerators, it’s unlikely that a forced corporate sponsorship will exactly rake in top flight entrepreneurs.