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The World Benchmark Study of Business Incubators & Accelerators 2019 - 2020
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Crowdfunding for Corporations; Embracing Incubation in New Ways

 

Anyone doing business today knows that the rules change regularly, making it difficult to keep up with the latest trends. Startups in particular keep turning their heads to follow the next great opportunity. When working with startups, keep in mind the words of Reid Hoffman, LinkedIn founder and investor in all things tech, who said, “Starting a company is like throwing yourself off the cliff and assembling the airplane on the way down.”

The need for startups to keep changing and adapting with the market is familiar to most corporations, because they do it themselves. However, there is a difference between being a gatekeeper, who allows only certain ideas to come to life, and a communicator, who establishes a relationship with the crowd to form a picture of the path to success. This article is about the new ways big corporations are evolving their R&D processes to embrace innovation and what that means for startups and their incubation programs.

What is Crowdsourcing?

Crowdsourcing can be summed up in three words; distributed problem solving. For instance, a business takes a project and dissects it into micro-tasks. These tasks are assigned to workers who are skilled to complete them, such as freelance copywriters creating SEO content for articles and websites. Crowdsourcing is essentially a workforce that is assigned tasks to complete projects of any scale with high-value output.

In the normal course of doing business, an enterprise would have their own team of programmers, developers, scientists and other employees to discover new technologies or perform R&D tasks. Crowdsourcing takes this to another level and asks the worldwide resource of creative, industrious thinkers to perform micro-tasks in order to complete the project. This approach saves time and cost. It also enables the corporation to reach the market before their competitors. The overall benefits look significant:

  • Cost Savings
  • Broad Workforce
  • Flexible Processes
  • Higher Creativity Level
  • Efficient Project Completion
  • Reduced Time to Market

Who is using Crowdsourcing?

To name a few, Coca-Cola, PepsiCo and Oreo are all turning to crowdsourcing as a cost-effective marketing strategy. Zeroing in on Coca-Cola as an example, the company announced last year that they would shift to an open business model, and they have kept their promise. Since the announcement, Coke has been working with their customers for new product development. They harnessed the power of their 50 million Facebook friends and asked for suggestions for an invention, social app or cause that could spread happiness. Using contests to design new products is a great way to discover what is on the minds of consumers and what they feel is valuable or worthwhile.

Patagonia, a designer of outdoor gear and clothing, took a different approach to crowdsourcing. They noticed consumers sharing stories about their old Patagonia gear on social media. They created a Tumblr to capture their stories. Testimonial and review marketing is a huge part of brand confidence. Crowdsourcing content like this made it possible for the company to have a powerful voice in the market and demonstrate their value, longevity and appeal.

What is Crowdfunding?

Crowdfunding, like crowdsourcing, looks to the world at large, but instead of projects and tasks, crowdfunding looks for capital. Crowdfunding is a platform that connects individuals or startups in need of funding with people who are willing to contribute financially. Most people think of individuals or charities when they think of crowdfunding, but there some exciting crowdfunding efforts going on with large corporations as well.

Using crowdfunding to develop new products and services isn’t as crazy as it sounds. Corporations use crowdfunding as an economical way of product testing by offering early access to products at a reduced price. Consumers who buy in at this stage are emotionally and financially invested in the product. This compels them to provide valuable feedback and testing at a greatly reduced cost over typical R&D focus groups and studies. While big business is still new to the game, the widely reported benefits are promising:

  • Access to Hedged Risk Capital
  • Faster, Easier Funding
  • Customer Loyalty
  • Low Cost PR
  • Advanced Sales
  • Inbuilt Marketing

Who is Using Crowdfunding?

Large corporations like Lego, General Electric, Gillette and Tyson Foods are using crowdfunding sources to engage customers on a level at which traditional R&D is not suitable. Drilling down to Lego as an example, the company would normally use traditional processes to research and develop a new product before taking it to a global launch. When Lego came up with an idea for toys aimed at adults, they wanted to make sure it resonated with consumers and chose crowdfunding to do the job.

The new Lego Forma product, mechanical models of animals requiring assembly, is aimed at adults who want to explore their creativity. By offering Forma at a 22 percent discount off the regular price, Lego created a huge focus group of invested consumers who would provide them with valuable feedback. As a result, Lego exceeded its goal of 500 donors by ten times, with 5,000 consumers providing feedback on the new Lego Forma. This valuable information goes right into the creation process, but the relationship Lego is building with consumers is priceless.

What is the Real Benefit?

Yes, there are efficiencies and cost savings by taking new ideas to the crowd. However, we observe that the reason for the success on both sides of crowdfunding and crowdsourcing come down to one thing: communication. Making good use of social apps and other methods of communication to invite the crowd to become an insider, with full bragging rights on testing a new product, is the real benefit that corporations reap from participating in crowd-based activities. In purchasing a pilot-product, consumers experience a certain level of investment in the product and if it sinks or swims.

As we said before, the rules of being a startup are changing, and consumer preferences on products, services and delivery methods are driving these changes. In such a competitive market, having a great product is no reason to stop and wait for success to come along. Send that product out into the crowd and continue to “build the airplane”. You will find useful feedback and funding from your new partners and creating a two-way communication to build your brand.

The Crowded Incubator

Is it apparent what our crowdsourcing and crowdfunding examples have in common? If you said that they were not actually startups at all, you would be right. These are all established, multinational corporations who are taking a chance on the crowd to facilitate their next big product innovations. Nevertheless, what does that mean for startups?

Most startups will agree that raising capital is the largest hurdle they have in front of them. Belonging to an incubation or acceleration program is not a guarantee of funding, especially for those in the early stages. As venture capital sources become scarcer and scarcer, new approaches like crowdfunding for capital and crowdsourcing for resources have enabled more startups to reach the next stage in their development. Business incubation and acceleration programs nurture startups with value-added services including:


 

Corporations that employ innovation management tools and collaborative innovation practices are more likely to develop new and interesting additions to their product or service portfolios. A new generation of business incubation and acceleration programs is developing right before our eyes, and they incorporate all these principals of change. 

Each form of funding, both venture capital and crowdfunding, will continue to serve a purpose in the future of the ecosystem. Working with a university-linked program gives entrepreneurs validation and credibility. And this gives potential investment partners a comfort level that they know how to run a business and that they have a viable product or service. From there, a successful crowdfunding effort demonstrates a market need, polishes the branding and makes the startup ready for an infusion of capital from a solid corporate partner.

Global Partners

We have demonstrated the benefits of crowdsourcing and crowdfunding and that their largest benefit is the new way consumers will communicate, and buy from, your corporate brand. What doesn’t come with crowd-driven interaction is time. This is where UBI Global comes in; thanks to our network of over 700 incubation and acceleration programs all over the world, we are the crowd-driven incubation and acceleration resource your company needs for your next project.

Enterprise organizations work with UBI Global to find niche audiences for their new ideas and bring them to life with worldwide investment and intelligence. The UBI Global network of business incubation programs amplify new ideas and nurture them to become viable market leaders. Our programs follow best practices to reduce investment risk by proving market demand and providing entrepreneurs with solid business foundations.

To find a partner program, contact us today for a personalized recommendation. We invite you to join our global community by becoming a UBI Global member. Benefits include instant access to the UBI Global business incubation network through our new social platform, UBI Connect, plus our member insights and exclusive events.

Don’t wait for the crowd to come to you; let UBI Global connect your company with the masses and future success.

 

Working with startups is exciting, but it can also be difficult to keep up with a fledgling company, who can turn on a dime and remain nimble in their processes. The service portfolio you construct is a careful balance of providing value to your startup clients and managing your internal resources. With this in mind, this article digs into what a successful service portfolio that creates value for startups looks like.

Larger Offering Leads to Success

The UBI Global World Benchmark Report 17/18 offered a clear picture of what a successful service portfolio looked like. Of the fourteen categories of services offered by the benchmarked programs, the most successful (top average) programs offered eleven of these services. In contrast, programs that had average scores offered only nine services in their portfolios. Clearly, the programs that offered a wider range of services to their client startups were more successful overall.

Digging in deeper to the exact offerings that top average programs offered that their lower scoring peers did not, the biggest discrepancies came in three categories. Access to Markets, Technology Transfer and Human Resources were services offered by almost all of the top average programs, while the average programs offered these services 24, 29 and 31 percent less often, respectively. Taking a deeper look into these three categories, we can begin to form a picture of how these services contribute to the higher success rate of the top rated programs.

Access to Markets

This category is about the ability of the startup to communicate and trade in their respective market. The depth at which the startup can penetrate the market increases the long-term success of the company growth and viability. Providing a fledgling startup with access to their market early is a complex operation, often involving international trade, tariffs, quotas and more. There is a distinct give and take process when a startup first begins trading that should be carefully organized by the program. This is what sets top-ranked programs apart from their average performing peers: how well they orchestrate the access to market for their startups.

Understanding the processes that have an impact on market access is vital to the program. Fortunately, we have great examples in top-ranked programs such as Business Incubator of NRU Higher School of Economics (HSE Inc.) in Moscow, Russia, who conducts regular customer development activities, collecting feedback from client startups on a monthly basis with which to adapt and tweak their service portfolio. Providing access to the global markets has given HSE Inc. the ability to assist their startup programs in securing over $5 million in investments over the past 5 years, even though their startups are extremely early-stage maturity levels.

Top program tip – focus on the top processes that define a successful market access policy, which are:

  • Value Identification – Insights into consumer behavior and market trends
  • Value Creation – Research data to support product and service development
  • Value Communication – Thorough outline of value proposition in terms of commercial appeal

Technology Transfer

Converting scientific advances made by startups or students into marketable goods and services is a process known as technology transfer. Some university-linked programs are stellar at technology transfer, spending a great deal of time on prioritizing technological breakthroughs and forming patents on behalf of the university and startup ecosystem. Lower rated programs often struggle to merge the world of academia with commercialism, sometimes due to different philosophies on either side, among other challenges.

Programs that form a practical, strategic approach to technology transfer become the intermediary between the world of academia and the commercial market. Taking charge of licensing agreements is just one-step for a program to mediate and merge these two worlds. Top-ranked programs also realize they have to develop their own understanding of how each side works and bridge any gaps that may create obstacles on the way to a successful startup. By consistently forming successful, sustainable companies through startup incubation, programs are certain to develop a reputation that university partners know they can rely on and trust.

Top program tip – Investors and industry insiders love prototypes; university partners who can assist with prototypes help programs and startups translate the effectiveness and importance of the product or service to potential investors, government partners and the public.

Human Resources

In the case of the UBI Global World Benchmark Study 17/18, the definition of human resources as part of a program’s service portfolio goes beyond the basic principles of recruiting and onboarding. In the case of the top-ranked programs, human resources are the actual people provided to the startup as part of the service portfolio.

Top-ranked programs know that universities are a gold mine of qualified, educated potential employees and staff for their startups. Working closely with research and development teams in the university puts healthy programs in touch with a vast network of faculty and students that become collaborators and even employees and officers of the graduate companies.

Top program tip – one of the best things about collaborating with a startup is the freedom to explore and to be different. This will appeal to many students, who crave innovative, risk-taking entrepreneur-focused cultures. Make sure your program conveys the type of culture and attitude they are looking for when recruiting for startup collaboration.

UBI Global is busy mapping, highlighting and connecting the world of business incubation through our World Benchmark Study 17/18, which is available here. Join our network of more than 700 member organizations worldwide that count on us to provide the best practices and tips from top university-linked programs. The World Benchmark Study for 2019/2020 is under way. Sign up here to be included! Membership with UBI Global is just a few clicks away, but the information your program will gain lasts a lifetime.