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More corporations support technology startups through accelerators

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February 25
8:11 AM 2014

The world's largest companies have rallied to support and fund new technology startups, TechCrunch reported.

This has not always been the case. CrunchBase data showed that only Google Ventures, the investment arm of search giant Google, has been the only major backer of startups. Now; however, large corporate names like Siemens, Coca-Cola, Warner Bros and even a nationwide association like the National Association of Realtors have an accelerator program, the report said.

MIT Sloan School of Management Visiting Associate Professor of Finance Yael Hochberg told TechCrunch that a number of reasons can be attributed for the increase in corporate accelerator launchings in the past few years. For starters, this is an example of big companies seeking the next hot thing in investment.

Hochberg said in the interview, "Back in the 1990s during the first wave of corporate venture capital, there was a lot of talk about VCs making a lot of money and then the corporates piled in. Accelerators like TechStars and [Y Combinator] are the new hot thing."

Another reason for the surge is that corporate accelerators actually have value for the business. Hochberg explained, "Over the last few decades one of the things that has definitely been happening with corporations is that they've moved to an open innovation model or outsourced R&D. They're doing less basic research in house and essentially looking to bring that in through acquisitions."

Industry observers like Hochberg also think that it's practical for corporations to support new startups in the space because the cost of coming up with new technologies has significantly declined.

There are also cases where corporations begin accelerator programs but discontinue the effort later on. In the early part of the corporate accelerator phenomenon, Facebook launched the fbFund but retired it after two years. The consensus is still not clear if corporations can give the kind of support that startups truly need, the report said. 

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