Sometime around late 2012, the tech world hit peak accelerator. Following the success of Y Combinator, which spawned breakout hits Airbnb and Dropbox, thousands of startup accelerator programs sprung up across the country. These programs act as a boot camp for young startups in exchange for a small chunk of equity, but it is questionable how many of them really help.
No matter, corporations want in on the startup action. Conglomerates from Nike (NKE) and Kraft (KRFT) to Microsoft (MSFT) have created programs as a way to learn from innovative young founders while providing them resources in the process. Call it innovation by osmosis. Add another one to the list today: Disney has announced its own accelerator, to be based in Los Angeles.
“We realized that not all of the best thinking can possibly come from inside the enterprise,” says Kevin Mayer, EVP of corporate strategy and business development at Disney. “We’re bringing in folks with fresh points of view that wouldn’t otherwise be in our sphere.”
To do this, Disney paired up with TechStars, one of the most well-known accelerator operators, with programs in seven cities. TechStars has set a precedent for corporate partnerships, working with Kaplan, Barclays, Sprint, R/GA, and Nike for their accelerators. (However, the Nike program may take a different form in 2014, according to Ricky Engelberg, senior director of innovation for digital sport, speaking at Guardian’s Activate New york conference last year.)
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Disney (DIS) will invest a generous $120,000 to each of the 10 or so startups it chooses for the program, with an option for another $100,000 in convertible debt. The deal gives Disney a 6% stake in the companies, which can fluctuate depending on whether they take the debt. (For context, most accelerators offer less than $50,000. Participation in Y Combinator previously offered startups six-figure sums (mostly from outside investors), but the program has lowered that amount to $80,000 in the last year. Update: See note below.)
Disney Chairman and CEO Bob Iger will act as a mentor to the Disney Accelerator startups, as will top Disney executives across its many divisions. Part of the mentors’ jobs will be to help the young startups navigate a large corporation like Disney, which is something they need to learn if they plan to work with big media companies. “It’s a big swimming pool and you can drown, I guess, if you’re not careful,” Mayer said.
Disney seeks applications from any startup related to any of Disney’s businesses, at any stage. The only thing it doesn’t want is scripts, Mayer said.
Mayer leads Disney’s M&A and investment activity. The company has done around 50 acquisitions over the last eight years, including startups like Tapulous and Playdom. Disney will consider investments and acquisitions of the startups in the accelerator, he said. The company obviously hopes to see a return on its investment, but is most interested in the injection of energy and fresh thinking that startups bring. “That in itself will provide a financial return to the company, though it’s less easily measurable,” he said.
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Disney already has a few in-house teams focused on innovation. Disney Interactive Labs builds digital products for the company, Disney Imagineering does design and development work and partners with universities. And Disney’s corporate R&D lab also serves as a center of innovation. Beyond that, the company hosted a developer day a year ago, where founders pitched ideas to Disney executives. Disney ended up investing in three of those companies.
This program is an extension of the developer day, Mayer says. The accelerator starts on June 30, and applications are open until April 16.
Correction: A prior version of this story incorrectly noted that Y Combinator lowered its offer to startups from six figures to $20,000. Y Combinator itself has always offered between $14,000 and $20,000 to startups. The total sum given to Y Combinator startups decreased when Y Combinator replaced Start Fund, a consortium of outside investors which gave each startup $150,000, with a program called YCVC, which invests $80,000 in each startup.
