[THE INVESTOR] LONDON -- Pundits tend to believe large companies, by nature, have difficulty making breakthrough innovations because they are weighed down by red tape or risk-averse corporate cultures.
One way London-based accelerator Founders Factory is tackling this so-called “innovator’s dilemma,” is to team up with the large firms to incubate, accelerate and invest in startups.
The firms are L’Oreal, Aviva, Easyjet, China’s CSC Group, Holtzbrinck and Guardian Media Group -- representing the six respective sectors of beauty, fintech, travel, AI, education and media.
Founders Factory COO Louis Warner
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“What Founders Factory is trying to do is to bring talented startups and find a formula to work efficiently with corporates,” Louis Warner, COO of Founders Factory told The Investor in a recent interview at his office in London. “Because corporates have immune systems and genuinely are quite difficult for startups to work with, we are trying to unlock easier ways of doing that.”
Financially backed by the six corporates, Founders Factory invests in startups and invites them to six months of rigorous business acceleration. Only 1 percent of the applying startups get into the program, but once they do, they receive not only office space, but funding of around 30,000 pounds (US$42,400) -- in return for minority stake -- and opportunities to pilot, test and scale their business with industry giants.
Corporate partners don’t make direct investment into startups, Warner clarified. But there is always an option to invest later because they have built a relationship with the firms through Founders Factory.
For instance, Vidsy, a London-based startup that provides a video-sharing platform, received 500,000 pounds in investment from Guardian last year.
“These leading corporates bring deep domain experience, access to propriety data, capital investments, brand association, credibility and all those fantastic things,” he said. “In some cases they can actually bring real commercial revenue deals for young startups. They validate the customer preposition and make orders.”
So far, Founders Factor has invested in about 50 startups since it was established in 2015 by Brent Hoberman, who co-founded popular online travel firm Lastminute.com and floated for US$1.1 billion. Its mid-term goal is to accelerate and incubate 200 startups over the next five years.
So where does the confidence come from?
Warner says cross-sector corporate muscles, coupled with seasoned experts supporting the startups that are in various stages, is what makes Founders Factory stand out among the plethora of accelerators in the country.
“There are about 170 accelerators in the UK, and a lot of them provide generally quite a strict, time-boxed, mentorship program. They also mostly offer office space, some mentors and small operating team,” he said. “In addition to what others do, we actually hired 60 full-time employees to support startups in AI, engineering, product development, growth, PR, branding and fundraising. We also have a team of scouts around the world on the ground, hunting for startups all the time.”
Going forward, it is seeking to do more in Asia, leveraging its latest partnership with CSC Group, China’s third largest private equity firm, to search for new AI talent, to join its diverse network of startups.
“About 70 percent of our startups come from the US, Canada, Turkey, Spain, German, Sweden, Norway, Finland, among others,” he said. “We are very interested in the Asian market and keen on doing more in 2018. But the practicality of the differences in culture and languages distract people easily. So we need to make concerted efforts to do more in Asia.”
“We would love to see more Korean firms in our program, as well,” he said.
The diversity of Founders Factory, however, is becoming a major concern as Britain’s looming departure from the European Union would drain talents in the industry that highly relies on skilled personnel and diverse resources from EU.
“We are worried but also optimistic about it,” he said. “Let’s be frank. No one knows what the Brexit would look like, whether it’s going to be a hard Brexit or a soft Brexit. The government is changing hands all the time. But we are optimistic that there is lot going on for London as the tech-center. We still think London is an extremely attractive place.”
By Lee Ji-yoon and Ahn Sung-mi
This story was sponsored by the Samsung Press Foundation. The UK Embassy in Korea and KOTRA also contributed to this story. - Editor.