A Difference of Approach – Corporate Incubator Models
Who Can Ventures Learn From?
Anglo African Ventures, the Fintech start-up investment division within Anglo African, looks to invest in and establish strategic partnerships with Fintech start-ups whose technology can be sold into the company`s client base.
Africa is a continent that has embraced connectivity. Mobile phone penetration stands at 70%, against a world average of 51%. This surge in mobile use is transforming how the investment community view Africa as an investible location.
This is where the unique value proposition of Ventures (AAV) can be identified. Ventures is not limited to offering Fintech start-ups capital injection to grow their business. The approach goes beyond that. The strategic partnership with AAE helps businesses scale-up into one of the most dynamic Fintech markets in the world.
The Fintech Investment approach
As a new enterprise in itself, what can Ventures learn from the current Fintech investment approach currently adopted by UK based corporations? The quality of Fintech start-ups emerging from corporate backed Incubator and Accelerator programs is testament to the central role they play in supporting innovation. Some of these programs recently exhibited their start-up community through “Demo-Days”.
Recent demonstrations included Incubus at PwC’s 1 Embankment Place, Startupbootcamps’ InsurTech in Spitalfields, RISE the Barclays’ Accelerator as run by Techstars and held at the 02 Centre and Accenture’s Fintech Innovation Lab held at Central Saint Martins in Kings Cross.
The 4 Models of Investment
Most corporate backed Incubator and Accelerator programs follow the Matchmaker Model, whereby the key stakeholders are the corporates who fund the program. The overall aim is to incubate and support start-ups that complement the demands of the corporates’ client base and integrate them into their own infrastructure. It gives the corporates an insight into the emerging types of disruptive technologies that could challenge their business model.
Within the Matchmaker Model, Ventures has identified four sub-models that reveal how the major banking groups are approaching Fintech investment:
- The “Traditional Accelerator” Model – The key stakeholder funds the program. The objective is to incorporate the start-up into the stakeholder’s infrastructure and bridge the gap between the start-up’s technology and demand as identified by the corporate. This makes the technology available to their clients.
- The Competition Model – Resembles the Dragons’ Den process of identifying and selecting suitable Fintech companies. This model prevents the huge costs associated with a physical, fixed, full time Incubator / Accelerator space.
- The VC Model – Comprises banks investing capital into companies after the early start-up phase which potentially reduces the investment risk to the investor. This can be summed up as a ‘quality rather than quantity’ approach.
- The Collaboration Model – Banks who normally compete with each other in all respects, collaborate with each other to share ideas and technologies.
Why an Incubation Model is Important For Start-ups?
Most corporates now realise that closed innovation, by itself, does not work. The two systems of corporate and start-up cannot effectively synthesize as the bigger suffocates the smaller through too many Key Performance Indicators (KPI’s) and an emphasis on results above experimentation.
This realisation has encouraged a shift in the landscape of corporate innovation towards a focus on the Incubator / Accelerator Model. This shift has been hastened by the pace of change within the start-up scene as more investors enter the space. This has been accompanied by the race towards greater digital transformation from within the banking sector. It is a different approach to “direct” investment.
About Anglo African Enterprises and Ventures:
Ventures possess insights into what our clients want and can offer technical support to help start-ups scale. We can provide commercial insights into an emerging market where mobile phone adoption has the potential to transform economies, help pull people out of poverty and develop a consumer class. We can identify the pressures being placed on African region banking groups. The mobile phone has transformed the way people engage with finance. AAE operates within the finance and technology space. Ventures is uniquely placed to analyse which Fintech start-ups have the greatest chance of success.
Anglo African Enterprises (AAE) is an information technology firm headquartered in Mauritius which services the major banking groups and telecommunication companies within the South to East African corridor. We are the leading player in Cloudification, Big Data Analytics, Digital Transformation and the Internet of Things (IoT) within the geographies in which we operate.