Snap Has a Startup Accelerator, but Who Benefits?

A fad these days is for corporations to launch startup accelerators, a program designed to help legacy incumbents innovate. We’ve seen these initiatives sprout up time and time again, like with Orange, Samsung, and Qualcomm. In Silicon Valley, entrepreneurs view independent ones like 500 Startups and Y Combinator as a badge of honor.

In many cases, starting an accelerator makes sense. This is especially true when you can genuinely offer something of value to startups. It could be expertise in telecommunications or access to the European market. It might involve influence in processors or smart devices, robotics, and more.

So it might not surprise you that on Wednesday, Snap launched its accelerator named Yellow. The goal is to guide mobile media startups and help them grow, which is a commendable idea. But one must wonder, in the case of Snap, which party is truly the beneficiary?

Snap Benefits

Yellow’s website states that it is investing $150,000 in startups, storytellers, and creators. The goal is to push the artistic boundaries of what’s possible with mobile content. Each batch will select up to 10 startups. It doesn’t matter what you’re working on—whether it’s an interactive story, a show, an AR experience, or building the next big media company.

Naturally, Snap has outlined a few areas where its interests lie, specifically in work around AR, interactive, and narrative storytelling.

Yellow is offering participants commercial support and partnership. They will also receive mentorship from industry experts and networking opportunities. Additionally, participants will have access to office space, which is based in Venice, Calif. All of this is in exchange for an undisclosed amount of equity.

Upon the conclusion of this three-month program, there will be a demo day.

In comparison, 500 Startups offers an investment of $150,000. This is in exchange for “around 6 percent” equity through a convertible security. This arrangement gives 500 Startups the right to make a follow-on investment of either $500,000 or 20 percent of the next round.

One of the more well-known accelerators is Y Combinator and it invests $120,000 into each company for 7 percent equity.

The balance of benefits

Understandably, both parties will likely benefit from the accelerator: Snap will better understand what others are doing in the space and find ways to improve itself; while startups get tutelage and can quickly connect with Snapchat’s demographic and also other media partners. But the reality is that Snap may benefit the most, maybe finding a solution to a problem that has plagued it for a while: Coming up with ways to retain users and stand out from a crowded social media market.

To say things could be better for Snap is an understatement. The company is losing money. In Q1 2018, the losses amounted to $385.7 million, up from $350 million in the previous quarter. Additionally, the company is experiencing a sluggish growth rate. It stands at 2.13 percent, bringing the total daily active users to 191 million.

It’s also losing executives, including its chief financial officer and vice president of monetization. And the recently rolled-out redesign, which everyone hated but chief executive Evan Spiegel declared was here to stay, has failed to meet expectations.

To add color, it appears that the redesign of Snap was carried out without any input from the company’s designers — it seems to be the prerogative of the CEO.

It’s plausible to believe that Snap is actively seeking outside-the-box thinking to turn itself around. If internal solutions are elusive, the company is exploring its ecosystem for ideas. This involves considering products from entities with tangential offerings that could align well with Snap or at least inspire creative solutions.

While I’m not implying that Yellow is intended to drive Snap’s roadmap and induce a pivot, there’s a good chance that the 10 chosen startups will contribute to influencing Snap’s long-term marketing strategy and, hopefully, propelling the company towards profitability.

After releasing the first Spectacles, Snap has established itself as a camera company. Yellow could be a strategic move to reinforce this mission, leveraging its platform to showcase its identity. While critics focus on financial and usage losses, what if Yellow becomes the catalyst that reveals Snap’s untapped potential?

The Founder Pitch

Entrepreneurs, storytellers, and creators that participate in Yellow will likely be eager to do so for several reasons:

  1. They’re working on some new-age storytelling products and see Snap as the leader in the space
  2. They’re determined to connect with any one of Snap’s media partners, whether it be BuzzFeed, CNN, ESPN, Esquire, Complex, MTV, or others
  3. They are targeting the same demographic as Snap and want to learn how to optimize their efforts

As I wrote about previously, Snap is one of the first tech companies to mainstream this camera-first modus operandi so startups may want to take advantage of this chance to learn from an early pioneer in the field and also change the way storytelling happens in this new digital age. These creators may also look at the media landscape and not see available support or resources from other entities like Google, Twitter, and Facebook/Instagram around their field of storytelling, which is probably an advantage for Snap.

Hopefully Snap will be able to provide the right advice, tools, and resources to these startups in order to improve its ecosystem and ultimately its product offering. If it wants to guide the direction of how people tell stories and share information in the future, it’s going to have to get this right. Snapchat depends on it.

Discover more from Ken Yeung

Subscribe now to keep reading and get access to the full archive.

Continue reading