Snap Has a Startup Accelerator, but Who Really 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. And in Silicon Valley, independent ones like 500 Startups and Y Combinator are viewed as a badge of honor among entrepreneurs.

In many cases, it makes sense to start an accelerator when you can truly have something of value to offer startups, be it expertise in telecommunications or access to the European market, influence in processors or smart devices, robotics, and more. So it might not surprise you that on Wednesday, Snap launched its own 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?

The details

According to Yellow’s website, it’s putting an investment of $150,000 into startups, storytellers, and creators that will “push the artistic boundaries of what’s possible with mobile content.” Up to 10 startups will be selected in each batch and it doesn’t seem to matter what you’re working on, be it an “interactive story, a show, an AR experience, building the next big media company” or anything else.

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, mentorship from industry experts, networking opportunities, and of course, office space (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.

By comparison, 500 Startups is providing an investment of $150,000 for “around 6 percent” equity in the form of a convertible security, which grants 500 Startups the right to make a follow-on investment of an additional $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

It’s understandable that 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 — $385.7 million in Q1 2018, up from $350 million in the previous quarter — and experiencing a sluggish growth rate of 2.13 percent to top off at 191 million daily active users. It’s also losing executives, including its chief financial officer and vice president of monetization. And the recently rolled out redesign that everyone hated, but chief executive Evan Spiegel declared was here to stay, has not met expectations.

For added color, it looks like Snap’s redesign was done without any input from the company’s designers — CEO’s prerogative, it seems.

So it’s not out of the realm of belief to think that what Snap is doing is looking for outside the box thinking on ways in which it can turn itself around. If it can’t find solutions from within itself, then it might as well turn to its ecosystem for ideas, those that are doing tangential products that could have a good fit as potentially part of Snap, or at least spark some creative ideas.

I’m not suggesting that Yellow is meant to drive Snap’s roadmap and cause a pivot, but there’s a good chance that the 10 startups chosen will play some part in influencing Snap’s long-term marketing strategy and hopefully setting itself on the path towards profitability.

Since its release of the first Spectacles, Snap has positioned itself as a camera company, and Yellow might be a way for it to double down on that mission and tap into its platform and really showcase what it’s about. many critics are caught up in its financial and usage losses, but what if Yellow is the catalyst that ignites Snap’s real potential that we didn’t see before?

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 product and see Snap as the leader in the space.
  2. They’re determined to get connected with any one of Snap’s media partners, be it BuzzFeed, CNN, ESPN, Esquire, Complex, MTV, and 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.