Data from the U.S. Department of Commerce indicates that 93% of consumer products are sold through physical retail, versus 7% sold online. Sales for consumer electronics through physical retail reach 77% – plus, nearly half of the remaining 23% of sales online go through Amazon. So in CE, traditional retailers still represent 85-90% of all product sales.
While there are innumerable accelerators, there are very few that are structurally focused on the “scaleup stage” of a startup company’s growth. The RX program fills this need, preparing a startup for the retail scaleup stage of their journey, and connecting them directly with major retailers that have expressed interest in the startup’s product category.
Y Combinator and many other “founder accelerators” support the earliest stages of startup growth. A typical stage-1 accelerator will provide between $50K-100K of funding in exchange for 5-10% equity. It also provides physical space, mentors, and resources to help founders get their company built and in motion. RX is a stage-2 scaleup accelerator; we help startups go from first product and incremental sales, to successful reach at scale – national and beyond, and winning in their respective product categories.
First, we provide the direct retail connections. RX works with major retailers to bring the products and startups in RX to market. First, we provide a virtual 12-week scaleup course that prepares a company for the demands of working with national retail, at national scale. Third, the startups in each RX are carefully selected to participate; these are the best in their categories, because retailers have asked us to find them the startups that are ready for scale. RX provides the fast track to retail scale – which is also the fast track to market leadership.
A scaleup is officially defined as a company with more than 10 employees, and growing greater than 20% per year in revenue or employee count over three years. In short, it’s a business that is experiencing compound, if not exponential, growth.
The startup commitment for RX is $15,000 cash, $100,000 in warrants, and a commitment to use RX program services as they scale up with the retailers they connect with in RX. We do not provide funding, as companies in the scaleup stage commonly have funding in place. We also do not provide housing, as scaleups are usually well established and “too big to move” – which is why the 12-week program is virtual.
Our retail partners contribute time and resources to drive the RX program. This means they will engage with the RX startups on Portfolio Day, and ensure that each startup is given the best internal audience. If selected, the retailer will support the scaleup through its broad channel assets. Behind the scenes, each retailer is also working to become more “startup friendly,” so they benefit from applying RX principles to their own internal processes and approaches, making it easier to onboard and scale a startup, via RX or otherwise.
Having been merchant officers, the RX team knows that a retailer/buyer can never commit to work with a startup company “yet to be named.” More practically, each retailer has committed to consider each startup coming through the RX program for assortment; in other words, they start with a bias to support each startup in RX. A final relationship still must be earned by the startup with each company.
Yes. We promise to put each startup in front of our named retailer partners on Portfolio Day. Afterward, we also commit to introducing RX startups to other retailers not currently active in the RX program, as they match with that startup’s channel strategy. We have direct relationships with decision makers at all major/regional U.S. retailers.
The startups in the program provide only a relatively small amount of cash to help fund RX operations. As such, the RX team is deeply vested in the success of the startups in the program. If they don’t succeed, we don’t, either. We are motivated to find the right scaleups that, after participating in the 12-week RX course, can be market makers in their category.
There is no other equivalent among scaleup accelerators, let alone one that is anchored by the very major retailers than can “make a market” for a scaleup. In talking with many startups, we are confident the RX program will be a follow-on accelerator for startups after they’ve graduated from stage 1 programs like Techstars and Y Combinator.
We are sourcing our first class to start in April 2016. That said, we tested the RX concept in 2015, through a test campaign with Staples – and rather than finding one startup to work with, they are currently bringing five startups to scale.
We’ve selected strong capability/mentor companies with decades of experience working with startups and later stage product companies. From supply chain and distribution partners, to finance, to marketing insights, we have assembled a wonderful collection of complementary companies to help teach, educate, and assist startups through our 12-week program.
We expect that each startup will begin to work with one or more retailers in the program. We commit to continuing to work with the startups to make these retail relationships work as smoothly as possible. The startups move to scaleup, and do so while minimizing the risk of said growth. We also expect a number of the capabilities involved in the 12-week program will develop relationships with each startup, as each startup needs.
We think the companies entering the RX program are ready for the scaleup stage, or just about there already: growing and ready, with the right support, to leap ahead of competition and become national category leaders.
Sprosty Network is a global business strategy and innovation firm with unmatched experience in both bringing technology products to scale with major consumer retailers, and in bringing new retail concept to market. We are focused on turning strategic growth planning into tangible initiatives and results for retail, and the companies that are driving the retail transformation – both in terms of product and consumer experience.
Members of the Sprosty Network have deep experience leading innovation practices within major retail, at a national and global scale. We understand, and have addressed, the challenges that both retailers and startups have in working together. We’ve added to that experience the day to day requests from our retail partners to help them more effectively reach out to the startup community. The RX program was borne from this experience.