Corporate Incubators Popping Up in Europe LONDON - In an Art Deco office block on a side street in central London, groups of 20-something programmers and engineers sat hunched over laptops in teams of three or four people. Surrounded by the trappings of a fast-growing start-up, including table tennis equipment and a fully stocked kitchen, the developers were tapping out computer code and planning marketing campaigns just like many other fledgling companies spread across the British capital. Yet unlike other strapped start-ups, these small tech companies already have links to the corporate world. That is because their shared working space here is run by Telefónica, the Spanish cellphone giant, which has pumped around 40,000 euros, or $54,000, into each of the dozen or so local start-ups as part of a program aimed at tapping into London's growing tech scene. The move is part of an increasing number of so-called corporate incubators - programs offering office space, contacts with prospective clients and often early-stage investment - that are popping up across Europe. For start-ups, links with some of the Continent's largest companies can open doors to potential new customers. And an early cash injection from corporate backers, which typically take minority stakes in the small companies, also may help persuade other venture capital firms to invest. "The main reason for joining was because of the connections," said Dan Strang, co-founder of Eventstagram, a photo-sharing service. The British start-up has signed several deals with Telefónica's British business after joining the Spanish telecom company's nine-month program in London. The company's offices were visited last month by the country's deputy prime minister, Nick Clegg. We couldn't have got that anywhere else. Operated by companies like Microsoft and the German telecoms giant Deutsche Telekom, these tech incubators provide large firms an entry into the Continent's fast-expanding start-up communities in cities like Berlin and Dublin. More important, they also offer large companies the chance to keep track of new technologies and trends that have the potential of upending their main businesses. As the speed of innovation accelerates - and the cost of starting a company declines - some of the biggest tech firms have been caught off guard by new business models and inventions. A prime example is Nokia, the struggling Finnish cellphone maker. Once the world's largest manufacturer of mobile phones with a market value of around $250 billion, the company failed to spot the rise of Apple and other competitors who took advantage of new technologies like touch screens and online applications. After its market share plummeted, Nokia is now worth around $30 billion, or just 12 percent of its record high and is in the final stages of selling its handset business to Microsoft for $7.2 billion. "Innovation is so rapid, and no one wants to be the next Nokia," said Torsten Oelke, who runs an incubator program for Scout24, a German online classifieds company. It plays on top management's fears. Some of Europe's telecom giants have been the fastest to set up start-up programs. Many of the Continent's cellphone operators have struggled to profit from the rise of online applications, social networks and mobile advertising offerings, and some have huge debt. So several of the companies, like Deutsche Telekom and Telefónica, are eager to find ways to tap into revenue opportunities from Europe's start-up community, according to telecom analysts. For Telefónica, whose current debt stands at just under €45 billion, or $61 billion, connecting with start-ups involves a network of 14 tech incubators spread across its core markets in Europe and Latin America. In just under two years, the company has invested roughly €9 million in 295 start-ups in cities including Prague; São Paulo, Brazil; and Barcelona, Spain. Deutsche Telekom now runs a similar operation. It recently opened a shared working space in a retrofitted 1920s telecommunications building in central Berlin that will house the European start-ups participating in its accelerator program. "We act as an early warning system for new trends," said Peter Borchers, who runs Deutsche Telekom's technology incubator, called Hub:raum, which also has offices in Krakow, Poland, and Tel Aviv. We also make the whole company a little more entrepreneurial. Not to be outdone, Microsoft's outgoing chief executive, Steven A. Ballmer, introduced the company's own accelerator in Berlin earlier this month, where nine start-ups will be put through a four-month mentoring program. And even Coca Cola - a company not typically known for its start-up connections - is hiring two-person teams in cities including San Francisco, Berlin and Bangalore, India, to find small tech firms whose ideas can be harnessed by the global drink giant. "At the end of the day, we're trying to create the next Twitter-like company," said David Butler, Coca Cola's vice president of innovation. Such statements have raised a few eyebrows across many of Europe's technology hubs. While entrepreneurs, venture capitalists and others working in cities like London, Berlin and Stockholm have welcomed the increased interest from large companies, many remain skeptical of these new start-up incubators with corporate ties. Some, for example, have questioned the motivations of the big firms" investment in Europe's start-up scene, fearing that they may try to co-opt ideas for their own needs or shut down projects that could hurt their core businesses. Others doubt that large companies will continue funding early-stage European tech firms, particularly because these types of investments often have a high risk of failure. "Running an accelerator for these companies costs the same as renovating the lobby of their headquarters," said Ciaran O'Leary, partner at the venture capitalist firm Earlybird in Berlin. Everyone is welcome, but they need to prove that they will hang around for the long term.