I’ve been interested in start-up accelerators for years, but recently as I chose them to be the topic of my MBA master thesis I’ve started to directly interact with, and research them deeper. Here are the some of my findings that you might find useful in preparation and growth of your new ventures.
So what does “to accelerate a start-up” mean exactly?
After S. G. Cohen and Y. V. Hochberg, let me define a start-up acceleration programme as a short-time business programme, lasting usually up to for 3 months, whose participants (start-ups) are chosen by strict selection in the early stage of it.is . Participants of start-up acceleration programmes receive extensive mentoring in business- and relationships building, so they get ready to find their first clients and investors. Start-up accelerators engage private capital. The core of their business model is to cover the costs, earn profit, and recruit new cohorts of start-ups for acceleration. Most of the start-up acceleration programmes provide working space and some small seed capital at start. Game theory method research of J. H. Kim and L. Wagman proves that a start-up that participated in but didn’t find an investor during the programme, still has a higher probability to get financing a than a start-up that didn’t participated in the such. Highly selective acceleration programmes give a start-up a sort of “certification”.
What is the difference between start-up accelerators and start-up incubators?
Start-up incubation programmes last usually from 1 to 5 years, they are not as selective as acceleration programmes; they invite start-ups to join incubation, and are interested bothl in early and later stages oftheir development. Mentoring in start-up incubators is rather minimal and tactical, when compared to accelerators where it is considered as strategic. One of the biggest differences is in the business model start-up incubators are into. They are usually not interested in investing in start-ups, but in start-ups paying them a rent for being incubated in the working place they offer. They can also work non-for profit, as in case of incubators co-financed with public money. You might find a lot of start-up incubators under tag name of co-working spaces or centers, with wihich they are almost identical considering the business model they execute.
You will also find accelerators displaying some traits of incubators, and vice versa, as these forms of supporting entrepreneurship like experimenting, and are still evolving. Both of the forms of nurturing entrepreneurship are vital, but let’s focus on accelerators today.
Start-up accelerators have gained on popularity in the recent 10 years. One of the first professional start-up acceleration programmes was launched by Y Combinator in 2005, in which companies such us Airbnb, Rededit or Dropbox have started. They were followed by participans of other, professional start-up accelerators such us Techstars founded in 2007, which now is one of the biggest acceleration programs worldwide. It’s estimated that global number of start-up accelerators might oscillate around 3000.
So what types of start-up acceleration programmes, are there?
- Corporate, and private accelerators – it is a form of corporate innovation activity which can be run by corporation internally. Time of the programme is fixed (e.g. 3 months maximum), and only a limited number of start-ups is invited. Such accelerators are led e.g. by Microsoft, or Telefonica. One other form of corporate accelerators is a model called “Powered by” where corporations contract professional acceleration programmes operator to run such programs for them. Such accelerators include Disney Accelerator Powered by Techstars, Barclays Accelerator Powered by Techsters, or Sprint Accelerator Powered by Techsters. Another form of corporate acceleration programmes can be about engaging their employees into already existing private accelerators in form of investors, mentors, or programme partners/sponsors. You can find more on these kind of accelerators considered as the best in class in US in short article I have published at LinkedIn some time ago.
- Network accelerators – usually accelerator programme has a defined managing director and mentors, but network accelerators are about franchising accelerator programs to multiple locations with different directors andmentors , which can result in numerous advantages for their participants. One of such accelerators is Techstars with programmes run in Austin, Berlin, Boston, Chicago, New York, Seattle, San Antonio. There is also Healthbox running its programmes in Chicago, Miamo, and Salt Lake City; 500 startups present in San Francisco, Montain View, and Mexico City; or Dreamit active in Philadelphia, New York, Auston, and Baltimore.
- Accelerators integrated into Seed Funds – sometimes accelerators include seed fund, which is type of early stage venture capital investing in their acceleration programme. Examples are 500 startups and Techstars, which run accelerators pararelly to seed-stage focused venture capital funds in their portfolio. Other start-up acceleration programmes are transformed nto seed funds, as in case of Y Combinator, which initially was a cohort-based acceleration programme, and now “funds start-ups in batches”. In Poland I’ve observed this model in example of SpeedUpGroup, which runs one of publicly co-financed 10 BRIdge Alpha funds. In order to invest in promising new business ventures SpeedUpGroup is to launch a 3-months-long, intense acceleration programme for the scientific start-ups they focus on, where successful entrepreneurs and corporations are to deliver mentoring on getting paid or going global.
- University accelerators – this kind of accelerator subset is affiliated with tertiary education institutions, and typically requires start-ups being affiliates of these institutions (students, employees, or graduates). Programmes typically take place during the summer. They include e.g. StartX run at Stanford, Global Founders Skills Accelerator run at MIT, New Venture Challenge at University of Chicago, OwlSpark at Rice University, SkyDeck at University of California, Berkeley, or Red Labs at University of Houston.
- Public sector accelerators – these accelerators are sponsored by government programmes, as in case of Start-up Chile launched in 2010. The programme is run by Chilean Ministry of Economy, and Chilean Economic Development Agency (CORFO), which is an organization responsible for country’s economy promotion. Start-up Chile provides participants with USD 40 000 equity-free seed capital, 50% delivered at beginning of the programme, and 50% after 3 months after reaching agreed milestones. The programme also aims to attract foreign entrepreneurs, as it provides work visas, local identity card, and support in securing housing. On top of that foreign participants get “buddies” from Santiago business community, whose interests and language match with them. Programme provides free office space in downtown Santiago, mentoring by programme staff and external mentors. What I particularly like about the programme it is “sustainability factor” design to impact local entrepreneurship ecosystem. Each beneficiary of the programme has to contribute in building entrepreneurial culture in Chile. During the stay beneficiaries have to accumulate certain amount of “Return Value Agenda” points, which is like artificial currency used for paying for their social contributions. I included this programme to accelerators, as Chilean government is in fact investing here, but expected return is not financial profit, but cultural, economic change achieved by giving testimonials and sharing the know-how with others. Selection to the programme also resembles the one of private initiatives, as all applications are assessed by external judges in outsourced start-up consulting Younoodle from California.
Interesting form of acceleration programmes, but rather beside the typology proposed would be non-profit ones (no equity expected), as in form of MassChallenge, which branch is in Boston I have visited this year. They are active thanks to their sponsors, and alumni funding. MassChallenge is also probably one of the biggest acceleration programmes in terms of size of cohort accepted in one batch, and pool of mentors provided (over 600 mentors, and from 2 to 4 working with one start-up). Their programme in Boston each year invites 128 companies from all over the world for 4-months programme. They are also active in St. Louis and London. You can find more on MassChallenge in their impact report.
So, which type of accelerator programme is for you?