As the importance of innovation has become more widely accepted, the number of countries and organizations that have been working to make entrepreneurship more accessible and more successful has grown considerably. As I’ve written before, it’s highly doubtful that many of these efforts have been successful, but their travails have at least given us an opportunity to understand what works and what doesn’t.
New research attempts to find out just how useful these accelerators and incubators have been in supporting high-potential startups in developing countries. The research finds that these startups are hampered by a range of things, including access to capital. The researchers reveal that while accelerators can help to overcome some of these challenges, success is far from guaranteed.
Growing entrepreneurial capital
They focused on an accelerator that provides the startups they select with training, personalized support, and visibility, but no financial capital. They begin this by selecting ventures with high potential for growth. They then identify the key non-monetary restraints to growth that are holding startups back.
For instance, the startup may struggle to access key market contacts or might have poor market visibility. The analysis found that startups in the accelerator grew by 166% more than they would have done without the support provided by the accelerator.
The researchers directly examined the potential of two high-potential startups, one of whom was accepted to the accelerator, and one of whom was not. While they had similar revenue prior to the analysis, their paths rapidly diverged afterward, with the startup accepted into the accelerator growing far faster than their unsupported peer.
The authors suggest that their fortunes were largely a matter of fate, as the startup that wasn’t accepted was judged by harsher criteria than their peers, and therefore despite being of equal potential, were not accepted into the program, and were on the slow-track from then on.
As such, they argue that accelerators need to have a better method of selection that ensures that assessment is not based upon seemingly subjective criteria.
“Our study shows that accelerators can unleash high growth for ventures with high potential that face non-monetary restrictions, which make them a low-cost and high-impact intervention,” the researchers say. “However, to effectively select ventures, they need to acknowledge differences in the scoring generosity of the judges and make their scores comparable.”
