A few years ago, research emerged looking at incubators and accelerators in Britain, Germany, and the United States. It found that the environments were not helpful at all for startups, and almost did more harm than good for their growth prospects.
It found that the sponsors of such programs often fell into the trap of thinking that simply having a program was job done, and therefore didn’t feel the need to provide much support to the startups themselves. Worryingly, however, the same was also true for the entrepreneurs, who often felt that acceptance into the incubator meant they had succeeded. It was rare for this to be seen as the beginning of a journey rather than the end.
Support for growth
Has the situation changed in more recent years? That was the question posed by a recent study from Wharton, which analyzed over 8,500 startups that had made it past the initial screening stage at over 400 different accelerators between 2013 and 2019.
Unlike the previous study, the Wharton paper found that accelerators actually helped startups to grow, albeit from the rather unsatisfactory metric of the amount of VC money they raised. The researchers found that startups in an accelerator were over 3% more likely to raise external funding, and typically raised nearly $2 million more than peers who were not in an accelerator.
While that could perhaps be passed off by VCs being more likely to back those who have already been screened by a reputable accelerator, the researchers also found that these startups also generated more revenue and hired more full-time employees.
The study highlights the growing importance of startup accelerators for entrepreneurs worldwide. In the United States alone, there are approximately 160 of these hubs nurturing fledgling enterprises, while globally, their number surpasses 2,000. The research unveils that the advantages of startup accelerators extend beyond renowned programs and hubs like Silicon Valley, where startup ecosystems are already flourishing.
“This suggests that accelerators aren’t just beneficial for high-tech startups in well-established tech hubs in the United States, but also for other types of ventures in emerging startup ecosystems found in regions such as Sub-Saharan Africa, Latin America, and the Caribbean,” the authors explain.
Design matters
The researchers found that the design of the accelerator program was strongly linked to the success of startups. They cite the various knowledge-building programs offered by the accelerator as a key factor, as well as the breadth of knowledge within each cohort.
The study indicates that accelerators offering a diverse array of training activities, such as pitching competitions, industry-specific advice, and structured learning sessions, tend to enhance the success rates of startups post-accelerator.
However, the paper emphasizes that the optimal blend of these activities varies based on factors like the startup’s developmental stage, industry focus, and the founders’ prior experience. For instance, structured educational content proves particularly beneficial for novice founders and those with limited formal education, helping bridge any knowledge or experience gaps prior to accelerator entry.
Moreover, activities like pitching sessions yield greater benefits for early-stage startups, especially in tech sectors, where securing investment from venture capitalists is pivotal for future growth. This underscores the significance of funding support for fledgling ventures.
Does that mean accelerators are guaranteed to help startups? Probably not, but it does at least show that, when the conditions are right, they can provide a degree of support.
