The State of Accelerators

As program manager for FounderFuel during the last 2 years…I’ve been putting some thought into the state of Accelerators, what makes an Accelerator world-class and what the future might hold. Below are my attempts at summarizing these thoughts.

Definitions: Accelerators, Incubators

Let’s first review the difference between Accelerators and Incubators, to make sure we are on the same page.

There are various kinds of accelerators, some with a special market or industry focus. At a high level an Accelerator can be defined by 4 main traits:

  1. The program is short, usually lasting anywhere from 3 to 6 months,

  2. Companies coming in to the program have at a very minimum an MVP,

  3. Companies will receive a minimal investment, usually pre-seed and the Accelerator will take equity in return,

  4. The Accelerator will provide its companies with access to Mentorship.

  5. Programs typically end with a demo day, or an event presenting the cohort.

Incubators generally provide the company with a physical space in which they can work to develop their idea over a longer period of time with less direct or managed interaction with those running the space. Incubators usually do not provide funding, so when it comes time to getting their product into market and raising Venture Capital, a company is more likely to go the Accelerator route.

The State of Accelerators Today

I recently attended the Canadian Association of Business Incubation Summit where Pat Riley, CEO of the Global Accelerator Network gave a talk on the state of acceleration and trends to look forward to. Below are some statistics that they’ve collected from their network of Accelerators from the past 7 years. 

  1. On average, it takes companies 4.8 months to raise money after completing the accelerator,

  2. An average of 7 jobs are created per company after completing the accelerator,

  3. 52% of companies that have completed an accelerator raised capital and of those 62% raised over 500k,

  4. 79% are still in business today,

  5. Accelerators help on average 6.4 companies at a time,

  6. Accelerators receive on average 273 applicants per Cohort,

  7. The Mentor network of an Accelerator has, on average, 84 members,

  8. The average amount of equity taken by an Accelerator is 6.3%.

None of this comes as a surprise as it mostly fits within the parameters of an Accelerator that I defined above. However, what is really exciting to see is that 79% of the companies are still in business. This is exciting because one of the main mantras at FounderFuel is that we’ll either accelerate your success or your failure. So to see that 79% of companies that have gone through Accelerators are still in business leads me to believe that the model is working.

I was recently interviewed by a student and they asked me if the stat “9 in 10 startups fail” can be applied to companies that go through Accelerators. My answer to him was no, it didn’t apply. I justified this by telling him that companies that go through Accelerators are provided with every tool and resource that they need to be successful and if 9 out of every 10 of them failed, we just wouldn’t be doing our jobs. Accelerators would have no raison-d’être.

I was a little surprised by how low the number is for companies who have raised money after an Accelerator. The average stands at 52%. But then when compared to the amount of startups still in business, this stat isn’t as scary. It means that startups have found ways to monetize faster and grow without having to raise additional funding. Raising follow-on funding isn’t the only measure of success for a startup (but more on that later). 

Where does FounderFuel fall within the stats of the average Accelerator? 

  1. It takes a FounderFuel company on average 7.1 months to raise money after completing the program,

  2. FounderFuel companies have, on average, created 6 jobs per company after completing the program,

  3. 74% of our companies that have completed the program have raised capital and of those 40% have raised over 500K,

  4. 83% are still in business today and 11% of our companies have been acquired,

  5. We help an average of 8.5 companies at a time,

  6. We receive on average 389 applicants per Cohort,

  7. Our Mentor network is made up of 151 members,

  8. The amount of equity we take is 6% (or 9% for hardware startups, but they get 100K).

Something interesting that I’d like to point out is GAN has never analyzed the Accelerator space from the side of the entrepreneur, which is necessary to get a full and balanced view of the space. At FounderFuel, we make sure to do detailed and anonymous exit interviews with all our Founders in the weeks following their graduation. These help us regularly rethink and rework the program to ensure that we’re providing a top-level program that is always benefiting the entrepreneur. It helps us measure and evaluate ourselves based on more than just the numbers, which is a common mistake among Accelerators. Numbers can only tell you part of the story. I would highly suggest that every Accelerator out there makes this a standard practice.

The Future of Accelerators

Now, what does the future hold for Accelerators? It’s hard to tell, but one thing that is obvious is that the status quo won’t remain. We’re seeing Accelerators race to grow and rethink their standard practices (whether that means rethinking the classic program, focusing on specific verticals or expanding their reach) it will be interesting to see which ones will be successful in this evolution. During his talk at CABI, Pat (Global Accelerator Network), highlighted 3 points about where Accelerators should be heading.

  1. Accelerators should start hosting multiple demo days, not just in the city you are located in but host Demo Day roadshows,

  2. They should start focusing on one vertical,

  3. Accelerators will be adding locations, it’s no longer just about the 1 city model.

I don’t completely agree with these points for various reasons. Investors are already suffering from Demo Day fatigue. I bet if you planned it properly, you could probably hit up a Demo Day almost every day of the year. Does it really make sense to encourage Accelerators to take their Demo Days on the road, will it really make a difference in the long run?

A better plan would be to continue building your brand, bring in great startups and work very hard to ensure they grow and scale and become successful. Doing so will attract Investors and they will want to travel from other cities to come to your Demo Day. It’s not easy but it creates much more value in the long run, not to mention the right kind of value. The same would apply for adding additional locations to your Accelerator. Is it really worth it? If you build a world-class Accelerator then companies will come to you.

It seems very “in” to start an Accelerator and they’re popping up all over the place, do we really need to move towards over-saturation at an even faster pace by encouraging Accelerators to open in multiple cities? I’m all for top-tier Accelerators expanding, but we’re close to (or some might say have already passed) the tipping point where there are too many Accelerators and not enough solid ideas worth accelerating.

Instead of opening up multiple locations and saturating the market let’s focus on collaboration between Accelerators.

Join us July 15th in Montréal during the International Startup Festival for another edition of the Accelerator Rally. See last year’s edition to get a sense of the topics covered and attendees. Stay tuned, as we will soon announce more details and open the call for speakers and panels.

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That’s all for now, stay tuned, I’ve been putting a piece together on red flags to look for when considering an Accelerator.


Work in the Accelerator space and want to share your thoughts? Reach out! We’d love to chat.

-Emma

Emma Williams
emmajjwilliams@gmail.com
3 Comments
  • thibaud
    Posted at 22:12h, 05 April Reply

    What about focusing on one vertical – is this something necessary for accelerators to differentiate from each others?

    • Emma
      Posted at 09:39h, 07 April Reply

      Hi Thibaud,

      I don’t think that there is anything wrong with focusing on one vertical if you have the support to do so. It can be difficult to build out a strong Mentor based that is focused solely on one vertical. My one tip is to stay away from verticals that are sponsored by a corporation or have them as a full partner. I would do a lot of research from alumni who had gone through to make sure that the corporation doesn’t slow their development, they aren’t tied to certain partnerships, branding, etc.

      As long as not every Accelerator moves towards a vertical and that there is a good mix of agnostic vs focused ones it can benefit an ecosystem.

      • thibaud
        Posted at 10:38h, 07 April Reply

        Thanks Emma – you enlightened my lantern. Excited to see FounderFuel W15 Demo Day!

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