What helps startups succeed? One of a few factors identified so far is providing startups with mentoring. According to the U.S. Small Business Administration–and a 2014 similar study in the U.K.–small businesses receiving mentoring services survive longer than non-mentored enterprises.
This fact points to a potential importance of startup accelerators and incubators. Yet, the real value of startup accelerators, which is a relatively new phenomenon, is far from being properly understood. That’s why one can’t but welcome a recent study on the topic conducted by Ian Hathaway who presented his findings in a Brookings Institution Brief and a Harvard Business Review article.
First of all, Hathaway does a great job by precisely defining the very term “startup accelerator” and then explaining why this type of startup support must not be confused with others, primarily with startup incubators and angel investors. Hathaway also provides useful data on the regional distribution of startup accelerators in the U.S.
However, quite naturally, I was mostly interested to know whether or not startup accelerators accelerate startups. Well, it turns out that some of them do and some of them don’t. Published data show that top accelerator programs do shorten the time for their graduates to reach key milestones, such as gaining customer traction, raising venture capital and exiting by acquisition. However, these positive effects dissipate when looking at a broader sample of accelerators. In fact, many programs do not accelerate startup development, and in some cases may be even harmful.
It appears to me that the data collected by Hathaway call for the creation of a national catalog–the U.S. News & World Report of Best Colleges Rankings immediately comes to mind here–providing all existing startup accelerators with a ranking reflecting their effects on the future trajectory of their graduates. Using such a catalog will help startups make informed decisions when considering joining an accelerator program–exactly as the college ranking helps high-school graduates find a school of their dream. Sure, not every startup will be able to enter an accelerator of their choice. But at the very least, they’ll be prevented from spending time and equity on the programs that can’t really accelerate them.
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Wow, very insightful. I never thought of incubators as being potentially harmful.