What’s the Value Delivered to Startups by Accelerators?

As the startup landscape has evolved, a flurry of incubators and accelerators have emerged.

Their numbers reflect the growing enthusiasm about startups and innovation. Incubators and accelerators are also a way for corporate and educational institutions to get involved with startups and encourage entrepreneurship.

acceleratorsThe question now is: what’s next for incubators and accelerators? Is there room for more incubators and accelerators? Do they need to evolve to deliver more value?

In a post on Medium recently, Ivy Nguyen declared “it’s time for most accelerators to go”. She suggested many accelerators are, at best, mediocre and the value they deliver is questionable.

“We hear the word “accelerator” so often now that we seem to have forgotten the root meaning: accelerators help you move faster and should take friction out of starting a company… Most accelerators I’ve seen focus on refining the pitch and pushing you out to investors.”

If anything, Nguyen puts the spotlight on how accelerators should support the growth of startups and the role they need to play within a healthy and vibrant ecosystem.

In operating an accelerator over the past three years, it has been interesting to see how the industry has evolved and what startups need to succeed.

At Ryerson Futures Inc. (RFI), we believe the four key pillars are:

  1. Market validation and customer acquisition. Many startups begin with an idea around solving a problem or doing things differently. Entrepreneurs then nurture the idea so it evolves into a product or service that has financial potential. At this point, accelerators play a key role by helping a startup establish marketing validation and drive customer acquisition. It involves taking a product from interesting to commercially viable and then attracting customers to establish a market foothold. Many entrepreneurs have not gone through this process so having experienced guidance helps them overcome hurdles and execute with intelligence and efficiency.
  2. The power of the network. There is tremendous value in helping startups establish strategic and tactical relationships. An accelerator can jump-start a startup’s growth by connecting them to the right people or company at the right time. Having access to a strong network makes life easier for entrepreneurs because it can quicker to move the needle at a time when there are many moving parts.
  3. A focus on traction, not fundraising. As Nguyen mentioned above, accelerators operate to help startups move faster. For us, traction matters because it means a startup’s product development, marketing and sales are making an impact. As important, traction makes fundraising easier, particularly in Canada where investors want to see that a startup has the potential to become a vibrant business.
  4. A long-term focus: At RFI, we don’t operate with cohorts because it is not a model that supports the success of entrepreneurs. Instead, we work with startups for up to 12 months. This provides them with stability, which is important given the volatile nature of the startup world. It also lets RFI work with entrepreneurs without the pressure of knowing they will be gone in a few weeks. This makes it easier to nurture entrepreneurs and work with them to drive new opportunities.

In many respects, it is early days for accelerators. Their role, the value delivered and how they serve startups is evolving. While some accelerators may struggle, accelerators as a whole can play a crucial role in the success of a startup ecosystem. For startups exploring the idea of getting involved with an accelerator, it is important to understand the value that can be delivered and whether there is a good fit given it is a partnership.

In an ideal world, accelerators provide the right support at the right time. They jump-start a startup’s development from a product, marketing and sales perspective. As well, accelerators help to prepare a startup for long-term growth.

Bottom line: Accelerators come in different shapes and sizes. They serve different kinds of startups and deliver value in various ways. Spending the time to deal with the right accelerator can lead to a win-win proposition.