When, how and who accelerators accelerate

Analysis of 23,000 ventures and 369 acceleration programmes from across the globe finds accelerators are effective but results can vary significantly.

The Argidius supported GALI has built a database of more than 23,364 enterprises and more than 369 acceleration programs across the world. From humble beginnings in 2012 (quite literally in an academic’s garage!), GALI’s longitudinal dataset has followed up over 9,567 accelerated and rejected ventures, which creates a comparison group to assess the effectiveness of startup acceleration. Four major publications have been released, in addition to thirty shorter reports, data summaries, and country reports.

Key findings:

1. Acceleration does, on average, have a positive effect on participating enterprises.

Accelerated ventures grow significantly faster than rejected ventures in terms of revenue, employees, and investment capital raised, even when accounting for the role of selection.
These differences increase over time.
Considering the cost of accelerators, the majority of accelerators are cost-effective mechanisms for driving funds (earned or invested) into promising ventures.
Benefits come from a combination of accelerators’ ability to select high-potential ventures, provide a market signal of the quality of these ventures, and provide programming that helps the ventures grow.

2. Accelerator impact varies considerably from program to program.

There is no one specific "recipe" for acceleration services that make for success, but evidence points to the importance of the ability to select growth businesses, tailored support, peer learning and localisation of service models.
Accelerators that use a ‘flipped curriculum’ that allows entrepreneurs more time to work on their own or in peer interaction outperform those that use classroom-based study.
The quality of the network of resources that an accelerator is embedded in is a critically important part of the offer.
Top performing enterprises perceive certain aspects of acceleration as being particularly important for contributing to their growth, peer networking, strategic introductions, support in business model development and pivoting, and signalling effects.
Top performing enterprises that do not attribute any of their success to acceleration cite a poor match of program offerings with their needs, an over-emphasis on investment over business fundamentals, a lack of meaningful connections with investors, and a lack of cohort cohesion.
The investment benefits of acceleration are concentrated among enterprises in high-income countries, whereas enterprises in low- and middle-income countries see more benefit in terms of revenue growth.
- Enterprises in emerging markets have stronger education and experience credentials; join accelerators at later growth stages; and, are just as, or more committed in terms of personal investment.
- Challenges in the entrepreneurial ecosystem include a mismatch between what investors and entrepreneurs are looking for, and cultural bias.
- Programs which promote revenue growth also lead to positive investment outcomes.

3. Impact varies from enterprise to enterprise within programs.

Only when high-potential entrepreneurs are accurately selected can acceleration have its full intended impact: the top performing quartile of enterprises in most programs account for most of the growth.
Top performing enterprises have the most financial resources at the time of application.
While gender was not a factor in determining growth in revenues or employment, all-men founding teams raise more investment than all-women teams.
Expatriate entrepreneurs in developing economies are more likely to access grant financing than local founders.
Enterprises that participate in multiple programs on average, derive benefit from both their first and subsequent acceleration experience.

4. Accelerators require donor or government support especially in nascent ecosystems.

Recommendations:

Insights for accelerators

It is important to adjust the elements and content of your programming to match the local ecosystem – the Silicon Valley blueprint will not work everywhere. For example, in an ecosystem with little early-stage venture capital, traditional demo days are unlikely to lead to funding for ventures, and alternative approaches to investment facilitation need to be considered.
Funding for your program will be difficult, and some support from donors or government will likely be at least part of the mix. Funding through returns on equity taken from participating ventures is a model that only works for 1 in 20 accelerators in the U.S and Europe.
While your training curriculum is important, it is even more essential to consider how you are facilitating networking and mentorship among program participants. This is important not only in terms of designing your activities but also in selecting a cohort that can benefit from transparent and collaborative peer interactions.
Consider how your processes may contribute to biases, in particular against women and local founders.
Clearly define your value-add and what you hope to accomplish. The distribution of outcomes among your ventures will likely be very skewed and concentrated among a relatively small group, and so trying to do and be everything for everyone is unlikely to work.

Insights for entrepreneurs

Consider exactly what you hope to get out of an accelerator program before applying, and then select programs that match your stage and needs.
Look at the types of ventures and entrepreneurs that have participated in the program, and make sure these are the types of peers you would want to connect with, engage with, and learn from.
Consider attending multiple programs if these programs are clearly designed to solve different problems at different stages of your enterprise’s lifecycle.
Keep in mind that the growth benefits of accelerator programs tend to be gained by a relatively small number of participants and set your expectations accordingly – though the ability to help you fail faster may also be a benefit.
If you are in a location with limited early-stage funding, participation in an accelerator alone is unlikely to fully alleviate this constraint, and it is important to consider whether the program provides funding directly or how it connects ventures to investors.

Insights for donors and policymakers

Accelerators are, on the whole, effective ways to support high-growth enterprises – but financially sustaining an accelerator in a nascent ecosystem is difficult, and so donor or government support may be necessary. This support is particularly useful when it is flexible and avoids imposing additional constraints and burdens on the accelerators, which can make it more difficult to be reactive to entrepreneurs’ needs.
Accelerators on their own cannot solve the many constraints in nascent entrepreneurial ecosystems. While accelerators can be an effective way to spur growth among the highest-potential ventures, they are not replacements for broader business support programming and policies intended to provide across-the-board benefits to small and medium-sized enterprises.
Do not assume that acceleration will benefit all types of entrepreneurs equally. If you are interested in supporting underrepresented entrepreneurs, probe into how the acceleration model is being developed to address the specific needs of these groups.
There is no one-size-fits-all “recipe” for an effective accelerator program, and it is more important to consider how the elements of the program match the needs of the targeted entrepreneurs and the realities of the local ecosystem.

Insights for investors

If you are engaging with accelerators – for example, by attending a demo day – be clear upfront about the profile of the entrepreneur you are realistically likely to invest in. For entrepreneurs in nascent ecosystems in particular, it can be frustrating to spend time engaging with investors that are not looking to develop their short-term pipeline.
Engage more closely with accelerators to understand their value and their ventures. Many accelerators are developing significantly more in-depth investment readiness programming, providing an opportunity to identify a more robust pipeline through close partnerships.
Consider alternative investment approaches that might carry more risk but also more impact. For example, Village Capital has had considerable success with a fund that guarantees investment in two ventures out of every accelerator cohort based on a peer scoring system. Raising this fund required investors willing to take the risk of experimenting with a radically different form of investment selection, but this has resulted in returns to investors and a more diverse group of supported ventures.