I spent a couple of hours today at FlashStarts, one of the new style accelerators for technology companies to raise early stage venture capital. They had asked a couple of VCs to come and hear company presentations—not pitches—and give some feedback. The presentations, as should be expected early in the process, had strengths and weaknesses. Driving home led me to musing about whether these new style accelerators are destined to be a fad or a permanent fixture in the start-up scene.
Accelerators like FlashStarts are popping up across the country, including in places not traditionally known for entrepreneurship—at least on the scale of Silicon Valley: Launchhouse; 10xelerator; The Brandery; 1871; Healthbox. Why is this?
Successful innovations are copied in an economy, like a successful mutation that sweeps through a population. Early versions of accelerators, such as Y Combinator and TechStars, have spawned imitators because they generated some great companies in a model for investors that seemingly reduced risk, lowered start-up costs, and brought together potential deal syndicates.
Will the followers be as successful as the innovators? It’s probably too early to tell. Does a mutation become a permanent fixture in the gene pool, like the ability to digest milk into adulthood, or fade away like some mutation none of us has ever heard of? Or will accelerators, like mortgage-backed securities (initially a valuable financial innovation) be adopted too widely and become a money-losing debacle?
There is a lot to like about the approach to accelerating start-ups. Entrepreneurs are encouraged to quickly (and inexpensively) build a minimally viable product (MVP) and get it out to customers for fast feedback and iterative enhancements. They receive mentoring from experienced, successful entrepreneurs like Charles Stack (the founder of FlashStarts) and experienced VCs like myself and Mike Stubler. They hang out in a cool space where they can share ideas and receive peer support from other entrepreneurs who are tackling similar challenges. Investors can come and interact with entrepreneurs without the pressure of having to “take a pitch” and make a Yes/No investment decision.
The main concern I have heard expressed about the proliferation of accelerators is whether deal quality will be diluted. Some companies serially apply to every accelerator program in the country until one accepts them. The process for each accelerator is supposed to be selective, but if there are many accelerators seeking deal flow, does this dilute overall quality? For the newer ones, that haven’t yet developed a track record and name brand, the answer is probably “yes,” at least in the short term. Established accelerators like Y Combinator and TechStars will probably continue to attract quality companies. Programs which aren’t able to demonstrate success will either adjust their models or go away. That’s how evolution works.
On balance, I think that these new style accelerators are positive and will become a permanent fixture of the entrepreneurial economy that the U.S. so desperately needs to drive economic growth and wealth creation. I’m spending more and more time with these programs, and I’m probably learning as much as I’m contributing. That’s evolution, too.