Global Accelerator Learning Initiative, Village Capital Highlight What Works in Startup Acceleration

Startup accelerators, which began emerging in 2005 with the launch of Y-Combinator, generally share three characteristics: they tend to be limited in duration; work with cohorts of early stage entrepreneurs; and, aim to facilitate connections with potential investors. In July 2015, the Aspen Network of Development Entrepreneurs (ANDE) and Emory University’s Social Enterprise @ Goizueta (SE@G) program announced the launch of the Global Accelerator Learning Initiative (GALI), a $2.3 million effort aimed toward assessing and analyzing the impacts of these accelerators. In collaboration with Village Capital, GALI released its first report last month, focusing on the effectiveness of accelerator programs, best practices in the space, and estimated impacts. Ultimately, the authors find support that the quality of partners and applicants has a positive impact on accelerator performance, while there is limited support that mentor quality or cohort networking played as strong a role.

To assess the impacts of accelerator programs, the authors of the report, which includes ANDE and Emory University researchers as well as Village Capital managers, use application and follow-up data from Village Capital on hundreds of entrepreneurs who applied to similar programs across different sectors in regions around the world. By calculating the average year-over-year change in revenues, full-time employees and investment levels (equity, debt and philanthropy) for entrepreneurs who participated in a program and for those who applied but were not accepted, the authors are able to estimate short-term impacts of the 15 different Village Capital programs.  

The apparent contrasts between the 15 programs allow for the authors to make seven predictions as to why some accelerator programs perform better than others. Through a variety of mechanisms, the research team behind the report then analyzed each of these predictions. The authors find evidence supporting three of these predictions:

• Partner quality improves program performance: Village Capital leaders were asked to give a simple grade to assess program partner performance, finding that the grades were much higher in the high-performing programs;
• Time spent on program related activities lowers program performance: Higher performing programs tended to set aside more time for entrepreneurs to work on their own as opposed to spending as much time as possible delivering program content; and,
• Quality of applicant pool improves program performance: While, on average, the higher performing programs had smaller applicant pools, their applicants tended to have more intellectual property, as well as more educational, entrepreneurial, and management experience.

Two of the predictions made by Village Capital leaders had mixed or limited support:

• Mentor quality improves program performance: Although the higher performing programs connected entrepreneurs with a larger number of mentors, this did not necessarily translate into more time spent with the mentors; and,
• Networking among cohort members improves program performance: Cohort dynamics were mainly positive in both high and low-performing programs, though participants in the higher performing programs tended to describe their cohorts as more partnership-oriented;

Additionally, two of the predictions made did not have support from the research:

• More advanced ventures benefit more from acceleration: Because program selectors in high-performing programs tended to place more emphasis on the quality or promise of an idea rather than the venture itself, this led them to select ventures that, on average, were younger than those in lower performing programs; and,
• Emphasis on financial acumen improves program performance: Higher performing programs spent less time on finance, accounting, and formal business plan development and more time on building skills around presentation, communication, networking, and organizational design;

Village Capital founder Ross Baird suggests that there are several implications in response to the findings outlined in the report. Overall, Baird finds that accelerators have better results when ventures have some initial revenues but need assistance in scaling. Baird suggests that accelerator programs should focus on the quality, not the quantity of applicants, and the need for fully engaged program partners and mentors. Oftentimes, according to Baird, “less is more” when it comes to developing program content, and accelerator programs should focus more on building entrepreneurial networks rather than delivering content – especially content built around finance and accounting.

An executive summary of the report can be downloaded here: http://c.ymcdn.com/sites/ande.site-ym.com/resource/resmgr/GALI/ES_Whats_Working_in_Startup_.pdf

The full report can be downloaded here: https://c.ymcdn.com/sites/ande.site-ym.com/resource/resmgr/GALI/GALI_Report_032816.pdf