NESTA recently published a discussion paper on the rise of startup accelerators, called The StartUp Factories. If you’re not familiar with accelerator programmes like TechStars and Y-Combinator then I’d suggest you give it a read as it’s exactly what we’re planning with our recently announced IGNTN programme.
Incubators are nothing new really but this new class of programme which mixes investment, mentoring and a super-fast turnaround have caught the imagination of many - and not surprisingly they are popping up all over the place at a ridiculous rate. Needless to say we’re beavering away at the idea here too.
But what makes this new breed more successful - judged at least by their ability to propagate themselves - than the countless ill-fated incubators that have come before?
Seed investment is a good start, but most accelerators contribute relatively small sums of money, typically in the low tens of thousands.
Mentoring, too, is good, and the more experienced the mentors the better but there are other ways to get access to good mentors without handing over a chunk of your business.
A short (usually 3-6 month) development timeframe will certainly focus the mind and a group of like-minded uber-competitive ‘classmates’ all jostling to become the star of the class will certainly help keep you motivated.
But do these things really account for the literally hundreds of intelligent, ambitious and committed entrepreneurs banging on the door of the best accelerators at every intake?
I don’t think so.
I think accelerators work for one fairly simple reason - they’re run as businesses. Well, the best ones are anyways. The best accelerators are founded and run by entrepreneurs.
They have real investors hoping for real returns. And they have real customers too - aspiring entrepreneurs and those looking to invest in the next Google or Facebook.
Like employers, investors know where to find the best and brightest. The simple fact of being accepted into a competitive accelerator is in itself a useful indicator that you’ve got a great idea and the smarts to carry it off.
As an investor, it means they’ve been vetted, the wheat has been separated from the chaff and, frequently, someone you know has already put money in.
But take that profit motive out of the equation and you’ve a very different proposition.
Without the incentive to turn a profit, the people running an accelerator have fewer reasons to go out of their way to connect their ‘graduates’ with investors. Public sector projects can often suffer from this problem.
Their metrics are simply different. They succeed by how many business come through the programme and how many are still around a year down the road.
There’s no structural reason that the public sector incubation-style projects can’t deliver the same format, cash, facilities and access to mentors that private accelerators can.
But if they are going to be successful (and some notable examples are) then they need to follow that thinking right through and focus on giving their customers (both startups and investors) what they want.
Mark Nagurski is Derry’s Digital Champion working on the Digital Derry project through the Londonderry Chamber of Commerce. You can contact him at firstname.lastname@example.org