Over the last 10 years some great minds have turned their attention to the challenge of how to create tech startups in a repeatable way. Many of these have looked towards Silicon Valley for answers. Paul Graham and others in SV came up with the accelerator model which has now spread across the globe. The success of Y-combinator has led to the proliferation of European accelerators based on the same model, but failing to deliver comparable results as in Silicon Valley. I believe there are several issues with the current accelerator model:
– Do accelerators recruit enough quality startups into cohorts?
The cohort system seems to work against accelerators. Recent programmes have struggled to find enough quality startups at the right stage in their development. Startups can only be accelerated effectively between the stages of problem/solution and product/market fit. Beyond this they have developed their ideas too far to help.
– Do accelerators really deliver results?
Most accelerator programmes focus on their ability to deliver quality mentoring. However, there simply are not enough experienced mentors out there. We cannot hope to emulate The Valley with its large number of internet millionaires from earlier IPO’s. Instead our accelerator programmes fall back on bankers and other professionals who have never been involved in tech startups before. This does more harm than good, and brings the bankers mindset to an innately creative market – more Excel VBA and process driven than free thinking and imaginative.
– Why are they going niche?
Okay, to solve these problems why not go niche? Let’s all jump on the same bandwagon! Aren’t FinTech accelerators an oxymoron? They are heavily sponsored by banks and other financial institutions who can’t fail to negatively influence outcomes. Can an accelerator run by Barclays Bank really create startups capable of disrupting the banking industry?
– What’s the real value?
The reducing cost of tech has made it much easier for startups to get to product/market fit without involvement in a programme. There is also far greater access to early stage capital from other sources. Startups with strong propositions and good teams are sending out the wrong signals by signing up for second rate accelerators. They are also throwing away equity for little or no return.
The availability of early stage capital through accelerators, crowd-funding and the startup loans scheme is causing a problem further downstream. These initiatives are stimulating the formation of startups that can’t hope to attract later-stage investment.
– So what is the answer?
The startup market has changed. Quality startups need linking with smart investors very early on. Luckily internet platforms are able to do this. Dreamstake in Europe and Angellist in the US are a good way to get investment from quality sources and ensure continuity. Startups benefit from a light touch. This means offering the appropriate level of funding and support exactly when it is required, on an ongoing basis. Accelerators are unable to do this, platforms can!