Startup Factories: The rise of accelerator programmes to support new technology ventures

 
Source: Nesta

Authors: Paul Miller and Kirsten Bound

Extract from executive summary

Over the past six years, a new method of incubating technology startups has emerged, driven by investors and successful tech entrepreneurs: the accelerator programme. Despite growing interest in the model from the investment, business education and policy communities, there have been few attempts at formal analysis. This report is a first step towards a more informed critique of the phenomenon, as part of a broader effort among both public and private sectors to understand how to better support the growth of innovative startups.

The accelerator programme model comprises five main features. The combination of these sets it apart from other approaches to investment or business incubation:

• An application process that is open to all, yet highly competitive.
• Provision of pre-seed investment, usually in exchange for equity.
• A focus on small teams not individual founders.
• Time-limited support comprising programmed events and intensive mentoring.
• Cohorts or ‘classes’ of startups rather than individual companies.

The number of accelerator programmes has grown rapidly in the US over the past few years and there are signs that more recently, the trend is being replicated in Europe. From one accelerator programme, Y Combinator in 2005, there are now dozens in the US that are funding hundreds of startups per year. There have already been a number of high profile startup successes from accelerator programmes.

The rise of accelerator programmes is closely associated with the changing economics of starting up. Costs associated with early-stage tech startups have dropped significantly in the last decade, creating an opportunity to invest with very small amounts of money (￡10,000-￡50,000) compared to previous eras of investment in digital businesses.

Click here to read the full report

Photo from Creative Commons: Flickr: npmeijer

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