Startup Accelerator

Defining Startup Accelerators

The current trend in corporate innovation is startup engagement, but this terminology is confusing. Accelerators are described as incubators, and the institution that inspired this phenomenon (Y Combinator) calls itself a “new model for funding early stage startups.”

Researchers have tried to mitigate the confusion by clearly defining different startup support models. Two of the researchers on the forefront of accelerator research, Susan G. Cohen and Yael V. Hochberg, defined a seed accelerator as follows:

“A fixed-term, cohort-based program, including mentorship and educational components, that culminates in a public pitch event or demo-day.”

—Cohen, Susan and Hochberg, Yael V., Accelerating Startups: The Seed Accelerator Phenomenon (March 30, 2014). Available at SSRN https://ssrn.com/abstract=2418000 or http://dx.doi.org/10.2139/ssrn.2418000

Accelerators are sufficiently different from their incubator counterparts and other innovation tools. The chart below provides a visual representation of these distinctions.

Figure 1: Comparison of startup support institutions

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Image Source: Brookings

Accelerators, then, are typically of limited duration—a period of immersive education. They help startups define and build products by identifying promising customer segments and by securing resources such as seed capital, employees, and work space.

A huge consideration for innovators and entrepreneurs is that accelerators open doors and networking opportunities. Program participants gain access to peers and mentors who include successful entrepreneurs, program graduates, venture capitalists, angel investors, and corporate executives.

A Short History of Modern Startup Accelerators

“Y Combinator is just accelerating a process that would have happened anyway.”

— Paul Graham, 2005

The accelerator concept didn’t emerge in a vacuum; rather, it is a concept that grew out of a need for an improved process behind VC investments.

In March of 2005, Paul Graham and Jessica Livingston came to the conclusion that current trends in VC investment were lacking. They suggested that VCs should make frequent, smaller investments, as opposed to fewer, larger investments. With the help of Robert Morris and Trevor Blackwell, the team, under the name “Y Combinator,” started the Summer Founder’s Program to test out this theory.

The Summer Founder’s Program pulled from a mix of traditional seed funding and business-incubator traits. The program gave bright college students a chance to create something amazing with their friends while, at the same time, allowed Y Combinator to uncover an important new strategy for venture capitalists: making multiple, small, and synchronous investments across a cohort of startups. That first Summer Founder’s Program provided a spark that disrupted the investment world; It essentially created a system that gave venture capital the ability to scale.

Y Combinator created a system that:

This new system did not go unnoticed. The early success of Y Combinator inspired other investors and, within several years, similar programs started to emerge. Early efforts included the following:

Image Source: Brookings

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Defining Corporate Accelerators

The corporate accelerator closely mirrors independent seed accelerators but there are important distinctions: the objectives of corporate accelerator programs are driven by corporate objectives and these programs are largely owned and run by organizations not traditionally in the business of working with startups.

There are also other differences between corporate and seed accelerator programs, processes, and outcomes.

Key differences between independent accelerators and corporate accelerators

Image Source: Florian Heinemann

As illustrated above, different tools are used to achieve specific goals. Accelerators are exploratory. The best results are seen after both networks and visibility have a chance to grow. If you need faster results, consider other innovation tools like M&A. If you need help choosing and implementing the right innovation tool for your company, contact us.

The Rise of Corporate Accelerators

Five years after the emergence of Y Combinator, corporations began to experiment with the accelerator model. Among the first corporate accelerators were Citrix (USA), ImmobilienScout (Germany), Microsoft (USA), and Telefónica (Spain).

This phenomenon emerged at a time when firms were holding on to record amounts of cash and were looking for low-risk growth opportunities in the wake of the Great Recession. Corporate accelerators allow companies to investigate startups that are aligned with their strategy while leveraging their current workforce and providing minimal capital. These factors, combined with the increasing interest in innovation among CEOs, created a fertile ground in which corporate accelerators thrived.

By 2016/2017, there were 188 total accelerators and 71 active corporate accelerators.

Corporate Accelerator Adoption, 2010-2015

Image Source: Deloitte

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Advantages to Corporate Accelerators

Corporate accelerators exist at the sweet spot among a number of variables: risk level, capital investment, access to the external ecosystem, and engagement level. This positioning offers a wide variety of incentives for corporations.

Consider the Product Type 

The first thing for an accelerator to consider is what type of product is being developed. While tight deadlines can inspire action, startup founders need enough time to develop a demo product that they can pitch by the end of the program.

“Copying Y Combinator without a reason is a poor choice,” wrote Jed D. Christiansen in his MBA dissertation Copying Y Combinator. “New program founders should specifically think about the reasons behind the length of their accelerator program.”

The three-month window may be ideal for web or mobile applications with typically low capital requirements and short prototyping durations, but if a startup has to build a physical product, it’s going to need more time.

Consider Cost and Efficiency

“Part of the power of the accelerator is that it’s a constrained period of time.”

— Brad Feld and Ian Hathaway Discuss Accelerators, Ian Hathaway, September 2015

As Christiansen noted, most of the funded startups at Y Combinator are unable to launch in the three-month window before Demo Day, but the accelerator has stuck to that length. “We kept the three-month cycle because it is a good length of time to build a version 1,” Y Combinator co-founder Paul Graham said,. “Some startups may not be able to launch in such a short time, but they should all be able to build something impressive.”

A short timeframe puts pressure on startups, but it has other benefits as well. “The limited duration is essential to controlling costs and increasing the number of startups in the accelerator’s portfolio,” wrote the authors of the Small Business Administration report “Innovation Accelerators: Defining Characteristics Among Startup Assistance Organizations.” “This in turn increases the expected profit of the accelerator by increasing the probability of one or more high value exits into the marketplace.”

External Resources

The following resources provide general insights into existing and emerging accelerator hot spots:

4. Choose the Sector

A major benefit of focusing on teams in one sector is that the ventures benefit from sharing expertise because they are working on related problems or technologies. Similar teams in one cohort also facilitate collaborating with investors and partners who are active in the particular sector.” 

— Corporate accelerators: Building bridges between corporations and startups, Thomas Kohler, 2016

The accelerator space is saturated with incumbents that have controlled the generic market for years. Most corporate accelerators have addressed their lagged entry by focusing on their specific vertical.

“By concentrating on one specific sector, the accelerator management team can develop the necessary sector-specific knowledge and expertise to identify and exploit the economic potential of entrepreneurial teams,” wrote the authors of the report “A Look Inside Accelerators” by the U.K. foundation Nesta.

Focusing on a corporation’s own industry allows an accelerator to take advantage of various synergies that can help a startup succeed. As the DEEP Centre report Global Best Practices in Business Acceleration noted, these can include global value chains, hands-on mentorship, and exposure to the corporate partner’s executives, employees and customers.

To date, two industries have dominated the growth in corporate accelerators. Half of the corporations that have launched accelerators are in technology, media, and telecom, while almost a quarter are in financial services. Both industries are being transformed by digital technologies.

“Corporations within these industries should pay particular attention to this emerging innovation model—as their competitors already are,” wrote John Ream and David Schatsky in Deloitte Insights. “Corporations in industries with lower accelerator adoption may want to explore the model as a distinctive innovation tactic that may help drive unique capabilities among their peers.”

In any industry, focusing on the sector correlates with startup success. A 2015 global survey on best practices in incubation and acceleration by Unitus Seed Fund and Capria Accelerator Fund found that 70 percent of startups in the top quartile of success “have a deep sector focus; the second and third quartile both have 50 percent who have a sector focus and only 10 percent of those in the lowest quartile of success have a sector focus.”

Corporations are in a prime position to provide startups with support in their respective industries. Innovation leadership must keep an ear to the ground and determine whether the industry is ripe for corporate support. The following are a small sample of resources for insights into disruptive trends.

Which leads to the next question: Is your sector ripe for disruption? 

Below are two resources for insights into industry and sector trends.

Consider the Educational Program Structure

“Less is more’ when it comes to program content. Programs where entrepreneurs spend a lot of time in the classroom — listening to guest speakers or to us teaching — have inferior outcomes.”

— What’s Working in Startup Acceleration, GALI

When there’s teaching to do, it’s tempting to sit students down in a classroom and show them what they need to know. But GALI found that “the more remote work we allow, the better.” Indirect learning, which focuses on the student’s inquiry and exploration rather than the teacher’s instruction, allows entrepreneurs to learn while working on their business plan and product.

According to the authors of a research paper titled “Do Accelerators Accelerate? The Role of Indirect Learning in New Venture Development:” “Much of the benefits of accelerator participation likely stems from accelerators providing opportunities for indirect learning that help entrepreneurs correct known and unknown flaws and gaps in their initial business plans and identify unexpected possibilities for improvements (e.g., target customer, go-to-market plan, technology and operations strategy, profit formula).”

Accelerators should design curricula around things entrepreneurs do remotely that serve the dual function of teaching valuable lessons and helping advance the startup. Time on site is better used in building relationships.

Some accelerators are beginning to blend online education with the accelerator experience. This allows founders to spend more time building both networks and product.

Where the corporate accelerator is located and how many entrepreneurs it’s trying to serve will both influence the design of the curriculum.

“Accelerators that operate in regions without a strong history of entrepreneurship will need to create a more comprehensive educational program,” wrote Christiansen in Copying Y Combinator, “while accelerators that focus on more experienced entrepreneurs can likely be successful with a more tailored educational program.”

As in any other educational setting, the smaller the cohort, the more specialized and individual the teaching can be. But even in larger programs, it’s important that all entrepreneurs get some education tailored to their startup.

“In larger education programs, the advice must be biased toward the general in order to be effective,” Christiansen wrote. “But product-specific advice and education can be invaluable to the long-term success of a company, and should be included as a part of every accelerator program.”

External Resources: Accelerator Education Programs

Here are some examples of general entrepreneur education curricula aimed at larger, industry-agnostic cohorts.

Additionally, the smaller the cohort, the more specialized and individual the teaching can be. But all entrepreneurs require some education that is tailored to their startup.

6. Market Your Accelerator

Once a corporation understands what startups are hoping to get from your corporate accelerator, the marketing can begin. Managing expectations from the get-go saves everybody a lot of time. Clear communication about the program’s criteria, what it offers, and to whom, will help the startups understand what’s in it for them. This way, the corporation can be confident that any applicants are at least on board with the bare bones of the program.

Selecting the channels through which to deliver the message depends on where the company has influence. For example, Sam Altman of Y Combinator states that an online class he taught boosted the entrepreneur applicant rate by 40 to 50 percent. For another company, an alumni network might be a more lucrative channel.

According to the report Bridging the “Pioneer Gap” by the Aspen Network of Development Entrepreneurs and Village Capital, the most common sources accelerators cite for startups are:

1. Referrals from entrepreneurs affiliated with the accelerator.

2. Impact investors (individuals and investment funds).

3. Commercial investors (individuals and investment funds that do not self-identify as impact investors).

4. Entrepreneurial associations (fellowships, scholarships) in the social impact space.

5. Entrepreneurial associations that do not identify with social entrepreneurship or impact investing.

6. Universities.

7. Sector-specific industry associations.

8. Sector-specific conferences (e.g., agriculture, education).

9. Social entrepreneurship or impact-investing conferences.

10. Inbound requests from program marketing efforts and social media.Outbound direct, “cold call” recruitment (e.g., finding and contacting entrepreneurs on the web, Facebook, LinkedIn).

— Aspen Institute

The report notes, however, that not all sources are equally helpful, and a corporation should decide where its outreach efforts will get the most bang for the buck in terms of attracting quality applicants, not quantity.

Startupbootcamp, which runs accelerator programs around the world, published a Startup Ecosystem Analysis for the year 2016. The accelerator ran 266 mentorship events in 53 countries in 2016, nearly double the number from 2015. It also finds teams at major conferences and industry events. Startupbootcamp representatives attended more than 40 such events in 2016, including Pioneers Festival in Vienna, RISE in Hong Kong, and Wolves Summit in Warsaw.

The program also relies heavily on referrals. More than a quarter of Startupbootcamp’s startup teams came through referrals from mentors, alumni, investors, and staff members.

Image Source: Impact Accelerator

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In its whitepaper, Impact Accelerator provided examples of its outreach approach, which includes using a network of earned, owned, paid, and shared media to reach as many people as possible. Messaging channels include live presentations, webinars, hackathons, traditional media, and social media.

Image Source: Impact Accelerator

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According to Altman, one of Y Combinator’s problems is that the top of their funnel is so large, and the sheer number of applicants so vast that the program risks discarding some of the good applicants with the bad.

The figure, below, shows the selection funnel for Impact Accelerator. In this case, of 160 million applicants, only 60 were selected.

Image Source: Impact Accelerator

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The precursor to screening applicants is to develop selection criteria that are unique to the company-accelerator context. A case study by the Small Business Institute Journal examined leading accelerator companies in the United States. It found that each had a different set of criteria for selecting participants.

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Selected startups or teams must have the elements necessary to succeed, including sufficient experience, a good product, a receptive market, and a plan. Even with these clear criteria, selecting startups to participate in an accelerator isn’t easy; accelerators that have been around for more than a decade admit that it’s messy and imperfect.

Timeline for Selection

In terms of the timeline for the selection process, most accelerators spend between one and three months recruiting each new cohort, according to both Bridging the “Pioneer Gap.”and “Startup Accelerator Programmes: A Practice Guide.” One-third spend between three months and a year.

Selection processes have evolved over the years as accelerators have gained momentum within the startup community. As the numbers of applicants continue to increase, video applications and the use of alumni help weed out poor prospects.

In contrast to the relatively short duration of the actual accelerator, the time spent in talent selection is substantial. According to Nesta, it’s common practice for accelerators to use selection committees composed of strategic partners, investors, alumni, and experts or mentors. Applicant interviews with these committees can range from a short, informal chat to an hour-long inquisition.

A graphic from Startupbootcamp shows their funnel-shaped selection process at the end of which only three percent of applicants are accepted.

Image Source: StartupBootCamp

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This detailed example of Kickstart Accelerator’s selection process and timing includes graded criteria.

Image Source: Kickstart Accelerator’s selection process

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Nesta’s “Startup Accelerator Programmes: A Practice Guide” includes examples of accelerator selection processes from Techstars London, Fintech Innovation Lab, and Bethnal Green Ventures. While all three use online applications, their methods diverge after that. Techstars and Bethnal Green end the process with a face-to-face committee interview, whereas Fintech puts shortlisted candidates through a half-day boot camp during which they trial-run their pitch. In between, all three have expert and/or executive review teams that create a shortlist.

Selection Criteria

Here arethree questions to consider when designing a startup selection process.

The Deloitte report, “Design Principles for Building a Successful Corporate Accelerator,” lists questions to ask in the selection process tailored to two different models of acceleration: 1) financial returns, in which the accelerator invests in startups and achieves economic benefit through exits, and 2) innovation integration, in which the accelerator directly integrates innovative technologies or disruptive business models into the corporation’s organization.

Questions for financial returns

1. Will the startup integrate or exit within the next five to seven years?

2. Does it have the potential to return 10 times the funds invested?

3. Does the team have a prototype and traction in the market?

4. Is the founding team visionary, ambitious, and able to scale this business?

5. Is the founding team receptive to criticism and ready to pivot from the original idea if the market demands it?

6. Do we have a network of experts that can help this startup in its specific vertical?

Questions for innovation integration

1. Is this a venture representing the edge of our business?

2. Is the marketing moving in such a way that this innovation could become the core of our business?

3. Do we have the specific resources the startup needs to develop the technology?

4. Do we have a network of experts in this vertical?

5. Is the founding team visionary, ambitious, and able to scale this business beyond borders?

6. Is the founding team receptive to criticism and ready to pivot from the original idea if the market demands it?

— Deloitte

Additional resources for accelerator applicants

Assessing the Founders

Paul Graham and Sam Altman have devised a way of gauging applicants’ potential for success. The method asks applicants to describe a time when they’d hacked something to their advantage or “beaten the system” in some way. This question can reveal initiative, creativity, tenacity, and the ability to think strategically to solve a problem.

Intelligence is not the number one criterion that Y Combinator looks for in applicants. According to Graham, “That’s the myth in the Valley … as long as you’re over a certain threshold of intelligence, what matters most is determination.” Altman lists the following characteristics that he looks for when selecting startups: clarity of vision, clarity of explanation, determination, passion, and evidence that applicants have done something great in the past. Moreover, Altman spends only 10 minutes identifying these characteristics in an applicant.

How do you assess a whole team using these criteria? Graham looks closely at not just how well startup teams work together but also how they get along. The relationship between the founders has to be strong. According to Graham, “Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be.”

External Resources: Corporate Accelerator Mentorship 

Recruiting qualified people is only a part of creating a solid mentorship program. Even the highest quality candidates need to be trained in mentorship best practices. The following resources provide insight into successful mentorship models, with a focus on mentoring startups:

Finally, any program needs to be monitored and assessed. The quality of mentorship can be assessed through feedback surveys that the startups complete. This information is part of a feedback loop that allows for constant improvement in the mentorship process.

Managing C-Suite Expectations

“When it comes to building the corporate accelerator, the organization should understand that the process requires time and continuous learning concerning what works best for the organization as well as the startups.”

— Design Principles for Building a Successful Corporate Accelerator, Deloitte, 2015

Communication about innovation efforts with longer timelines has to be clear. Leadership and shareholders need to be aware that corporate accelerators rarely lead to instant results. One of the worst possible outcomes for an accelerator is a premature termination.

“Corporate sponsors of incubators and accelerators bring greater resources to bear, but their commitment to acceleration may change at any time due to factors outside the influence of the program,” wrote the authors of California Tool Works, a report on innovation and acceleration by the California Business Incubation Alliance. “This kind of change often interrupts the operation of accelerators and their associated networks.”

At the CB Insights’ Innovation Summit in January 2017, Los Angeles Times tech reporter Paresh Dave asked 500 Startups founding partner Dave McClure about corporate timelines for accelerators:

Paresh Dave: So, what’s wrong about looking at the five-year horizon and doing that?

Dave McClure: I don’t think most corporates plan for that long. Certainly, most people running corporate accelerator programs, if you look at the trajectory on those, they often aren’t renewed for more than one or two years.

“Building an accelerator is an exercise in ‘business building’ in itself, and is in fact the first step towards an internal ‘business building’ unit for the corporation,” Deloitte wrote in Design Principles for Building a Successful Corporate Accelerator. “This is a concept which we believe will be standard in successful major corporations within the next five years.”

In order for the concept to work, Deloitte wrote, the organization has to understand the mechanisms of early-stage venturing, and that it usually takes five to seven years for early-stage ventures to achieve meaningful financial results. Even a startup that doubles that speed is looking at a two- to four-year timeline.

“This type of accelerator requires a strong long-term financial commitment with lasting C-level and board support, anticipating that the accelerator will most likely be a cost center before achieving returns,” the report noted. “Chances are high that along the way, a significant number of startups will fold or fail to achieve acceptable results.”

Justifying Corporate Accelerator Costs

“A rule of thumb for the financial estimation is to set aside 5-10 percent of the money that the organization would like to see a business create. For example, if the goal is to build a 100 million-euro business, the organization should be looking to set aside 5 million-10 million euros for building and running the accelerator.” 

— Design Principles for Building a Successful Corporate Accelerator, Deloitte, 2015

Expenses for a corporate accelerator may include third-party vendors, office space, marketing expenses and internal teams, according to Falguni Desai, managing director of Future Asia Ventures, writing in Forbes. “Budgets to simply run the accelerator can range anywhere from $2 million to $5 million per year,” he wrote. Outsourcing your accelerator to a company like Techstars costs an upwards of $1 million, according to a discussion on Quora.

But comparing R&D spending to accelerator expenses adds perspective.

Image Source: The Atlas

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The 2016 Global Innovation 1000 study by PwC Strategy shows that the 10 most innovative companies outperformed the top 10 R&D spenders, which refutes traditional theory and past research studies.

No one will be surprised to hear that Apple and Alphabet continue to lead the most innovative list, followed by 3M and Tesla. However, they do so with far less spending on R&D than some big-name industry leaders. Volkswagen, Samson Electronics, and Amazon spent the most on R&D but with little to show for it. Apple spent $8.1 billion on R&D and outperformed Volkswagen in innovation, which spent a colossal $13.2 billion. 3M spent just $1.8 billion on R&D and outperformed Samsung, which spent close to $13 billion.

Depending on strategic motives and company structure, accelerators and corporate venturing could well be a way to save money and complement R&D programs.

According to Yael Hochberg, a visiting professor at MIT Sloan School of Management, startups are about experimentation, and the cost of that experimentation is about one-tenth what it was a decade ago. Hochberg says, “[Businesses] can actually go out and get a sense of whether these things are going to be successful a lot more quickly and at a much lower cost.”

Corporate Accelerator Leadership and Structure

Building a corporate accelerator into an established business requires surgical precision. Proper leadership needs to be in place in order to manage expectations and ensure that both corporation and accelerator are getting what they need.

An accelerator is straddling the line between an emerging concept and a contribution to a mature and established corporation. There is a need, therefore, for an entrepreneurial mindset that also has a deep understanding of the company’s culture, structure, and mission.

Dominik K. Kanbach and Stephan Stubner suggest combining parent-company heads of corporations with over 15 years’ experience, leaders with startup experience, and a network of relevant external stakeholders such as investors. Deloitte recommends some areas that accelerator leaders should consider at the outset. These include identifying areas for potential disruption in the industry, determining whether there is a long-term commitment to building exponential business and scaling, and ensuring that the corporate leaders are supportive of digital transformation.

The hardest part of securing the long-term support of the C-Suite and board is persuading them that the risk of not following an innovative path and allocating the required resources is greater than the risk of doing so.

What’s scary about a corporate accelerator is that the risks are admittedly high. There are significant initial costs, and there is no immediate payoff. The quality of both startups and mentors can be low if either are poorly selected. Based on this graphic from the World Bank, few corporate boards that are protective of shareholders would jump at the chance to initiate an accelerator based on the risks.

Image Source: World Bank

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But that’s the state of technology advancement in the digital age. High speed and high risk.

Kanbach and Stubner describe corporate accelerators as either integrated within the parent company as part of a specific business unit, such as digital or online business, or a specific department, such as innovation management, corporate strategy, or product development. The way that the accelerator is integrated determines the reporting line of the accelerator management team.

A separate accelerator removes the direct risk from the corporate coffers. It can act as a bridge between innovation and the corporation. It’s funding should be separate and anticipate high initial startup costs with a suitable timeline for returns. David McClure of 500 Startups warns, however, that too much accelerator independence could be detrimental if a company has many innovative activities ongoing within its structure. While some projects might have a short horizon and some a longer horizon, innovation efforts should be coordinated to avoid crossovers, expense, and missed synergies.

According to McClure, “[the corporation] might have an accelerator program, they might have an innovation program, they might have a direct investment program, they might have a VC arm and they might have acquisition, right? And I think all those should probably be coordinated.” That’s because innovation doesn’t start and end with the creation of a new product; a new product becomes part of the corporation’s core business.

Corporate Accelerator Metrics and KPIs

Pertinent to the independence and success of an accelerator, we look at how an accelerator’s progress can be measured over the short and long term. Data are key. Data can be the difference between the continued support of corporate leadership and the cessation of an accelerator. Data are also essential for cohort members to assess and document their progress in meaningful ways.

A study by the California Business Incubation Alliance from 2016 found that only 4 percent of corporate programs don’t track any performance metrics of their portfolio companies but almost 90 percent track financial and product milestones. Which data are tracked and reported depends on the focus of the accelerator governance.

It’s important for corporations to be transparent with their accelerator metrics to maintain trust and credibility and to ensure future high-quality applicants. Techstars provides an excellent example of transparency by listing every company it has ever funded.

For ideas on additional metrics for assessing startups, McClure suggests the following data for early-stage startups.

The Importance of Post-program Startup Support

“Once an accelerator has developed over a number of years, the alumni network can be an important source for mentors and investors, as successful graduates are more likely to invest back into the community that supported them in the first place.”

— A Look Inside Accelerators, Bart Clarysse, Mike Wright and Jonas Van Hove, February 2015

Peter Relan, internet executive and creator of an early startup incubator, claims that 90 percent of accelerators and incubators will fail, or won’t provide a positive income, based on the rule of thumb that nine out of 10 startups fail. He lists the reasons for failure as too little mentorship, a lack of funding post-program, and a lack of development resources. All of this can be solved with post-program support.

The Power of Networks

Accelerators require long-term management. They improve over time, and their popularity depends on the quality of the selected applicants and mentors. The graduates from an accelerator join an alumni network, which broadens the accelerator and the corporation’s connections. Each new startup member through the program is a future alumnus who is often willing to re-invest time and money in the organization.

One suggestion from participants was that an online platform where program alumni can connect, share experiences, and access mentors they had met during the program would be helpful. In addition, graduates would like to have additional live training or online resources as a component of continued support services.

An ongoing network of alumni extends collaboration, increases knowledge-sharing and ensures the long term success of accelerators. Y Combinator’s unmatched success in this space is largely due to its extensive alumni network. There are even VC funds made up solely of Y Combinator alumni (Pioneer Fund, Orange Fund).

The infographic below shows how such networks play out in real life for Y Combinator.

Image Source: Fast Company

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Support Programs

Relan implies that incubators are often more for show and PR purposes than they are real efforts with a long-term commitment to advancement. He also concludes that those startups who continue to have access to resources and support after they exit will have the best chance at survival.

From the startups’ perspective, according to an analysis by the I-DEV International in conjunction with the Aspen Network of Development Entrepreneurs (ANDE) and Agora Partnerships, a common complaint of incubator and accelerator alumni and a possible reason for failure is that programs did not provide enough support once the formal program came to an end. Some participants reported that they struggled to access the resources or ongoing support to translate plans into action.

The best accelerators provide outreach events and regular interactions for their alumni. According to Bridging the “Pioneer Gap”, the types of post-program support offered to entrepreneurs include:

Further, these accelerators provide outreach to their alumni, in the form of events and regular interactions, to keep startups engaged with their program. This further strengthens the network effects outlined above.

“A demo day for alumni prior to the public pitches provides opportunities for the startups to get constructive feedback and engage the accelerator community,” wrote Thomas Kohler in a Harvard Business Review case study.

Founder Feedback

As with any project, there needs to be a review, and founder and mentor feedback is the bread and butter of any program that wants to achieve continuous improvement. In the case of Y Combinator, a survey is sent out to graduate companies requesting anonymous feedback. The information received is crucial to improving the results of subsequent projects, as stressed by Y Combinator’s Michael Siebel:

“One of the things we do is send a survey out to every company asking for anonymous feedback. You have no idea how much we read that. … That’s kind of the base for how Y Combinator changes. The things that founders think we need to improve are the things we figure out how to improve for the next batch.”

— Michael Siebel