The second article in the HowDo guide on building corporate accelerators outlines program design. Corporate accelerators must be tailored to the needs of the organization and its goals. Broadly speaking, though, the components of the design are basically four-fold: Duration, Location, Sector, Learning.
Accelerator Program Length
“We discovered [the three-month program length] by accident. When we first started YC, we began with a summer program. We were trying to learn how to be investors, so we invited college students to come to Cambridge and start startups instead of getting summer jobs.” — The F|R Interview: Y Combinator’s Paul Graham, Carleen Hawn, May 2008
The three-month program may have been discovered accidentally, but it helped create a new dimension of startup support that leverages the time constraint. While the most public accelerators (Y Combinator and Techstars) have chosen the three-month approach, organizations should design their programs according to the type of product they are focusing on and the amount of capital they have available.
Source: GALI , 2016
Considerations for Program Length: Type of Product
The first thing for an accelerator to consider is what type of product is being developed. While tight deadlines can inspire action, startup founders should have 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, which typically have low capital requirements and short prototyping durations, but if a startup has to build a physical product, it’s going to need more time.
Considerations for Program Length: Efficiency/Cost
“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 notes, 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 says. “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 time frame pushes startups with a kind of tough love, 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.”
“There is a start-up revolution occurring. Every major metro area in the world will eventually be able to support an accelerator.” – Future Techstars, Step Forward, Max Chafkin, April 2012
There are generally two schools of thought about the location of a startup accelerator. One believes that startup accelerators can thrive anywhere. Brad Feld, who co-founded Techstars in Boulder, Colorado, wrote in Inc. Magazine that “A good accelerator can be run in any city in the world for $500,000.”
The other believes Silicon Valley is the best place in the world to house an accelerator. At the Etohum San Francisco 2015 event, Y Combinator’s Michael Seibel said, “We think it’s just ridiculously important to have YC in the [Silicon] Valley. I don’t think we’re ever going to launch an international chapter of YC. The advantages of the Valley are that we can introduce people to money and good valuations, we can introduce them to tons of other companies that can be mentors and customers, and we can introduce them to the pace of the Valley — the speed that you have to operate. We can’t do that anywhere else.”
Both schools agree that accelerators will be more successful when they’re part of a thriving ecosystem. But while Graham says startups should seek out an industry or startup ecosystem, Feld argues that entrepreneurs can create their own.
“I’m not claiming, of course, that every startup has to go to Silicon Valley to succeed,” Graham wrote on his website. “Just that all other things being equal, the more of a startup hub a place is, the better startups will do there.”
Feld disagrees: “I think it’s unbelievably myopic to say the only place you can build your company is Silicon Valley or City X,” he told Marketplace. “It goes against the law of systems dynamics — if everyone goes to a certain place to do a certain thing, you’re not going to have increasing returns forever. You should decide where to live your life, and then build your life around that.”
It’s worth noting that Feld considers the startup process to have a longer time frame than most entrepreneurs think about: “It takes 20 years to create a company,” he told the Wharton School in 2013. “The startup community needs that kind of 20-year time horizon.”
Accelerator Programs by Metropolitan Statistical Areas (2015)
Source: Hathaway, 2016
All this said, corporations are generally constrained to the areas where they already operate. Before moving forward with any accelerator plans, corporations need to assess their city’s innovation and startup potential.
Resources: Accelerator Location
The following resources provide general insights into existing and emerging accelerator hot spots:
- Top 10 Cities for Corporate Innovation: Innovation Leader magazine’s ranking of cities based on ecosystem for supporting corporate innovation.
- TechCities 1.0 Report: Cushman & Wakefield look at the big player tech cities in the United States for 2017 and those to watch in the future.
- Global Cities 2017: Leaders in a World of Disruptive Innovation: This analysis by A.T. reports the world’s most influential cities.
- Map: Emerging tech hubs and specialization: Marketplace’s coverage of cities that have the potential to become the next Silicon Valley.
- The 2017 Kauffman Index of Startup Activity: The Kauffman Institute investigates startup activity by analyzing the rate of new entrepreneurs, the opportunity share of new entrepreneurs, and the startup density of a region. Reports are organized by city, state, and nation.
- Beyond Metropolitan Startup Rates: Regional Factors Associated with Startup Growth: This paper from the Kauffman Institute reports on entrepreneurship activity in 356 U.S. metropolitan areas with a focus on the startup rate for all industries, the startup rate for high-tech sectors, and the rate for high-growth firms.
- Measuring an Entrepreneurial Ecosystem: The Kauffman Institute offers 12 indicators for measuring the outcomes and vibrancy of a local entrepreneurial ecosystem.
- Can You Buy a Silicon Valley? Maybe: Paul Graham offers a less technical overview of how a city can transform into a tech hub.
“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 notes, 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.
Resources: Industry and Sector Trends
Which leads to the next question: Is your sector ripe for disruption? Below are two resources for insights into industry and sector trends.
Accelerated Learning and Training Design
“You’re just trying to accelerate time so in three months you’re trying to get two years’ worth of learning about your business to happen.” — Brad Feld and Ian Hathaway Discuss Accelerators, Ian Hathaway, September 2015
Accelerators transform not only startups, but the founders themselves. To keep their heads above water, founders have to learn to move quickly. The learning dynamic within accelerators is complex. Anyone with the intention of building an accelerator would be wise to read Susan L. Cohen’s How to Accelerate Learning: Entrepreneurial Ventures Participating in Accelerator Programs. This study lays out a learning framework based on the structural elements of the accelerator. That includes directors, mentors, cohorts and teams, as well as how time constraints can affect learning.
Source: Cohen, 2013
Looking beyond the indirect learning factors, accelerators must plan some sort of education curriculum. While 97 percent of accelerators offer business skills training, training/education offered at accelerators is far from uniform. Effective training methods vary widely based on the topics covered, time spent in class, cohort size, location, etc.
What’s Working in Startup Acceleration, a study of 15 Village Capital programs by the Global Accelerator Learning Initiative (GALI), found that high-performing programs spent less time working on finance, accounting and formal business plan development, and more time on presentation skills, communication skills, networking, organization structure and design.
Source: GALI, 2016
Accelerators need to focus on the practicalities of innovation, not the intricacies of double-entry bookkeeping. Many promising entrepreneurs don’t have access to resources because they don’t have the right networks. They didn’t go to the right schools or don’t speak the same language as emerging market investors. (This is part of the reason we’ve created HowDo; to provide a baseline for people to discuss innovation and growth. If you need help building a bespoke education program for your accelerator, Contact West.)
So, while understanding financials is necessary for running a business, it’s not the best use of accelerators’ time. When planning the education curriculum, there should be less concern with the output and more focus on perfecting what goes into creating output that has value.
According to a Whitepaper by Impact Accelerator, startups most request courses on user experience, digital marketing, and SEO optimization.
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 be done, 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.
Focus and Cohort Size
Where the 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.”
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.
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