Why Accelerators Work

About once or twice a month, I get an email from someone asking:

Why do you think accelerators, especially GAN Accelerators, work as well as they do?

I’ve received this question for the past seven years — and continue to get it today.

So, instead of just replying to the numerous Ph.D. researchers who keep asking me why accelerators seem to work so well, I thought I’d share my responses directly with you. My goal here is that you’d not only get a sense of why accelerators are succeeding but that you can take these lessons and apply them to whatever industry or part of the startup ecosystem you’re in. Because I think we can all learn from many of the insights here.

My Response

Insight #1: Accelerators are community-driven, not guru-driven.
Before accelerators came along, most of the startup support I saw was championed by an individual person, working within their own community. That person would start a co-working space or incubator or fund and bring startups to them. And then they’d shepherd those startups, sharing their knowledge and (almost single-handedly) helping companies under their wing grow.

But when I joined Techstars in 2011, I saw something different that forever changed my view on how startups should get support. I watched Nicole Glaros and David Cohen decenter themselves as the most important part of their programs. They began to limit their interactions with cohort companies and, instead, chose to cultivate and then feature experienced members of the Boulder community, recruiting them to come alongside the 10 companies that eventually became the Techstars Boulder 2011 cohort of startups. Instead of Nicole and David being the gurus and making it all about them, they made the community the “gurus.” And fortunately, this trend has continued to grow beyond Boulder. Whether I’m in Seoul or Los Angeles, Wellington, New Zealand or Helsinki, Finland, I’m seeing and watching what happens when a community is driving support for startups, rather than a lone hero.

And you can almost immediately see the benefits of this kind of dispersed model. Startups get support from a diverse group of people who each offer their own views of what should and shouldn’t work for their businesses. Each of those individuals can also leverage their own networks and resources, driving even more support toward founders.

But the main reason this is so effective? Instead of a program’s fan base consisting of only the startups in its current cohort, programs now have a community of people — its local community — who all believe in and are excited about what local accelerators are up to. A whole town begins to talk about its hometown program, its startups, and what everyone is doing to add to the local economy. Which means a wide group of people becomes focused on a shared goal. Relationships become collaborative rather than competitive. And the excitement and support become generative for everyone involved.

Insight #2: Accelerators centralize all startup activity.
Picture what happened before accelerators. Most startup activity was dispersed widely over the geography of a city. If a startup wanted to meet with a handful of investors, they’d have to travel all around town to do so. One meeting on this side of town, followed by another meeting across town, and so on, until exhausted.

And to get a mentor, a startup would have to spend hours trying to find someone not only capable of but willing to work with them. They’d then have to interview those mentors (the small few they could find), to see if they’d be a truly good fit together. Which would leave them with one person — if they were lucky — interested in coming alongside them for support.

Not only was this kind of dispersed activity incredibly inefficient and pretty ineffective, but it was also incredibly low-access. Don’t have a car and have to take public transportation? Have to worry about childcare while you’re out hunting down 10 different potential investors you’re not even sure will be interested in your company? Don’t have access to the internet to keep searching for potential mentors and have to use a library every time you feel up to it? Have any sort of disability that limits your mobility getting back and forth across town? Well, your chances at finding meaningful support were even lower.

Now, however, accelerators have created a place where all of this activity is centralized. Instead of a startup going all over town to meet with investors, accelerators are bringing those investors to one building to meet with startups. The same goes for mentors. These days, most great accelerators average somewhere around 70 official mentors. Not only does this mean a higher concentration of connections, it also means a higher quality of connections. Investors and mentors are vetted; they have a proven track record of skills, experience, and support for founders that ensures relationships will likely be incredibly valuable.

Here’s an example: When I went to Oslo, Norway this past Spring, the team at The Factory asked me to give a quick presentation to their current cohort. I was able to meet each of the seven companies currently in-program. But they also brought in four other alumni companies that were looking for funding. So I was able to meet with 11 companies on a random Thursday morning, got back on a plane that afternoon, and landed safely home to see my family here in Denver (CO, USA) by 8 p.m. that night.

Insight #3: Accelerator programs are time-bound.
In other words, accelerators have a defined start and end date, even for groups with rotating programs. This continues to be one of the best features of an accelerator — a reason why they are so powerful.

Here’s why: With constraints come tradeoffs. For instance, I know that in order for this blog to get out the door by Thursday, it has to be finished by Monday morning. I can’t work on it forever, even if I want to.

It’s the same with startups going through an accelerator. By having a defined start and end date, startups are forced to make strategic tradeoffs in order to confidently pitch to potential investors. They have to make hard decisions, in-program, about how to get customers and start generating revenue, all before their program ends. This is even true for accelerators that have startups coming in on a rotating or staggered basis. Startups can’t stay forever. There’s a date that they need to leave, forcing them to make decisions that lead to revenue and/or financing.

Insight #4: Harvard-level acceptance rates.
Last year, there were 41,000 startups who applied for 1,700 spots in GAN Accelerators. That’s a lot of applications for just a few spots. But what this leads to? Accepted applicants are already of a far higher quality before they even begin a program. They’re already the cream of the crop. Meaning there’s a good chance that they’ll be even more successful on the other side of it. Which makes the next point so interesting…

Insight #5: They’re easily launched.
For better or worse, accelerators can be launched fairly easily. The average accelerator budget is around $700K (including seed funding). So if you can find $700K, there’s a good chance you can launch a program in your own community. And while there are a lot of bad actors in the accelerator space, there are many, many more good actors (GAN Accelerators best among them). And whether you’re a fan of this proliferation or not, it means that founders don’t have to wait years for an accelerator to show up, further giving startups the power to create and grow their businesses, wherever they call home. Which also leads me to…

Insight #6: They’re validated.
Now, I know this is going to sound biased, but hear me out. Nearly a decade ago, as people recognized the low barrier of entry required to start an accelerator and, in turn, programs began to proliferate everywhere, it became very clear very quickly that startups needed a way to weed out the bad actors. So, it seemed natural that some sort of mechanism for validating accelerators as high-quality was essential for startups looking for accelerator support. In other words, there needed to be a quality standard. This is why GAN exists. Knowing that an accelerator has been vetted gives founders the confidence to know that they’ll not only love the experience of going through a program, but they’ll be able to trust the results when they do. And, it doesn’t hurt that creating a global network of high-quality accelerators means that those accelerators then also have access to learning from their peers (and a worldwide network of mentors to draw from), helping their programs continue to innovate and improve.

Insight #7: Cohort and peer learning.
This point is a synthesis of points #2 and #4. Accelerators typically run programs that include cohorts of about eight startups in-program at any given time. Having a concentration of high-quality startups all in one place also has its benefits:

• Startups can learn from one another. They’re in the same location and can share tips, lessons learned, or other insights that help one another.
• Startups can push one another. By having a strong cohort, startups see where their peers may be further ahead and other areas where they may be further behind. This can create healthy tension, motivation, and confidence.
• Startups can use one other’s products. If a startup launches a new feature, they can run that by their peers to get instant feedback on it.
• Startups can support one another, emotionally or otherwise. The startup journey is fun, but it can also be very hard. Being around peers allows founders to share those struggles and easily get empathy from people who are going through the exact same thing.

Insight #8: Thoughtful programming.
And finally, whether a startup is going through a strict, three-month accelerator program or one that brings startups in on a rolling basis, all accelerators are weaving in great programming throughout that time. Think of it as an MBA on steroids. During the relatively short period of time that a startup spends at an accelerator, they’re learning everything from to how to effectively fundraise, to how to create an effective go-to-market strategy, to how to build a team. It’s a lot, but they leave with many lessons for how to get to that first $1M in funding or revenue. And on top of it, most of this programming isn’t done by the accelerator’s Managing Director. As mentioned in Takeaway #1, lessons are facilitated by a diverse group of mentors in the community, further building on the idea that accelerators are community-driven and community-led.

Of course, these aren’t the only reasons that accelerators are successful but rather (what I think) are the top reasons why they have come to be as effective and prolific as they are.

Originally published at www.gan.co on July 10, 2018.