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Where Do Accelerators Fit in the Venture Creation Pipeline? Different Values Brought by Different Types of Accelerators

  • Shu Yang ORCID logo EMAIL logo , Romi Kher and Thomas S. Lyons

Abstract

Despite the emergence of startup accelerators as venture development organizations (VDOs) to high-growth firms, research has yet to identify where these accelerators fit into the venture development ecosystem. By clarifying and reviewing three different subsystems in the entrepreneurial ecosystem, our paper proposes that as an extension of the current incubation mechanism, accelerators contribute to the entrepreneurial ecosystem by transforming entrepreneurs and their ventures at early stages. Drawing upon the Pipeline model (Lichtenstein, G. A., and T. S. Lyons. 2006. “Managing the community's pipeline of entrepreneurs and enterprises: A new way of thinking about business assets.” Economic Development Quarterly 20 (4): 377–386.), we first plot where the accelerator model fits in the broader entrepreneurship ecosystem, and then demonstrate how different types of accelerators help participating entrepreneurs and their ventures progress along the venture development pipeline. Our theoretical approach contributes to both the entrepreneurship ecosystem and the accelerator literature and provides a practical map for both policymakers and early-stage entrepreneurs to manage and utilize their entrepreneurship ecosystem more effectively.

Appendix

Table 1:

Literature review of accelerator studies.

NoAuthor and yearTypes of acceleratorResearch questionResearch methodKey findings
1Radojevich-Kelley and Hoffman 2012Seed acceleratorWhat do accelerators do and what are their results?Case study1)Accelerator companies use unique selection criteria and have higher success rates for their graduates;

2)Mentorship driven programs increase the overall success rates of start-ups by providing entrepreneurs with access to angel investors and venture capitalists which tend to increase success rates
2Winston, Hannigan, and Gasiorowski 2013General*Accelerators and crowd-funding: complementarity, competition or convergence in the earliest stages of financing new venturesQuantitative studyAccelerator-backed startups:

1)receive the first round of follow-up financing significantly sooner; are more likely to be either acquired or to fail;

2)are founded by entrepreneurs from a relatively elite set of universities; and

3)exhibit substantially greater founder mobility amongst other accelerator-backed startups.
3Cohen and Hochberg 2014GeneralWhat is the “accelerator” phenomenon?Conceptual studyDescribed:

1)value of these programs;

2)Definition of accelerator programs;

3)the differences between accelerators, incubators, angel investors and co-working environments; and

4)the importance of the various aspects of these programs to the ultimate success of their graduates, the local entrepreneurship ecosystems
4Fehder and Hochberg 2014GeneralAccelerators and the regional supply of venture capital investmentQuantitative studyMetropolitan statistical areas (MSAs) where an accelerator is established subsequently have more seed and early-stage entrepreneurial financing activity.
5Hallen, Bingham, and Cohen 2014Seed acceleratorWhether or not the “acceleration” effect exists?Quantitative study1)Acceleration effects are difficult to be achieved by all accelerators;

2)accelerators are complements to (and not substitute for) more experienced and connected founders
6Wise and Valliere 2014Seed accelerator, University acceleratorHow do accelerators’ managers’ experiences influence their performanceQuantitative studyThe direct startup experience of accelerator managers matters more than their connectedness to the ecosystem
7Regmi, Ahmed, and Quinn 2015GeneralAssess the effectiveness of acceleratorsDescriptive1)The number of accelerators in the US is in the rise, while the growth has slowed down significantly after a very high rise in 2012.

2)Startups that graduated from accelerator programs have approximately 23 % higher survival rate than other new businesses.
8Weiblen and Chesbrough 2015Corporate acceleratorsHow large corporations from the tech industry have begun to tap into entrepreneurial innovation from startups.Qualitative studyCorporate accelerator is one mechanism that corporate could use to engage with startups that balance speed and agility against control and strategic direction, and to bridge the gap between themselves and the startup world
9Hochberg 2016GeneralWhat is the “accelerator” model and their effects on regional environmentConceptual studySummarize prior conceptual studies on accelerators by describing the phenomenon, emphasizing its definitions, differentiating it from incubators, business angels, coworking spaces and venture capitalists, and identify current evolving trends
10Kanbach and Stubner 2016Corporate AcceleratorsWhat is the “corporate accelerator”? How do they function and why they exist?Qualitative studyIdentify four different types of corporate accelerators:

1)listening post;

2)Value chain investor;

3)Test laboratory;

4)Unicorn hunter.

Propose that they are different from each other in terms of their objectives and configurations.
11Kohler 2016Corporate AcceleratorsHow to design corporate accelerators in a more effective way?Quantitative studyTo leverage startups’ innovation and to make corporate accelerators an effective part of a firm's overall innovation strategy, managers need to systematically and thoughtfully consider the design dimensions of proposition, process, people and place
12Pauwels et al. 2016GeneralWhat is the “accelerator” model and its taxonomy based on different design logics?Qualitative studyIdentify

1)three design themes (categories) of accelerator model: “Ecosystem builder”, “Deal-flow maker”, “Welfare stimulator”, and

2)five design elements–program packages; strategic focus; selection process; funding structure; alumni relations
13Plummer, Allison, and Connelly 2016GeneralHow do accelerators magnify other “signals” of young ventures when they pursue financing opportunitiesQuantitative studyA startup's characteristics and actions are signals that remain relatively unnoticed unless a startup combines them with a third-party affiliation that enhances the signal's value, thus increasing the likelihood of receiving external capital
14Battistella et al. 2017GeneralHow can start-ups benefit from participation in an accelerator

program from an open innovation perspective?
Qualitative studyDyadic co-creation with accelerator network partners and crowdsourcing are revealed to be effective practices provided by accelerators that benefit startups most. But participating in accelerators cannot substitute the founding team intrinsic characteristics
15Cohen, Bingham, and Hallen 2017GeneralWhy some accelerators are more effective than others?Quantitative studyAccelerators that provide concentrated consultation, foster comparisons, and require activities can help participating entrepreneurs overcome their bounded rationality
16Gonzalez-Uribe and Leatherbee 2017Social Impact AcceleratorThe effects of business accelerators on venture performance: Evidence from start-up Chile?Quantitative studyEntrepreneurship schooling bundled with basic services can significantly increase new venture performance, but no support for causal effects of basic services by them own
17Goswami, Mitchell, and Bhagavatula 2018GeneralWhat intermediary role do accelerators play in developing regional entrepreneurship ecosystems?Qualitative studyAccelerator play a key intermediary role in linking founders to their regional entrepreneurship ecosystems; four accelerator expertise: connection, development, coordination, and selection
  1. *When authors did not specify which type of accelerators they studied, either they use “accelerator” as a broad item containing all types, or they simply refer to the most common type of accelerators: standalone seed accelerators

Table 2:

Entrepreneurs at different skill levels and commensurate service providers.

TechManagerialEntrepreneurialPersonalService Providers
MajorsOutstandingOutstandingOutstandingOutstandingVenture capitalists, Professional consulting practices, investment bankers, etc.
AAAHighHighHighHighAngel investors, emerging business consulting practices, university tech transfer offices
AAHighMediumMediumMediumManufacturing extension programs, small business development centers, small specialized venture funds, high-technology incubation programs, etc.
AHigh and/or mediumLowLowLowMicro-enterprise programs, small business development centers, business incubation programs, etc.
RookieLow and/or noLow and/or noLow and/or noLow and/or noMicro-enterprise programs, youth entrepreneurship programs, etc.
  1. Source: Adapted from Lichtenstein and Lyons (2006)

Table 3:

Venture Life Cycle Stages.

StagesDescriptions
Stage 0This phase begins with either an interest or desire on the part of an entrepreneur to start a business, or an idea for a business, and ends with the emergence or birth of an organization with an economic offering (e. g., a produce or a service) ready to be sold to a potential client and to generate revenue.
Stage 1This phase begins when the business is launched (with a product or service ready for sale) and ends when the business has reached breakeven from sales. The business has passed the first preliminary test of survival—its offering has demonstrated some interest by a small set of customers, although acceptance by the “market” has not yet been demonstrated. Profitability has not yet been achieved, and the venture's continued viability (i. e., its ability to maintain a separate existence) is not assured;however, the business exhibits potential.
Stage 2This phase begins with breakeven from sales and if successful, ends with the establishment of a sustainable business—with either healthy or marginal profits. The latter pays a living wage (i. e., a “mom-and-pop” operation), whereas the former would be positioned to grow further. This level of economic viability or measure of stability has been achieved by securing and satisfying a critical mass of customers and producing sufficient cash flow to at least repair and replace the capital assets necessary to continue the business as those assets wear out. This assures the survival of the business as long as market conditions remain the same.

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Published Online: 2018-07-18

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