Startups

Accelerators Are The New Business School

Comment

Image Credits: Seth Sawyers (opens in a new window) / Flickr (opens in a new window) under a CC BY 2.0 (opens in a new window) license.

Vitaly M. Golomb

Contributor

Vitaly M. Golomb leads global investments at HP Tech Ventures and is the author of the forthcoming book, Accelerated Startup – The New Business School.

More posts from Vitaly M. Golomb

It’s no secret that most startups fail. What’s a bit less obvious is that most startup accelerators also fail. While a few top-tier programs get the cream of the crop unicorns of the future, the hundreds of others struggle to attract teams that will produce the investment-grade companies on which their models so depend.

As the true business school of the future, most of them provide tremendous educational value to these budding entrepreneurs — who very well may produce a valuable company some day. Overwhelming odds are, however, that those initial projects that accelerators get a piece of, for their cash and time investment, aren’t the ones with which the entrepreneurs will ultimately succeed. For accelerators to survive long term, their business model has to change.

A Little History Lesson

In the mid-1990s, Idealab brought the business incubator model to the tech world. Concepts were developed in-house or brought in to the fold to be graduated into standalone business by an experienced operations team that could execute quickly, with few constraints. Rocket Internet turbocharged this model, taking over many hot regions around the world with e-commerce arbitrage and business model copycats in a few short years.

In the mid-2000s, Y Combinator and TechStars pioneered the accelerator model. Talented entrepreneurs and technologists began coming in from the cold. They entered an environment of mentorship, co-suffering peers as motivators and a bit of money to cover living expenses — barely enough to get a minimum product out to market. Early success stories such as Dropbox, Airbnb, and SendGrid started surfacing, and so did numerous accelerators around the world looking to duplicate those wins.

Copy/Paste #fail

Quantity rarely correlates with quality, and the viral explosion of accelerators that followed is no different. It spawned well-intentioned programs run by teams with little experience in either founding and running technology companies or finding the best and funding them as investors.

They were able to secure enough cash to cover operations, as well as initial checks from government development funds intent on creating local jobs, corporates looking to boost their street cred, or unsophisticated individuals thinking they would quickly develop a valuable and diversified portfolio.

While top-tier programs receive thousands of applications for each batch, and enjoy being more selective than Harvard and Stanford MBA programs, the rest are fallbacks by default. Every program wants the next billion-dollar startup, but the difference in team and product potential from the very best to the rest is several orders of magnitude in quality.

Cost-of-living differences also play a major factor in the equation. Where a $50,000 check in San Francisco will support a team of three barely above poverty level for a few months, in other parts of the world like Eastern Europe it offers a decent lifestyle for a year or more.

This often attracts far-less-experienced founders who get a chance to live the ‘wantrepreneur’ lifestyle, filled with pitch competitions and happy hours instead of round-the-clock ramen-and-Red Bull-fueled product development and marketing sessions that make or break real startups. Perhaps they’ll one day build up their skills and produce something insanely valuable, but it will be when they are coincidentally ready for that top-tier program anyway.

The Next Generation

When the ineffable Adeo Ressi launched the Founder’s Institute, many ridiculed its tuition plus equity model. In the years since, Founder’s Institute has made a tremendous impact on thousands of entrepreneurs in dozens of cities around the world. They’ve even managed to cash out on a few of the resulting companies.

General Assembly, TechHub, Galvanize and a slew of others have come up with valuable, revenue-generating models, combining entrepreneur education and collaborative work spaces. Corporates are getting into the game with various grant and equity accelerator schemes to establish early relationships with the best and brightest in their segments of interest.

Smart Universities are now beginning to realize their disadvantage in the rapidly transforming world of education. Programs such as Stanford’s StartX launched to provide a way for students to learn by doing, alongside the traditional theoretical approach.

Choices, Choices

If you’re thinking about applying to an accelerator, you should be doing your own vetting to make sure that the assistance provided and results meet your needs and expectations. Since one of, if not the biggest, benefits you will gain from the accelerator program is the invaluable experience and feedback of its mentors, you should do your own due diligence by reaching out to them, as well as founders of companies that have gone through the program.

You should also have a firm understanding of the type of deal the accelerator offers, and how it compares to your other options and the opportunity costs.

Consolidation is an eventuality, and we seem to be at the cusp of it in the accelerator world. The dot-com system collapse left us with infrastructure that enabled the second wave of Internet-era startups. The accelerator bubble is likely to have served as the laboratory for a completely new way to educate future generations of entrepreneurs. This is something we all should be cautiously thrilled about.

More TechCrunch

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

13 hours ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

15 hours ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android