Why Accelerators Fail Startup Founders

Let’s take the two most distributed Startup Development Organizations in the world, and tease  out what’s happening In a point of fact: overwhelming most Accelerators *fail* founders; but why?

With such a bold assertion, let me properly set the stage by pointing out that when 90% or more of all startups fail rather quickly, it’s not a criticism that most continue to fail through Startup Development Organization.  The fact is that the world simply can’t sustain everyone launching so many ventures doing similar things.  What I want to explore with you is why *most* seem to fail to meaningfully improve upon the averages.

Two most distributed Startup Development Organizations: Techstars and Founder Institute.

These two are not the same thing. The only similarity might be the fact that they have grown to operate locally, depending on local directors, mentors, and investors.

People often shine a light on YCombinator but a distinction of YC is that it’s almost entirely run through Silicon Valley. These two programs, which I’ve referred to as distributed, are not because they are operated more locally (which is what I mean by being the most distributed).

Until about 2005, “startups” in the modern sense of the word, were almost entirely based in N. California. I say “modern sense” because it’s critical to appreciate that while a startup is still, as it has always been: a startup, what happened before 2005 is that the internet was born and quite literally changed every industry. Where that largely started was Silicon Valley… meaning the experience, the partners, the investors, and opportunities, were as it pertained to the internet (for the most part) there.

Please don’t misconstrue that as praise of Silicon Valley and admonishment of elsewhere. I’m not saying “Silicon Valley” is better or that the way things operate there is ideal… Rather, in figuring out how anything works well (or doesn’t work well), we have to be pragmatic and realistic about the circumstances of how something is run – and overwhelmingly most internet-oriented talent, money, companies, and experience, then, was there.

A “startup” is still fundamentally a temporary venture in search of a new business model and that hold true everywhere while also explaining why a startup is NOT “tech” or internet specific things – but since the internet CHANGED *everything* about our world; the likelihood of a new business model (a startup) having an impact in any sector quickly became dependent on the internet and experience with it. It would take a decade (or more) for that experience to move from Silicon Valley (as it did to Austin, Texas) or mature elsewhere (as it certainly is now).

But let’s not wade into startups or the history of the internet too much, let’s get back to Accelerators and why/how so many fail to meaningfully support founders.

First, what would it mean to meaningfully support founders?

If the average rate of success of startups is around 10% (90% of startups fail), then we can easily expect that the rate of success through an Accelerator is greater. Yes? Challenging Startup Development Organizations is the fact that a 20% success rate is an astounding 100% improvement on our economy and yet, it also means 80% still fail (and that’s a lot of disappointed founders). Bottom line, anything north of 1 in 10 being successful could well mean that the program had a positive impact.

What is it that we can EXPECT that reinforces that an Accelerator would have a greater rate of success?

1. Accelerators don’t (shouldn’t) take on every founder. They are curating what can get in; presumably selecting ventures more likely to succeed. Our noble intentions to help everyone who wants to be an entrepreneur aside, the facts are well researched that few are capable, the market only has room for so many ventures, and we know what causes startups to fail – with this in mind, it’s realistic that a good Accelerator will *not* support everyone.
2. They accelerate – whatever that might mean, we can safely conclude that it means they will provide resources or do things that result in a startup accomplishing more, faster.
3. They connect by making it easier for entrepreneurs to find anyone who might be meaningful to what they’re doing, saving time and money, while avoiding bad advice or wasted cycles in founders who might otherwise talk to the wrong people.

Begging now the question, why might said program NOT be impactful?

1. They do try to help everyone OR (more likely) the program directors have an agenda or little startup experience – in either case, onboarding founders who are not likely to succeed. The danger in this is not that it would keep the rate of success lower; the issue being that startups and founders who shouldn’t be accelerated, take time, talent, and resources, AWAY from the ventures that might.
   
2. Are they actually accelerating or are they just using that word? What would be required to “accelerate”? Probably, things like PR, marketing, capital, or even some development resources (be those software developers or business developers helping close partnerships). Let’s be blunt, if an “Accelerator” isn’t “Accelerating” then they are a drain on your startup community and they’re misleading founders and investors – likely contributing to a higher-than-average rate of failure.
3. Most so-called Accelerators, I find, operate locally, and with the greatest respect to the good intention, a network of the ideal mentors, investors, or other resources for a startup are NOT within your neighborhood. Is the Accelerator actually connecting founders with EVERYONE most relevant to the startups or is it limited to the network of people preferred (or worse, who are paying to be involved… perhaps under the guise of “investing”). I can speak from experience to the fact that it very frequently happens that a Startup Development Organization makes mentors or Angels pay to make themselves available within and it’s a severe detriment to founders… constraining who the founders can meet and allocating capital not to the entrepreneurs but to an intermediary.

Take for example our MediaTech ecosystem as an example of how those circumstances are detrimental to founders.  We’re a fairly close knit sector of the economy wherein the other programs, notable mentors, and meaningful investors, tend to know and support one another; so, when I see an “Accelerator” in Austin (where I live) that isn’t connecting something they helping in media, with our world, we know they’re full of s*** — they’re failing to meaningfully help startups in media (and likely getting paid in the process).

I want to consider a 4th factor that I didn’t mention as a contributing factor to success (because, frankly, we know from research about startups that having this doesn’t actually cause success): Capital.

While capital available to founders won’t result in a greater rate of success, since we’re talking about Accelerators, we can’t overlook the fact that Accelerating would mean they have capital available and/or reduce costs as exceptionally as possible (by having things funded for founders).

How do Accelerators operate in your experience? Are they charging founders for desks? (that’s coworking)  Are they charging founders to connect with mentors?  (that’s predatory)  Are investors freely available or do startups have to Pay to Pitch? (that’s disgusting)

Is Capital readily available in the form of reduced (near zero) costs to founders, or actual investment? OR is the Accelerator neglecting that Acceleration costs startups money?

You can’t accelerate ventures if you’re not actually making that possible.

By the way founders, providing AWS credits and HubSpot for free for a year, is NOT investment from an Accelerator and you should NOT be giving up anything (such as equity) to get that. Such things are readily available through any Startup Development Organization, so an Accelerator claiming $50,000 of investment, warranting equity from you, which is really just in the form of technology or other services, is taking advantage of you.

How We Got Here

Now that we have a sense for why some Accelerators succeed while others fail, why do so many fail?

Let’s revisit my point about the internet and the fact that “Accelerators” exploded on the scene from 2005 until about 2015 (with them now essentially in every city).

Startups then, and now, are dependent on experience with the internet.

How exceptional is that experience in your city? Did the Accelerator owners start their careers at Salesforce, Amazon, or Yahoo? Have the mentors who are involved worked in SaaS, mobile apps, or cybersecurity? Are the investors available in the ecosystem experienced with THIS context or are they wealthy people who have been successful in Real Estate, Oil, Ranching, Construction, or some other still fairly traditional field?

What happened around 2010 (after the 2000 dot com bust and when the economy was recovering… and then again after the mortgage crisis in the United States resulting in another recovery period) is that cities throughout the world wanted to lean in on helping entrepreneurs in this new economy. And yet, the EXPERIENCE with the internet was not yet there.

Techstars and Founder Institute had not yet scaled throughout the world and so “Accelerators” were emerging in cities, locally run, locally funded, and locally mentored.

Around the same time we saw books emerge (books such as Lean Startup or Zero to One) heavily embraced by the Startup ecosystem; yes, because they are good books, but also, to an extent they emerged because of the growing demand from people throughout the world to have a guide to Accelerate startups and give founders direction.

“Don’t know how to do a startup? Read Lean Startup” We’d often hear, as though a playbook puts a founder on the right path.

Don’t get me wrong, these are EXCEPTIONAL books… IF you have experience with startups and you fully appreciate what they’re guiding and why.

Why do most Accelerators fail founders? A confluence of circumstances:

1. Little experience with the internet
2. Reliance on books
3. Local dependence
4. Insufficient startup experience
5. Failing to “accelerate”

Before I move on I want to reinforce my point about the internet because I don’t want anyone to misconstrue that I’m saying a startup has to be on the internet or that if your venture isn’t, it isn’t a startup. What happened around 2005 was that the entire world finally started shifting to the impact of the internet: how we shop, how we pay, how we communicate, how we research and learn, and so on. A Realtor (someone selling real estate) would no longer be effective if they didn’t know how to use the internet in support of their job.  That example translates to every sector and thus, every startup. That, perhaps your startup is a new BioTech device or electric vehicle… maybe you have invented a new beverage you want to bring to market, or you are working in Space technology — if you (or your team members, mentors, investors, or this Accelerator) don’t know how to use the internet effectively and efficiently, you will suffer and struggle. You can’t do marketing and promotions well, you can’t find resources as well, and you will fail to effectively connect tools, platforms, and infrastructure that you need, as well as others can.

The delta of time from 2000 until about 2015 (when experience with the internet really finally started to permeate throughout the world beyond Silicon Valley) meant that EVERY venture was at a severe disadvantage without that experience. This is a massive contributing factor to why Accelerators rarely failed to change the 10% success rate and while even today (due to legacy models or the people still running them lacking this experience), Accelerators too often fail.

So What Of Techstars and Founder Institute?

(Why did I mention them?)

Around this same time is when Techstars and Founder Institute emerged from Silicon Valley – exceptional programs. These two were rather distinct from the other major brands in this regard because what they did was expand to other markets, making their work accessible to far more throughout the world.

This was (and should be) in high demand because after all, if you want an Accelerator in your city, why would you try to reinvent the wheel within a local ecosystem of inexperience, when you can take on what is established, proven, and more far reaching?

The rub was… for these programs to operate throughout the world, they irionically had to depend on that very local community. With all the trappings of doing so, a very effective program wherein everyone is experienced and aligned to how it works, will stumble and struggle as they have to sift through (i.e. sift out) consultants, investors, and mentors within a new community.

Challenging.  But that’s not why I mentioned Techstars and Founder Institute in particular (though hopefully now we’ve unpacked some thought provoking insight to explore about why Accelerators often fail). 

The reason I mention these two things is that Incubators and Accelerators are NOT the same.

Accelerators are NOT Incubators; Incubators are not accelerators.

In cities throughout the world where stakeholders are just desperately trying to make something work, gain support and resources, and have an impact, people mince words.   People will call it an Accelerator because you’re asking for an Accelerator; and failing to deliver what we should expect an accelerator actually does for founders, we have the failed impact to which I’ve been referring but is *that* REALLY even an Accelerator if it is helpful or is it an Incubator?

Incubators TEACH, work with, or research and develop.  

This is an incubator.   That into which a mere egg is placed in hopes that it becomes a healthy chicken.  An incubator isn’t the antibiotics, shelter, or feed provided to existing chickens to help accelerate their growth!  If your city lacks incubators and hopes that Accelerating founders will make your ecosystem successful, you’re neglecting all of the education, R&D, and collaboration that must precede accelerating anything.  Accelerators fail founders because they’re failing to expect incubators to exist to get everyone off on the right start.

We see the implication of the lack of these distinctions and the failure of startup communities to support Startup Development Organizations in the right way at the right time, in how “Accelerators” take on anyone, in how Accelerators aren’t accelerating because they’re giving lectures on marketing fundamentals or how to find a co-founder (clearly EARLY stage requirements), or in how they take on pre-seed founders ? Image that, that’s trying to make a chicken hatch before the egg is even *ahem* seeded. 

Your ecosystem must start with and support Incubators if you hope to have mentors, investors, and entrepreneurs who know what they’re doing and can provide meaningful opportunities to Accelerators.

Let’s revisit our three considerations in this, the context of Incubators instead of Accelerators.  What is it that we can EXPECT that reinforces that an Incubator would have a greater rate of success?

1. Incubators don’t (shouldn’t) take on every founder. The might welcome everyone who wants to learn, research, or collaborate but they are doing so within a sector of the economy where they can most benefit those entrepreneurs and investors.  Our noble intentions to help everyone are accomplished by helping everyone WITHIN a distinction rather than everyone who says “founder” “tech” or “startup.”   Thise coalesces not just startup stage experience but also industry expertise, partners, investors, and opportunities. 
2. They incubate, developing an idea, or would-be founder, by teaching what we very well know about how startups succeed and why they fail, by working with founders from an experienced point of view, and by participating in the research necessary for an innovation or entrepreneur to avoid mistakes and uncover opportunities. Preceding the acceleration stage, they drastically reduce the rate of failure throughout… enabling Accelerators to be more successful.
3. They connect by making it easier for entrepreneurs to find anyone who might be meaningful to what they’re doing, saving time and money, while avoiding bad advice or wasted cycles in founders who might otherwise talk to the wrong people.  (Point #3 is exactly the same, which is why Incubators and Accelerators should be sector specific)

Why might an Incubator NOT be impactful?

1. They do try to help everyone OR (more likely) the program directors have an agenda or little startup experience – in either case, failing to meaningfully help founders. The danger in this is not that it it misinforms and misleads founders and investors.
2. Are they actually incubating? What would be required to “incubate”? Probably, things like experience, curriculum, tools, community, and marketing. Let’s be blunt, if an “Incubator” isn’t helping turn eggs into chickens then they are a drain on your startup community – likely contributing to a higher-than-average rate of failure.
3. Incubators can and should operate locally with the support of the network, companies, and investors from industry.  The network of the ideal mentors, investors, or other resources for a startup are NOT within your neighborhood but they are within your sector and when an Incubator is effective for entrepreneurs, they are ensuring entrepreneurs learn from and work with the people who know best. .Evidence of this?  Your City, local companies, investors, and even Accelerators would be underwriting such Startup Development Organizations because if they genuinely wanted to help startups (as they claim), they’d put the expertise in place to start them on a better foot.

Accelerators too often fail founders.  Frustratingly, the research, experience, and resources are well established and validated such that we can expect Accelerators *don’t* fail founders (as much).  If you’re struggling with your ecosystem, questioning programs, or trying to figure out what could be done better, ask first, “who’s teaching everyone, and do they know what they’re doing?”