Tech accelerators have become common in Ireland and elsewhere - it is a firm that may or may not provide office space but their focus is “accelerating” a startup from birth to a viable company.
Data has been collected on accelerators worldwide over two years by the seed-db.com project but it is of course incomplete - it has tracked 225 programs world-wide; 4,264 companies accelerated; 243 exits for $3,383,948,600 and $7,223,440,293 funding.
However the data are skewed by Y Combinator, the most prominent Silicon Valley accelerator that was launched in 2005.
Bloomberg Businessweek said last year that when David Tisch, former managing director of Techstars, a big accelerator, stepped down from his role with the program, he complained in an interview that “the majority of accelerators are not good for companies.”
The business magazine said that a study conducted by Houston’s VC Aziz Gilani last year, showed that only two accelerators—Y Combinator and Techstars—had produced meaningful exits for company founders. Forty-five percent of the programs he included failed to produce a single graduate who raised venture funding.
We quoted Dane Stangler of the Kauffman Foundation last month on the role of business incubators to launch early-stage companies. "Most research shows that incubators are not effective at all for actually producing companies," he says;
The Wall Street Journal reported last month that "Techstars, one of the country’s first and largest accelerator programs, has been shifting this year to take in more mature startups, said David Brown, co-founder and managing partner of the accelerator."
This week the Journal's Venture Capital Dispatch blog says that on Techstars' website it says that, as of early November, 78% of its 472 participants were active, 10% have failed and 12% were acquired while Y Combinator says that of its 735 companies since 2006, 68% are still active, 20% have failed and 12% have been acquired.
However, the WSJ says: "The true failure rate for participating startups is much higher."
Most of the active firms are recent clients.
Y Combinator has had clients such as Airbnb, which has raised $80m and is valued at $10bn; Dropbox, which has raised more than $500m and is also valued at $10bn; and Stripe, founded by the Irish Collison brothers, which has raised $120m and is valued at $1.8bn.
The WSJ blog says Techstars typically pays $18,000 to $20,000 in exchange for 6% equity in its startups, who go through three-month sessions. Startups also have access to an additional $100,000 from venture investors at the conclusion of the program.
A report funded by a US government agency says: "Consider reports of accelerators’ impact with caution until more robust data becomes available."
Last week The Guardian included the DCU Ryan Academy’s Propeller Venture Accelerator Ireland among the best in Europe. Its terms are:
So absent credible data, Irish ministers will continue to fund but generally, have a salt cellar on standby.
The value of being accepted by Y Combinator, operating in Silicon Valley in the same town as Google, is self-evident in terms of connections but how many from the hundreds elsewhere are pedalling just hope funded by gullible politicians?
Dublin Web Summit 2014: Separating hype and reality - Research on tech startups, VCs' declining role, survival, policies, challenges in Ireland and elsewhere.
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