Conversation Map Deep Dive:
“Has the flood of accelerators dried up the pool of qualified entrepreneurs?”

Five years ago the Impact Accelerator ecosystem comprised about 20 organizations around the world. Today there are more than 70 (that we know of!) and new programs are opening each year.  On one hand, this flood of new accelerators, and the accompanying flood of new impact entrepreneurs (“there are more applications each time!”) is the sign of a healthy new market full of promise and opportunity. On the other hand, it portends a future of resource scarcity, diluted impact, and the kind of competition that pits would-be collaborators against each other and leaves critical holes in the ecosystem.

What makes a qualified entrepreneur?

As much as we hate to admit it, increased quantity doesn’t always mean increased quality.  A new accelerator inundated with a flood of applications sounds like good thing, right?  But what happens when none of those applicants are actually qualified?

Cogently, the participants at SOCAP14 shied away from a concrete definition of “qualified entrepreneur” observing that the definition changes based on the stakeholder – investors, donors, accelerator managers, mentors, and entrepreneurs.

One participant astutely noted that “7 billion people have more great ideas than a few dozen accelerators” and the group came to the conclusion that a “qualified entrepreneur” is one “qualified to be successful in your program,” an observation that opens the door for a serious discussion about specialization.

The problem is that Impact Accelerators in the ecosystem today seem to have clustered around a few small subsets of impact entrepreneurs. This tendency is highlighted in the Accelerator Focus Map created at SOCAP14:

The Case for Specialization

In a healthy ecosystem, specialization optimizes the distribution of resources.  When all accelerators are generalists, they compete for the same pools of resources…and many struggle to survive, let alone turn a profit.

If they were to strategically specialize, the way mainstream business accelerators have, even several hundred accelerators globally would not be sufficient to cover all of the location, sector, stage, and skill-specific issues facing impact entrepreneurs today.

Location, Location, Location

Perhaps it’s time for Impact Accelerators to put down roots outside the US. As one participant noted, “when we opened local accelerators with local teams, we saw massive regional/local demand…”  Accelerators that focus on regional/location-specific networks, partnerships, mentors, and capital add unique value specific to the challenges and opportunities entrepreneurs are facing on the ground.

Sector

Sector-specialization is almost a given among mainstream business accelerators. Think Y Combinator, RockHealth, and TechStars. Yet few Impact Accelerators exhibit similar focus, despite strong sector-based clusters of impact startups (health technology, water and sanitation, mobile banking, education, etc.) “Quality sector specialization is critical” to continued growth in the ecosystem.

Follow the money

“Yes” one participant noted, “[the pool is dried up] if you are looking at VC-investible deals.” but not “if we are looking at not-so-scaleable businesses.” There is a keenly-felt dearth of investable deals among impact entrepreneurs, exacerbated by the fact that the already small quantity is scattered across dozens of accelerators, most of whom are not explicitly focused on capital acquisition. (see “Bridging the Pioneer Gap,” where Village Capital and ANDE discovered that “60% of Impact Investors say they have sourcing relationships with accelerators, yet 47% have never sourced a company from those accelerators“)

As it stands, “competition from non-impact (esp. sector specific) accelerator draws entrepreneurs out of the impact pool – often because they can provide more money.” ANDE, Agora, and iDev, in their “Measuring Value Created” report, found that only 40% of Early Stage ventures (and a mere 5% of Growth Stage ventures) secured financing through their incubator/accelerator. This gap has been attributed to the failure of accelerators to produce cohorts of enterprises that are aligned with the investment criteria of investors.

Perhaps specialization based on growth stage, and a “move beyond generic mentoring and networking, etc.” could help keep impact entrepreneurs in the ecosystem.

So, is it time to specialize?

There is a substantial gap in the current ecosystem for accelerators focused on sector and location-specific partnerships and capital acquisition for enterprises ready to scale.* Through specialization, Impact Accelerators will be better able to compete with sector specific mainstream accelerators and address the gaps in the full lifecycle of support for the enterprise.  

One participant concluded, “it’s a good development to have more accelerators, but we need to help entrepreneurs choose the right accelerator at the right moment for them.”  This is vital to the long-term success of the Impact Ecosystem.  

Next Steps

Mentor Capital Network and the Global Social Benefit Institute are working with Conveners.org to create an Accelerator Selection Tool we hope will:

  • Expose gaps (ie: opportunities for specialization) in the accelerator ecosystem

  • Enhance fit between accelerators and applicants by surfacing the sector, location, stage, and skill focus of various accelerators.  

  • Save time for entrepreneurs and program managers alike.

  • Increase visibility of individual accelerators and raise the profile of the ecosystem among mainstream accelerators

To have your program included in the tool, just complete the survey.

 

*NOTE – some of the gaps in this image are artifacts of selection bias–all represented programs were participants at the SOCAP14 session.  Conveners.org is working on version 2.0 to include a broader range of accelrators globally – if you want your program to be included, please complete the Accelerator Selection Tool Survey