What the Startup Numbers Say about the Impact of Accelerators

Thanks to Brad Feld and David Cohen who founded GAN in 2010, we just celebrated our sixth anniversary. The industry has come a long way since the accelerator model was introduced over a decade ago. Now we find ourselves in a place where accelerators have officially become an establishment in the startup world.

Since their emergence, there has been talk of whether accelerators would work or not. Originally, everyone thought they were a fad, and now there are rumors of accelerators consolidating or going out of business.

With the advent of our six year anniversary upon us, we’ve been spending a lot of time at the Global Accelerator Network asking ourselves if the accelerator model really helps startups. To figure that out, we looked at the numbers for startups who “graduated from” accelerators over the past five years. The findings are pretty interesting.

*Just a quick caveat: While the information here presents what I think is a fair snapshot of the marketplace, it is only from the 80 accelerators in the GAN. I know that GAN isn’t the only game in town, so you shouldn’t expect it to present a picture of the entire landscape — just our part. Fortunately, GAN accelerators are global, diverse and operate a similar model. You can see all of them here.

Here’s what we found:

Accelerators have already helped a lot of startups. We pay attention to a few different key metrics to measure this, and 5,149 startups have received investment from GAN accelerators.

Of those, 61% report being able to raise money. 16% claimed that they didn’t need to raise any additional money, which means nearly 80% of those startups that worked with accelerators left raising money, having money in the bank, or with paying customers. Startups that raised money were typically able to raise just over $500K in funding.

I’m also happy to see that by our count, these startups have been responsible for the creation of 21,622 jobs. Importantly, the teams have gender diversity. Around the world, 34% of these startups have a female executive on the team. If you look at just the United States, 52% of the teams have a female executive.

Startups going through an accelerator are getting better access to mentorship. Each accelerator works with just about 70 mentors on average, but when it comes to mentors, quality is a lot more important than quantity. Interestingly, of the 70 mentors, 16 of them spend over three hours a week at the accelerator. That means startups are getting intense attention and support from a few select mentors.

Finally, 83% of the startups that have ever gone through an accelerator are either still in business or have been acquired. That means that they’re still growing and changing and providing value to their local communities.

Not unlike the startups they invest in, accelerators are looking at a few areas to better support startups. Here’s what we’re seeing:

If you’re not a “local” company, you’re likely having trouble getting into an accelerator.

I am frequently asked by European startups for help getting into an American accelerator or vice versa. Only 16% of accelerators are taking participants from outside of their country. This means that we’re not seeing a lot of companies going to new countries and getting funded via the accelerator model.

About 6% of all the companies that have gone through an accelerator have exited. Fortunately, 91% of those had a positive return for their investors, and while that means that 9% lost money for their investors, those that did exit, generally did so to noteworthy success.

Traditionally, accelerators have been modeled after the VC approach where they invest in a handful of companies in the hopes that at least one can have a large exit and generate a return. While most GAN accelerators (over half) have seen these kind of exits, there are many that haven’t.

Looking at them individually, you’ll find that the average accelerator has helped 30 portfolio companies, and each accelerator has had (on average) two companies with an exit. Accelerators should be constantly talking about and looking to find additional ways to help companies organize exits. Even if they are producing sustainable growing companies, those companies need to exit for most accelerators to be sustainable. Unfortunately, many accelerators are going out of business before that happens.

One of the ways we have seen accelerators offset operational costs is through corporate sponsorships. Unfortunately, those have decreased as many corporations launch their own accelerator programs or have marketing budgets decreased. In response, we see accelerators finding other sources of revenue from things like running code schools, events, and innovation programs.

The average accelerated startup is taking longer to raise money today than it did when we started a few years ago. Two years ago it took a startup four months to finish raising a round after leaving an accelerator. Today it is taking closer to an average of seven months to complete raising a round of financing. At the same time, startups are generally raising larger rounds. A few years ago, the median raise was just under $400,000. It is now well over $500,000.

Finally, while this isn’t bad in and of itself, what most people don’t realize is that while accelerators are receiving most of their applications through online sources (like F6s.com and Angellist.com), the companies that actually get accepted aren’t always the ones who apply online. Startups that are found through online applications are actually the minority. Accelerators are more frequently finding their next cohort through alumni and mentor recommendations. After they’ve exhausted those, they frequently turn to startup events. So startups are spending a lot of time applying online when the majority of acceptances come through recommendations or meeting in-person at an event.

Overall, I’m still not sure that there is a better way to help startups than the accelerator model. Even though there are still some ‘opportunities for growth’, it’s hard to argue with the track record of success accelerators have. While we need to find a way to help startups generate more exit opportunities and better connections to investors and the corporate world, I’m confident that those are problems we can solve. I don’t know of another group better positioned to take on such a challenge.