Startup Studio vs. Accelerator

These days, everyone knows what an accelerator is. Even my 101-year-old grandmother. However, fewer people have heard of a startup studio. When discussing the lesser-known studio model, I often get the following question: “Why do you think the studio model is better than the accelerator model?” The underlying assumption is that I founded Boulder Bits – a startup studio – because I think it’s a better startup engine. The truth is that it is not better, just different. Accelerators and studios both have their place in the startup ecosystem. Below, I’ll describe some of those pros and cons.

Background

Before jumping in, let’s just state the fundamental difference between studios and accelerators. Accelerators take on amazing teams with pre-formed companies and help them get on a scalable trajectory. Studios take internally formed scalable projects, put teams on them and help them scale. While there are hundreds of accelerators and thousands of incubators, there are only dozens of proper studios. To exacerbate the challenge of comparing studios and accelerators, studios come in a wide variety.

Different – Not Better:

The startup studio model and accelerator model serve different types of founders and investors. Accelerators are great for first-time founders who need to overcome hurdles. Studios are great for experienced veterans. They both can create huge successes, and both models can fail if mismanaged. Neither has any guarantee of success for a single company or founder, but can guarantee success of the ensemble. It’s like asking, which do you like more, sports or movies? Both are vital parts of the entertainment ecosystem.

Stats & Comparisons:

I struggle to compare accelerators to one another. They often report different metrics for success rates. The following post gives a qualitative difference between the two accelerators, drawing pros and cons of which is better: Y Combinator v.s. Techstars: Accelerator comparison by a three-time alum | Codementor. Here is a list of the top 20 accelerators (or top 5%) and there is a huge amount of variability among them: The Best Startup Accelerators of 2015. If you compare the top 5% of startup studios, you’d have less than a handful of studios to consider: Idealab, betaworks, Rocket Internet and probablyeFounders. These are some of the most mature studios around. Most startup studios are too young, less than a few years old – like my own. So it’s hard to tell.

Metrics of Success:

There are lots metrics you could use to measure success. Here are a few you could use to compare studios and accelerators: number of companies scaled, number of companies with IPO, percent of companies with IPO, percent with successful exits, percent with revenue more than $100M per year, percent of founders that make millions of dollars, percentage of companies still operating, total dollars earned for investors and return on investment.

The Best of the Best:

We can analyze the best of each category to understand how studios and accelerators compare. Now, these numbers are not my own, and gleaned from other sources, so they may not represent the most recent facts:

Idealab – 100+ companies in 20 years. >70% still active. About 35% IPO or Acquired. About 5% unicorn. Pretty damn incredible. – various sources

Y-Combinator – 820+ companies in 11 years. >70% still active. About 13% IPO or Acquired. <0.5% unicorn. Again, pretty damn incredible. – various sources

In this light, if you’re looking at overall volume, Y-combinator wins hands down. If you’re instead aiming for percent of unicorn, Idealab wins. Both have similar numbers in the “still active” category. Idealab’s spin-offs have been running for longer, so I’d suggest the “still active” stat is more meaningful, whereas Y-combinator has more recent graduates, which may skew the stats.

Publicity

Accelerators have much more public visibility. There are many more accelerators than studios. Each accelerator throughputs far more startups than your average studio. Most accelerators have demo days and demo nights where they showcase that year’s class.

Fun Bits:

• “In a way, startup studios could be an answer to the dysfunctions of venture capital.” Read a Quora opinion about the benefits of a studio model here.
• Mike Fishbein comments on the viability of the startup studio and the opportunities they have, such as diversification, high risk and high return, shared resources, and the enabling of entrepreneurship. Read more here.
• This diagram illustrates the essential differences between the models:

Originally published on April 27th, 2017 on our previous blog.