EventsNewsTips for StartupsUncategorised

From SXSW: The Accelerator Bubble

By 31st March 2016 No Comments

South by Southwest conferences are always packed with the innovation and heated debates – this year was no different. I often use these conferences as a barometer for the market. This year I was particularly interested in how people are viewing accelerators, their place in the market, and even how they are defined, fortunately a topic on most people’s lips. Many were asking the question of whether traditional programs or corporate accelerators actually worked.

This discussion reminded me of a time when I first spoke to people on the concept behind The Sandpit and the vision to become a ‘Business Builder’. We at the time, were met with lukewarm reactions and those who showed a polite interest, but couldn’t grasp the issue with traditional accelerators. This year was different. People seemed to have a strong understanding of what we do and how we operate at The Sandpit. I am not sure if this is due to accelerator fatigue, or a genuine deeper understanding of what is working for start ups…

The debate culminated in a session I attended titled “Accelerators: Flaming Out or Burning Hot?”, chaired by Professors Susan Cohen and Yael Hochberg, from Seed Accelerator Ranking. The discussion covered the topic of accelerator programs, from the existence of an “accelerator bubble”, to whether it’s about to pop. Professors Cohen and Hochberg, produced a research piece named the ‘Seed Accelerator Rankings Project’. It was no big surprise that the likes of Y-Combinator and TechStars were in the leading group of the rankings.

Firstly, it is important to understand their definition of an accelerator, which is; “a fixed-term program, with mentoring and a cohort ending in a demo day or pitch event.”. It’s worth mentioning that there are now 170 accelerators in the US which fit this description. I’ll let you draw your own conclusions as to whether an “accelerator bubble” exists, but it is something that we, at The Sandpit, have attempted to distance ourselves from. We have no fixed timeframe nor specific pitch/demo days at the end! We certainly are not saying that the accelerator model is wrong, just that it is right for certain start-ups and not all. The same way that not every start-up should take VC money and try to grow a horn.

Accelerators undoubtedly have a track record and multiple success stories. However, the question now is whether they are really doing what they set out to do. With the bar constantly being raised for entry into these top performing programs, they are seeing more advanced start-ups get in. For those earlier stage or less rounded companies (for whom arguable these programs were set up to serve), do not make the cut. These programs may well be enticing for investors, which is great, but in the same way the VCs have moved further and further up the food chain, something needs to fill the void.

One observation by Cohen and Hochberg was the explosion in “corporate accelerators” from all sectors. Some wanting to work with startups to find the next product in their sector that will give them an advantage, others just wanting access to innovation to help the people in their business think differently and some perhaps without a clear idea of the goals but thinking that they should be doing something rather than nothing.

As the debate rages on one thing’s for certain, when 90% of all startups fail within the first three years, we at The Sandpit will continue to challenge the norm.

Author The Sandpit Team

More posts by The Sandpit Team

Leave a Reply