Have Accelerators Reached Saturation Point?

by Foley & Lardner LLP
Contact

A few weeks ago, I attended the ribbon-cutting ceremony for the new MassChallenge accelerator space. There were hundreds of people there, including the founders of TechSandBox, an accelerator in Hopkinton, MA, and Smarter in the City, an “inner city” accelerator in Roxbury. Foley & Lardner is, of course, deeply involved with many accelerators in Boston and elsewhere, including MassChallenge, LabCentral, Techstars and Plug and Play. We also work with companies at many other accelerators, including the PayPal Start Tank, the Canadian Technology Accelerator, the Hult International Business School accelerator, and so on. Many of these new accelerators focus on a particular niche, whether a specific industry, a specific location, or a particular business or financial model. Some take equity from each company, while others, such as MassChallenge, do not. Some offer space, connections and mentorships, while others also provide price money or seed capital. Of course, some of them deliver on that promise better than others.

It’s amazing that each of these accelerators is able to attract suitable companies. This is especially significant, given that accelerators must renew their portfolio of companies within a very short cycle: once or twice a year. In contrast, venture and angel funds hold onto their portfolio companies for a number of years.

I wonder. Can there be a sufficient “inventory” of startup and early stage companies to fill the pipeline for all of these accelerators? Are there enough sponsors and mentors to go around? Will the quality of mentorship suffer as quantity increases? Is there enough available financing, whether angel or venture, to provide the graduates of these accelerators with a reasonable path to success?

A bit of history is in order. During the last emerging company boom in the dot-com era, incubators were the fashion of the times. With the bust, most of them crashed and burned, as did many of the companies that they hosted. Are we seeing a similar phenomenon with accelerators which, bluntly, are a slightly improved version of the old fashioned incubator model?

Innovation is a fantastic thing and the buzz and excitement of entrepreneurial energy fostered by all of these accelerators has generated a vibrant ecosystem in Boston and elsewhere. More and more large companies and service providers have realized the value of startups and have stepped in to support, financially and with human resources, these emerging companies. Previously ignored markets have been discovered. Whether it’s Roxbury, Worcester or Springfield – or even Maine, New Hampshire and Vermont – new geographic areas are being harvested for exciting companies. For the first time, media, retail and nextgen manufacturers have found supporters in the Boston ecosystem and, indeed, many companies are capitalizing on the convergence of heretofore separate marketing and technologies.

Yet, there is a fly in the ointment. The supply of resources to accelerators could become exhausted. After all, there are only so many companies willing and able to provide sponsorships. And there are only so many individuals willing – and capable – to act as mentors. At the same time, greed, buoyed by entrepreneurial and investor enthusiasm, have encouraged some entrepreneur/promoters to push the economics of accelerators beyond currently accepted, and reasonable, parameters, asking for more money and resources from investors and sponsors and returning less. Most importantly, graduates of accelerators will find that the angel and venture markets have not yet caught up with the increased demands of the ever-growing universe of accelerator spinouts. Indeed, today there are fewer early-stage venture funds, with much less capital, than before the 2008 crash. The lack of adequate financing may then start a vicious cycle: fewer sponsors and supporters will see a pay-off for their money and labor, fewer will be willing to make a commitment to accelerators, and fewer new ventures will see accelerators as their route to success.

Is this doom and gloom scenario an inevitability? Is it just another manifestation of the economic cycles that we seem to go through again and again? Let’s hope that this is not the case. Let’s begin a discussion about how to preserve the vibrancy, energy and job creating value of accelerators and avoid falling into the same traps that closed off the innovation economy during the downturn of the last economic cycle.

View This Blog

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley & Lardner LLP | Attorney Advertising

Written by:

Foley & Lardner LLP
Contact
more
less

Foley & Lardner LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.