Subtitled: Many Concepts of Incubators and Accelerators
The research methodology section describes the research steps, the sources of empirical data and the type of data analysis to be performed. The Results section summarizes some of the negative experiences of entre-preneurs who have been part of business incubation programs and provides some reflections about the dif-ferences in these experiences in incubator-like and ac-celerator-like environments.
Finally, the Conclusion provides some final reflections and summarizes some of the most typical downsides of being part of an in-cubator or accelerator. Key Insights from the LiteratureAccording to Gunter (2012), startups tend to be the most rapid job creators. Either startups move up by rapidly expanding their innovation to become economically successful, or they rapidly go out of business.
Very often, startups develop radically innovative products and, eventually, disrupt existing markets. However, startups who seek to do things differently face several challenges and uncertainties associated with the shaping of a viable business model, reaching out to early buyers, setting up durable partnerships and sustainable operations, etc.
To deal with these challenges and uncertainties, startups usually benefit from all available resources including existing regional and national business incubation programs. Incubation vs accelerators In order to establish a successful business, entrepren-eurs are often looking for business programs that could help the growth of their business. In fact, incubators and accelerators are meant to boost the success-ful development of newly created firms by increasing the likelihood of their survival and growth. Incubators and accelerators should enable a smooth start and fu-ture growth for startups.
However, many concepts of incubators and accelerators have been put forward, which sometimes confuses both scholars and practi-tioners. The original concept of an incubator has changed since the first private incubator was established in New York in 1959 (Hausberg & Korreck, 2018). Since then, many different forms of entrepreneurship support have emerged, one of which is the accelerator. The first seed accelerator was Y Combinator in 2005, which was followed by TechStars in 2006. Many others have fol-lowed their lead, but Y Combinator and TechStars re-main two of the top accelerators in the world today. Such programs are now commonplace, but there is still confusion regarding the terms incubator and accelerat-or.
For example, many startup programs that describe themselves using the same term do not share common characteristics. Thus, in order to make a distinction between these two terms, it is necessary to answer the following questions:• What does an incubator or accelerator offer?• Who is an incubator or accelerator targeting? Characteristics of an incubatorThe goal of incubators can differ depending on the type.
There is, therefore, a distinction between the classic business incubator and a typical accelerator. “Accelerat-ors usually are fixed-term, cohort-based programs providing education, monitoring, and mentoring to start-up teams (usually not single entrepreneurs) and connecting them with experienced entrepreneurs, ven-ture capitalists, angel investors and corporate execut-ives and preparing them for public pitch events in which graduates pitch to potential investors” (Haus-berg & Korreck, 2018).
The risks associated with selecting and joining an incub-ator or acceleratorA critical assessment of the effectiveness of an incubat-or or accelerator can guide entrepreneurs to make the right decisions about engaging with specific business support programs. Many entrepreneurs are novices who lack competencies, working capital, and potential for funding. Entrepreneurs make decisions based on what they perceive, and startups often want to be ac-cepted into a well-established program without consid-ering if it is the right program to be in. According to Bliemel and co-authors (2016), entrepreneurs usually apply to join an accelerator because they need seed funding, incubation services, and partnership net-works.
They emphasized that, for example, when entre-preneurs are only seeking mentorship, an accelerator program could be detrimental to them since there are many risks associated with an accelerator. Miller & Bound (2011) articulated several criticisms of accelerat-or models:• After graduating an accelerator, startups are still fra-gile and in need of support.• The equity taken by accelerators becomes problemat-ic for further funding. Startups fear “Rich guys launch-ing ‘startup accelerators’ so they can rip off new start-up founders” (Miller & Bound, 2011).• Because of the increasing number of accelerators and their tendency to invest in early-stage firms, B-grade companies will not receive investment.• “If accelerators continue to grow and start producing thousands of small companies, we can expect to see a bottleneck developing and in the event of a crash in confidence in the sector” (Miller & Bound, 2011).
• Accelerators will become “startup schools” who will encourage learning through educational returns rather than building real businesses.
• Accelerators build small companies that do not have quite global ambitions. These are companies that are building something that will become a feature of a lar-ger service, rather than aiming to become a large com-pany in its own right.
• Accelerators are making entrepreneurship so access-ible that they start draining talent from larger techno-logy firms. Yu (2015) argues that founders with promising ideas avoid joining accelerators and instead choose different ways of progressing. For most of them, an accelerator without a well-established value ecosystem and net-work is worthless. On the other hand, the best startup exit for an accelerator or for-profit incubator comes when the startup is acquired. In this sense, an accelerat-or is just another type of incubator, whose goal is to in-crease the startups’ survival chances (Hausberg & Korreck, 2018).
But there remains a lot of definitional uncertainty. As Mian and co-authors (2016) emphas-ized, the definition of accelerators cannot be general-ized due to idiosyncrasies in their relations to political, economic, social, and geographic conditions. The summary of the risks associated with the possibility of startups joining business incubation programs demonstrates the need for more systematic studies fo-cusing on the potential downsides of business incuba-tion practices. The next section describes the methodology adopted to answer our initial research question, starting with the hypothesis that it is not al-ways beneficial for new ventures to join business incub-ation programs. Research MethodologyFor this study, we adopted an explorative qualitative re-search approach using multiple semi-structured inter-views with startup founders, complemented by informal discussions with serial entrepreneurs.
We de-signed the questions around issues related to some of the negative experiences of going through specific in-cubation/acceleration programs and how such experi-ences affected the future of specific ventures.