Observing Acceleration

Uncovering the Effects of Accelerators on Impact-Oriented Entrepreneurs

Peter W. Roberts, Saurabh A. Lall

• Publisher: Palgrave Macmillan
• Year: 2018
• Print ISBN: 9783030000417
• eBook ISBN: 9783030000424
• Topic: Business
• Subtopic: Business General
• Index: Business

This book summarizes five years of learning from data collected as part of the Global Accelerator Learning Initiative. The authors present data describing impact-oriented ventures and accelerators that operate in both high-income countries and in emerging markets. Blending survey data with insights from sector experts, their various analyses shed light on the basic structure of accelerators, showing where they are having their most promising results. Unlike previous studies, this book does not focus on a few high-profile accelerators (like TechStars and Y Combinator) and startups (like AirBnB and Uber). Instead, it compares a range of accelerator programs that target specific impact areas, challenging regions, and marginalized entrepreneurs. Therefore, it serves as a valuable tool for scholars, policymakers, and practitioners interested in the effectiveness of accelerator programs as tools that unleash the economic potential currently trapped in entrepreneurial dead spaces.

© The Author(s) 2019

Peter W. Roberts and Saurabh A. LallObserving Accelerationhttps://doi.org/10.1007/978-3-030-00042-4_1

Begin Abstract

1. Introduction

Peter W. Roberts¹ and Saurabh A. Lall²

(1)

Goizueta Business School, Emory University, Atlanta, GA, USA

(2)

University of Oregon, Eugene, OR, USA

Peter W. Roberts (Corresponding author)

Saurabh A. Lall

End Abstract

This book is about the interplay between entrepreneurship, entrepreneurial ecosystems, and accelerators. A quick run through the Wikipedia website orients the reader to this trio of concepts. Entrepreneurship is ‘the process of designing, launching and running a new business.’¹ It tends to take place in the context of local ecosystems, which are ‘the social and economic environment[s] affecting the local/regional entrepreneurship.’² When there are problems with these local ecosystems, promising entrepreneurs often rely on accelerators, which are ‘fixed-term, cohort-based programs that include seed investment, connections, mentorship, educational components, and culminate in a public pitch event or demo day to accelerate growth.’³ When the typical reader reads these three definitions, she envisions the founder of a company like Uber working in a place like Silicon Valley, leaning on the support programming offered by accelerators like Techstars or Y Combinator. This is a perfectly fine place to begin thinking about entrepreneurs, ecosystems, and accelerators. After all, Uber recently had its market valuation pegged at roughly $50 billion,⁴ while Silicon Valley has become self-caricaturing when it comes to spawning high-tech companies.⁵ Moreover, prominent accelerators like Techstars and Y Combinator are regular fixtures on published lists of top programs, while their founders—Paul Graham and Brad Feld—are quoted regularly in the media for their views on entrepreneurship and acceleration.⁶

While it makes sense to begin by thinking about these prominent accelerators, it is not acceptable to stop there. There is simply too much else that is, and should be, happening around the world when it comes to accelerating entrepreneurship. Consider, for instance, the programs run by Village Capital, Points of Light, and GrowthAfrica. Since its founding in 2011, Village Capital has engaged numerous partners to run accelerators in sectors and regions around the world. To support promising entrepreneurs who tackle social and environmental challenges, they run programs in the agriculture, education, energy, financial services, and healthcare sectors in the United States, India, Kenya, Mexico, and South Africa. In a typical program, Village Capital works with 10 to 12 ventures and deploys a peer-review model that allows participating entrepreneurs to select the ventures that receive seed funding from Village Capital and its co-investors. The Points of Light Civic Accelerator (CivicX) operates out of Atlanta, Georgia, and supports for-profit and nonprofit ventures that want to solve critical social challenges around the country. Since running its first program in 2012, CivicX has provided mentoring, education, and post-program support to more than 100 ventures. Each of their programs consists of three four-day sessions and spans ten weeks. In the end, two ventures from every cohort receive investments of $50,000 each, structured as convertible notes for the for-profit ventures or revenue-share agreements for the nonprofits. GrowthAfrica is headquartered in Nairobi and runs programs in Kenya, Uganda, and Ethiopia. Although the organization was established in 2002 with the broad goal of enhancing business development in Africa, its first accelerator ran roughly one decade later. Since 2012, GrowthAfrica has worked with more than 150 ventures across a range of sectors, including agriculture, energy, financial services, and healthcare. In doing so, they partner with like-minded organizations, including other accelerators (e.g., Village Capital), foundations (e.g., Hivos), and networks (e.g., VC4Africa).

Those who know these programs—or any of the other impact-oriented accelerators working around the world—also know entrepreneurs who generate more than attractive financial returns for investors. In many cases, their ventures generate employment or improve incomes for people that currently live in poverty. In other cases, they produce innovative business models that give underserved people access to essential products and services like education, energy, financial services, and clean water. For example, one Village Capital program worked with FINV, Mexico’s first sustainable crowdfunding platform.⁷ Its mission is to create a bridge between the demand for financing and the supply of capital without the interventions of traditional banks. One of the CivicX programs supported Pentorship, an educational company in the United States that provides skills-based training and tools to incarcerated persons.⁸ As they expand, more people will be prepared to thrive when released from prison. GrowthAfrica worked with Wanda Organic, a Kenyan social enterprise that develops organic bio-fertilizers to improve food security.⁹ This company provides the latest in biotechnology solutions to medium-scale farmers that protect the soil while increasing farmers’ profitability.

Moving from these examples to the hundreds of alumni from scores of impact-oriented accelerators reveals a range of business models and aspirations that are positively disrupting the status quo. It also reveals a range of places that bear little resemblance to Silicon Valley. In the years since the semiconductor industry was propelled forward by the direct and indirect descendants of Fairchild Semiconductors,¹⁰ this region has become the prototype for high-octane entrepreneurial ecosystems.¹¹ Many books and articles are written about the networks and connections that allow promising entrepreneurs and ideas to flow toward the most able supporters and investors.¹² Now, Silicon Valley is flooded with mentors, angel investors, and venture capitalists. These ecosystem actors are complemented by a number of accelerators—including 500 Startups, Alchemist, Angel Pad, and Y Combinator—that help to identify promising entrepreneurs and ideas and then ensure that their knowledge and network gaps are recognized and closed. These acceleration processes facilitate connections to funding networks so that entrepreneurs also receive the investments required to scale their operations. Combinations of productive ecosystems plus high-quality support programs do not guarantee the success of any one entrepreneur, but they do ensure that the overall probability of success is maximized.

The non-traditional entrepreneurs who work in other places—like the founders of FINV in Mexico, Pentorship in Atlanta, or Wanda Organic in Kenya—face more serious ecosystem challenges. Fewer individuals and organizations are in place to advise and invest in promising ventures. This makes it extremely difficult for entrepreneurs to find and then make positive connections to these critical stakeholders. In reality, there are way too many regions and sectors that are not really conducive to positive entrepreneurial outcomes, and these tend to be the places where the contributions of promising entrepreneurs would be most valued.¹³ It is troubling to a lot of people that major entrepreneurial advances are not as common in sectors like health and education as they are in mainstream technology; that underdeveloped regions in East Africa, South Asia, and Central America (and the United States) do not benefit from positive entrepreneurial outcomes as much as the highly developed regions in the United States and Western Europe; and that women and minority entrepreneurs experience greater difficulties turning their promising ideas into prospering companies.

In the midst of all the outsized knowledge, network, and capital gaps that slow the progress of impact-oriented ventures in entrepreneurial dead spaces, the prospect of having a few more accelerators is enticing. This is where we see both good news and bad news. The good news is that a growing number of accelerators—like Village Capital, CivicX, and GrowthAfrica—are taking up the challenges of working in underdeveloped entrepreneurial ecosystems. If they are able to find and effectively support promising entrepreneurs, then more early stage ventures will scale and generate positive impacts for more people, in more places and in more ways.

The bad news is that we really do not know whether these accelerators are working.¹⁴

Adding Breadth and Depth to Our Observations

The title of this book emphasizes ‘observing’ for two reasons. The first relates to what typically comes to mind when thinking about entrepreneurship and acceleration. As we said before, it is OK to home in on the most salient and successful instances when orienting to a topic. However, it becomes problematic when observation stops there. After all, inferences are likely to be misleading when researchers only observe those things that are easiest to look at.¹⁵ Consider the impression that is left from the second sentence on accelerators taken from the Wikipedia page cited earlier: ‘Most startup accelerators in Silicon Valley and globally are privately funded as an investment fund that take equity and focus ...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. Entrepreneurs, Ecosystems, and Accelerators
• 3. The EDP Data
• 4. Is Acceleration Working?
• 5. Driving the Net Flow of Funds
• 6. Building Application Pipelines
• 7. A Closer Look at Entrepreneur Selection
• 8. Programming to Close Knowledge, Network, and Capital Gaps
• 9. Acceleration in Emerging Markets
• 10. Where’s the Equity for Women Entrepreneurs?
• 11. Accelerating Learning About Accelerators
• Back Matter