John Whatmore's blog

Who will promote "accelerators" in the UK?

John Whatmore - 10.11.2011

There are some new entrepreneurs on the block - and they are running "accelerators"

NESTA's recent report The Startup Factories discusses a new form of incubator - the accelerator, and details its essential features (except one) as:

1. An application process that is open yet highly competitive
2. Provision of pre-seed investment, usually in exchange for equity
3. A focus on small teams not individuals
4. Time-limited support comprising programmed events and intensive mentoring
5. Startups supported in cohorts or 'classes'

The one omission (less obvious at first sight) is that these accelerators are run by angel-entrepreneurs.

These new accelerators have at least five characteristics that are attractive to angel-entrepreneurs:

• Cost and launch capital requirements are decreasing, at least for internet-based businesses.
• Corporations are increasingly looking to 'open sources' for their new products and new businesses.
• By virtue of their experience and contacts, angel-entrepreneurs can add a great deal of value to the ideas for new businesses of the participants in their accelerators.
• As accelerator managers, they are in a uniquely close position in which to assess the participants in their programmes, and so to make advantageous investments.
• At least forty carefully chosen new ventures pass through even the smallest accelerator each year.

No wonder that accelerators provide a superb opportunity for angel-entrepreneurs!

The result has been that buy-outs have been rising with dramatic speed, both in number and in value, along with confidence in the outputs of accelerators. This has reached such a high point that managers of one of the earliest accelerators (YCombinator in Silicon Valley) recently offered follow-on funding finance to every one of an entire cadre ($150,000 to each of ten participants).

So far in the UK, managing an incubator or an accelerator has been a job rather than an entrepreneurial opportunity. Seedcamp may well provide opportunities for the investment of its founder Saul Klein's Venture Capital Funds, but the week-long programme is as much a selection performance cum development programme. Springboard in Cambridge is not itself a source of follow-on funding; and Ignite, a similar programme in the North East, has as its aim not to be an investor but to provide a source of local business growth.

Techstar's panel of mentors is substantially made up of angels, many of whom will become investors and members of the companies with which they engage. There are signs that Angel groups in the UK are developing their own professional services which will make the financing and running of development facilities for early-stage ventures a possibility. But the number of start-up experienced entrepreneurs in the UK is as yet small.

Perhaps the likes of Luke Johnson could act as mentor to incubator managers?