Accelerators provide intensive and time-limited business support for cohorts of startups, aiming to get them ready for investment more quickly than traditional incubators.
How do accelerators work?
The accelerator model has some typical features that set it apart from other approaches to startup investment or business incubation. These include:
- A highly selective admissions process.
- A focus on cohorts or ‘classes’ of startups rather than individual companies.
- Mentoring or other business training.
- Intense and time-limited support, usually lasting between three and 12 months.
Accelerators may be funded by venture capital investors, public bodies or large corporates, depending on structure and objective. They also often tend to focus on supporting technology-based or digital startups.
Most programmes encourage a high degree of peer-to-peer learning, so that founders can learn from others in similar circumstances. Mentoring from experienced entrepreneurs also plays a significant role in most programmes. The provision of funding (sometimes in exchange for equity), a workspace, facilitated networking and educational seminars/workshops are other common services.
One of the world’s first seed accelerator programmes – which is often credited as having sparked the wider accelerator movement – is the California-based Y Combinator. This programme provides advice, access to networks and seed funding in exchange for an equity stake (typically $120k for 7 per cent). It has helped to develop more than 1,400 technology companies, including many now-familiar firms such as Dropbox, Airbnb, Coinbase and Reddit, and the combined worth of Y Combinator ‘graduates’ was estimated at a value of over $80 billion in June 2017. This accelerator has set the benchmark for others and has informed a lot of Nesta’s work in the field.
Nesta's work on accelerators
Nesta made early investments in a range of startup incubators, from Seedcamp to Springboard, the European Microelectronics Academy to Design London. We became interested in the emerging trend of seed accelerator programmes in 2010 as a promising low cost and high impact way to develop startups and entrepreneurs.
Our research began in 2011 with The Startup Factories, which charted the rise of accelerator programmes supporting new technology ventures in the US and Europe. We created the first ever map of accelerator programmes across Europe.
This report was a first step towards defining and analysing the effectiveness of the approach. Alongside that, we started to gather evidence of effectiveness in the wider incubation community with Incubation for Growth. We have continued to monitor this rapidly developing landscape. Our 2015 report, A Look Inside Accelerators, sets out how accelerators could be grouped by type: as ecosystem builders, investors or matchmakers. In turn, Startup Support Programmes: What’s The Difference (2015) explains how accelerator programmes differ in how they make money and when they intervene in the startup journey.
Nesta works with policymakers to help guide their thinking around the role of accelerators within a mix of publicly funded business support mechanisms. In 2017, we collaborated with the UK’s Department of Business, Energy and Industrial Strategy (BEIS) to create a new directory mapping all accelerator and incubator activity in Britain. Business Incubators and Accelerators: the National Picture identifies where these programmes are located throughout the UK and what sectors they focus on.
Subsequent research has sought to prove robustly that accelerators can have impact; to identify activities which add most value and understand the broader ‘spillover’ effects that they may have on the ecosystem they are situated in. Alongside our research, we have helped to build peer support networks for programme operators. Nesta is one of several founding partners in the Accelerator Assembly, a network of accelerators across Europe. Part of the European Commission’s Startup Europe initiative, it aims to enable research, share information, and improve the transparency of programmes.
We are dedicated to understanding how to improve targeted incubation and acceleration for social ventures. We have analysed the emerging trend in social impact accelerator programmes in Good Incubation and explored the trend around the world – for instance with Good Incubation in India. Nesta was also an early investor in Bethnal Green Ventures – now one of the world’s leading ‘tech for good’ accelerator programmes.
In the last ten years, we have partnered with the Cabinet Office, the Open University, the London School of Economics, Imperial College and the UK Science Parks Association among many others, to further illuminate the field of accelerators. Nesta’s ongoing research aims to give a richer understanding of the effectiveness of accelerator programmes, help programme managers to evaluate and report their impact to funders, and to help policymakers decide which types of interventions should be funded for emerging startups to thrive.
Bethnal Green Ventures
Bethnal Green Ventures (BGV) is an accelerator programme with a mission to develop tech-based solutions to the world’s social problems. It evolved out of Social Innovation Camp – a competition event co-funded by Nesta and the Young Foundation – that brought together software developers and designers with people who understood social problems. When Bethnal Green Ventures launched in 2011, it was one of the first social accelerators in Europe.
It was also one of the first organisations to be funded by the Cabinet Office’s Social Incubator Fund (with match funding from Nesta and Nominet Trust) in 2013. In 2017, Big Society Capital joined Nesta and Nominet Trust in backing BGV to grow beyond the accelerator programme to offer advice, support and further investment to alumni teams.
Since it started, BGV has supported more than 200 founders to launch and grow startups using technology for good. Several of the social ventures it has supported (such as Fairphone, DrDoctor and Mastodon C) have gone on to be thriving, scaling, impactful businesses with revenues and numbers of beneficiaries in the millions
Digital Arts and Culture Accelerator
In 2016, Nesta and Arts Council England partnered on an accelerator programme designed to help projects become investment ready. The accelerator offered a three-month programme of business support to help projects explore the potential of their original ideas. This one-off initiative allowed both partners to test how the accelerator model, which is now common in other sectors of business innovation, might work for the arts and cultural sector.
Our evaluation of the accelerator showed that there were some areas where the standard tech model fitted the arts and culture sector imperfectly, such as the focus on equity finance and the premise that any venture would have the sole attention of a founder. However, there was a clear value acknowledged by participants in being part of a cohort of innovators and learning new skills together.
Some of the cohort have gone on to scale their ideas with additional funding. One case is the Arts Impact Fund, an innovative funding partnership between Arts Council England, Esmée Fairbairn Foundation, Bank of America Merrill Lynch and Nesta.
- A Look Inside Accelerators (2015)
- Business Incubators and Accelerators: the National Picture (2017)
- Good Incubation (2014)
- Good Incubation in India (2016)
- Incubation for Growth (2011)
- Startup Support Programmes: What’s the difference? (2015)
- The Startup Factories (2013)