Accelerators and ecosystems
A new institutional form has emerged in the entrepreneurial ecosystem in recent years: the seed accelerator. These fixed-term cohort-based “boot camps” for startups offer education and mentorship for startup founders and culminate in a “demo day,” during which graduates pitch their businesses to potential investors. Many local governments hope to use accelerators to transform their local economies through establishment of startup technology clusters. Evidence of accelerators' efficacy is limited, however, so we examine their effects on regional entrepreneurial ecosystems, particularly provision of venture capital (VC) financing to new startups (1). Accelerators emerge in different regions in different years, often for reasons exogenous to the nature of the ecosystem or precisely because of its lacking. This allows us to compare changes in regions that receive an accelerator with similar regions that do not have one. We see a shift in funding for startups in accelerator-treated regions: more deals, more dollars, and more local investment groups. This applies to startups that attend the accelerator and those that do not. Most accelerators focus on software companies, and regions with accelerators shift toward a higher share of early-stage software and information technology–related VC deals (although financing for other industry groups, such as biotechnology, is not necessarily reduced). These patterns hold both for high- and low-ranked accelerators in the annual Seed Accelerator Rankings, which suggests that the funding increase is less about the effect of accelerator programs on companies that attend them and more about what such programs do to encourage latent entrepreneurial activity in the region more generally—providing role models, catalyzing establishment of other ecosystem institutions, and acting as a nexus for startup activity. Although accelerators studied so far focus on software startups, further research will be needed to assess new programs emerging to serve biotech and hardware startups.
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