Accelerator networks and how they are aiding growth
If the UK is to become a post-Brexit beacon of innovation, its accelerator networks will play an important part. Jason Sinclair looks at how experience sharing can help build the next phase of businesses that then raise growth capital and get involved in M&A, with a focus on the Accelerator Network.
The model, says Christopher Haley, head of new technology and startup research at Nesta, was imported to the UK. “We helped to shape it,” he explains. A 2017 Nesta report found that in the UK 368 accelerators and incubators were supporting more than 7,000 businesses. As a simple rule, incubators help entrepreneurs flesh out business ideas, so that they get to a stage where the business has an idea or a product it can pitch to investors, consumers or customers. Accelerators expedite growth of existing companies, which already have a proven minimum viable product – they assist by offering mentoring, funding and networking help.
Lisa Power, who sold her own business for £45m and now mentors at the Accelerator Academy, says: “They all believe they’re going to be unicorns. We’re shaping their foundations.”
But how many will become huge companies, like Y Combinator alumni Dropbox, Coinbase and Airbnb, and how are accelerators going to help them achieve their goals?
In the UK, the Accelerator Network segments companies by life stage: hackathons, pre-accelerators, schemes for post-revenue businesses that are aiming to raise up to £1m from angels and VCs, and scale-up programmes (see box, ‘The network recruits’). Incubators really look at just developing ideas, so are in that pre-accelerator phase.
The network’s rubric involves a central base of classroom learning, backed up by one-to-one advice from mentors. Ian Merricks, who founded and chairs the Accelerator Network – and is managing partner of its backer, White Horse Capital – says: “During the course of any of our programmes, the entrepreneurs will have access to 60-70 sector experts covering the whole range of business experience, from sales and marketing to finance, investment and IT. We distil the critical areas into a syllabus, with a fully briefed network of stage-specific industry experts sharing their views on best practice, common pitfalls and ways to shorten the otherwise painful learning curves that start-ups are otherwise forced to pay for with time and money.” For example, Shaun Beaney from ICAEW’s Corporate Finance Faculty is one of the experts who speaks on the network’s twice-yearly FastForward programme for start-ups.
Merricks refutes the common misconception that accelerators offer rebadged management consultancy: “Accelerators are cohort-based, learning alongside peers, and that’s where we find that the life-stage focus is the most important segmenter. If you are in the first flush of your new business and you have a great idea but you want to know how you can jack in your day job and work on it, it’s pretty useful to be able to talk to other people who are at that stage.”
This collegiate spirit could change, and that’s a result of how accelerators are becoming increasingly segmented by sector rather than life stage, speculates Haley. “One of the broad trends in the last decade has been a move out of the purely digital space into other sectors,” he explains. “Whether it’s insurance, aviation or eyecare, we have specific industry verticals and it’s not entirely clear what it’ll do to the dynamics of an accelerator.
“All accelerators have an element of peer learning in them, and that might change with start-ups that are all likely to compete against each other because they’re sorted by specific subsector rather than stage.”
Merricks, himself an entrepreneur who has three successful exits behind him, thought that building accelerators was a good way of working on common problems for companies before investment. Following initiatives by Seedcamp and Techstars, he launched Accelerator Nation – the third accelerator in the UK – in 2011 because, as he says: “Our perspective was not ‘we need this thing called an accelerator’, but ‘how do we get results?’. A lot of that rationale has been lost, with corporates piling in and calling something an accelerator when it doesn’t have those clear objectives.
“It’s hugely time-consuming to build networks to give support to young companies that don’t have the money to pay for that level of service – getting together scores of experts, introductions to customers, capital, advisers, demo days in front of angels and VCs.”
To address this, Merricks says, programmes have either “sharpened their pencils and focused, saying ‘we don’t need to be open to everybody, we need to be more prescriptive in what we’re looking for, maybe we need to take equity in these firms’” or they have left the UK market entirely because “it’s difficult and the returns are five years out”.
Despite this, Haley believes that the UK has the highest concentration of accelerators outside the US, with more than half of these being in London, according to Nesta. He has noticed a change in who is setting up and providing the funding for accelerators.
“The first accelerators were about providing deal flow for VC firms,” he says. “But the majority of programmes now are corporate-funded or sponsored in some way. There are interesting questions about what success looks like. Some 40% of programmes receive some sort of public subsidy. Quite often the reason they’re receiving public subsidy is to provide economic regeneration. There’s a potential tension between a public funder who wants to create businesses that will stay in the local area and help build a local economy, and an investor seeking returns who may wish the start-up to relocate to California or to Europe.”
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