Startup success: The role of business accelerators and incubators (BAIs)
After having examined data from 8,580 companies that made it past the initial screening stage at 408 accelerators in 176 countries between 2013 and 2019, Wharton School Professors Assenova and Amit published a paper (article) earlier this year demonstrating that accelerated startups grew more, on average, than their peers. The numbers are persuasive:
“Accelerated startups were 3.4% more likely to raise venture capital, and raised $1.8 million more in the first year after graduating from these programs,”
“They also planned to raise $2.64 million more capital, on average, over the next year. Accelerated startups also generated more revenue, hired more full-time employees, and paid more in wages to their employees, on average — indicating that they were scaling faster than their peers.”
Much of the success can be attributed to following factors (non-exhaustive), such as program design and offering, in particular the mix of knowledge-building programs offered by the accelerator to the cohort, are beneficial for improving startup performance post acceleration. This includes formal pitching events, industry focused insights, peer interactions and structured curricula, the latter being most beneficial for first-time founders and those with less formal education. Peer interactions allow for knowledge sharing, and bring new marketing strategies and product features into consideration, further increasing long-term value creation. In this regard, the researchers found that:
Accelerator program industry sector focus was positively correlated with the knowledge depth of peers in a cohort;
Program designs that emphasize greater knowledge depth within cohorts are associated with greater revenue scaling, while designs emphasizing knowledge breadth are associated with greater ability to raise external funding;
Startups that participated in orgrams with pitching events were 28% more likely to raise venture capital (VC). This effect represents a ninefold increase from the baseline probability of raising VC;
Programs featuring pitching events and seed funding, and programs with longer duration were more beneficial, on average, for ventures in high-technology industries, compared to those in non-tech industries;
Programs with industry sector focus, by contrast, were more beneficial for ventures raising VC funding in non-high-tech industries, compared to those in high-tech industries. As the researchers note, “there is not a one-size fits all design that is universally beneficial for different types of ventures, but the specific design features that accelerators may want to emphasize vary by venture industry;
Greater knowledge depth of peers in a cohort corresponds to greater fundraising and revenue scaling for first-time founders but not for experienced founders, who are “more likely to raise VC, raised more capital, had higher fundraising aspirations, and scaled revenue and employment by more than first-time founders, on average”.
While the researchers humbly recognize the study’s limitations, much value can derive from the Assenova and Amit paper, as it provides clues to both startups and program administrators as to what ingredients are required to succeed.
In the same vein, Innovation, Science and Economic Development Canada (ISED) - Small Business Branch similarly published a report, titled “The Effect of Business Accelerators and Incubators on business performance: Findings from the Business Accelerator and Incubator Performance Measurement Framework” (PDF, HTML). In this 2024 report, authors Joshi and Tu find:
“Empirical findings indicate that these companies are young, growth-oriented firms with significant levels of R&D engagement. Most importantly, there is early evidence that BAIs are associated with the growth trajectory of high-potential Canadian start-ups. A fixed-effect regression analysis reveals a positive correlation between BAI support and business performance. During the year a company receives assistance from BAI, its employment tends to be 14% higher than that of a similar non-BAI PMF company, while its revenue is higher by 13%. In the subsequent year, a BAI-supported company continues to maintain a 13% higher employment size, although it no longer has an advantage in revenue.”
These results are equally important as Canada makes a comeback on the 2024 Global Innovation Index, rising to 14th position, and further holding “the highest rank globally in Venture capital (VC) recipients (1st), and Joint venture/strategic alliance deals (1st). It also holds top ranks for the quality of its universities (4th) and the impact of its scientific publications (H-index – 4th).”
How does MVIP™ support startup success and maximize value?
Not only does MVIP™ provide founder experience, but ensures that startups follow a roadmap to attain deliverables, in an effort to maximize value. This can be done through a series of actions, such as :
Safeguarding of knowledge assets and intellectual property on core technology to build a competitive moat, as well as the management of these assets;
Taking steps to improve financial reporting of intellectual property assets on balance sheets and financial statements, or other internal documents so as to track efficiency and performance;
amongst many other concerted actions to maximize value in collaboration with selected business accelerators and incubators;
making use of a flywheel of grants and incentives as well as other mechanisms, including IP boxes (or patent boxes) and financing agreements, such as IP-backed financing (see here and here) to promote growth;
Align with investors requirement; and
Make other recommendations to the startup during MVIP™’s engagement. Contact us for more information.
By prioritizing actions and on the lookout to derisk investment, MVIP™ helps startups avoid unnecessary expenses associated with protecting less critical assets. This allows for efficient allocation of limited resources. We also encourage startups to focus on developing IP that directly contributes to their core value proposition and market differentiation. This is key to protecting their revenue stream.
In sum, MVIP™ is a powerful tool for startups to protect their innovations, attract investment, and build a sustainable competitive advantage. By strategically managing their intellectual property, startups can increase their chances of success in the marketplace.
Contact us for more information.
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