What is a startup accelerator? Why do they matter? Which ones are the “best” in our Southern California neighborhood? These answers are mostly subjective, but I think the attempts to answer these questions will clarify a complicated issue and hopefully serve as another valuable resource for entrepreneurs making those first decisions on how to get from idea to funded to “successful”. I’ve used a vague eyeball test to decide based on past success of portfolio companies, quantity of quality portfolio companies, services offered and how relevant they seem, and the resumes of principals at the accelerators. We’ll get to the list of 4 in a couple paragraphs…
What are we discussing?
First, let’s differentiate startup “accelerator” from “incubator”. I had to figure out the diff for the purposes of this post. Both types of organizations invest in and work with multiple startup companies–simultaneously–to increase the companies’ chances of commercial success. This includes funding. Those startups are overwhelmingly tech because of the powerful, economical ways tech infrastructure can be deployed and shared. Earlier this year, Christina DesMarais wrote this piece on the difference twixt incubators and accelerators, using two LA-based organizations to point up the contrast. She didn’t quite get all the way to clearly defining the differences. For those who’ve had their nose in Los Angeles tech for a while, Idealab is the quintessential incubator. Compared to accelerators, incubators get hold of companies and ideas earlier, devote more soft (space, time, introductions) resources, and stick around for a longer period of time because these younger portfolio companies need the extra care. By this definition, incubators will necessarily associate with a smaller number of startups. I’ve read articles that differentiate by specific equity amounts and time horizons. The ones I’ve seen seem too specific and would eventually have too many exceptions to really get at the heart of it. Older incubators like idealab generated and received ideas close at hand. The newer versions use additional resources to spread a somewhat wider net.
Continuing the definition, now by example. Many agree that the two leading accelerators are Techstars (Boulder, others/ blog) and Y Combinator (Mountain View/blog). Understanding their businesses means understanding how accelerators work. There is enough variation between them to get an idea of the range of accelerator business models. Last year, Techstars edged out Y Combinator as top accelerator—in Finnish eyes at least. Y Combinator invests about $18K per company and spreads it around quite a bit. 460 companies in seven years according to their site. Techstars sits at the opposite end of the accelerator spectrum. They’re very selective, get into business with few companies, and by necessity forge deeper connections. Y Combinator puts more bets on the table. A lot more. Chris Devore leads with “scarcity” when defining the “TechStars Recipe”. He’s right.
And now back to Los Angeles…
With that backdrop, let’s see how all this applies to our neighborhood. Benjamin Kuo and Yohei Nakajima have covered this ground in recent months. We’ll bounce off from there and try to help make sure that LA gets more names in the top 10. Here’s my favorite 4, listed in alphabetical order, not ranked. My approach is to point up few
distinctive features of each, and not give a Laundry List.
- Location: Orange County
- Focus: Technology/ product (mobile, social, local, and Internet marketplaces)
- Program Duration: 3 months
- Mentors: lots of experienced investors, and mentors. The team has experience in every aspect of business including product concept and development, fund raising, business model development, sales & marketing, operations, and merger & acquisition.
- Stake: 6-8%
- Companies: No companies listed on site, but TrustVillage and Vokle appear to be member companies
Each company can receive up to $25,000 in funding plus 17K worth of legal, web and PR services. Advisors and mentors will spend time with the companies to help them build out their product, gather market validation, and develop a viable business model. K5 provides a space to work with Internet access, mentor office hours, legal services, website design & hosting help, and other professional services. At the end of graduation of the program there is also a demo day to pitch to VCs to receive more funding.
- Location: Santa Monica
- Focus: Technology/ Media
- Program Duration: 4 months
- Mentors: 66 mentors listed top entrepreneurs, executives and investors from the technology and media.
- Stake: 6% common stock
Companies: DataPop, Mogreet, GumGum, and Cramster
Each company will receive 50K in funding, free office space, access to mentors, advisors and investors.
- Location: Santa Monica
- Focus: Internet software & Media
- Program duration: 3 months
- Mentors: Over 100 Mentors and Vc’s
- Stake: 6-8% no special rights or board seats
- Companies: Ecinity, InstaCanvas, Lafter, Penango, Retention Science
Each company receives up to $21,000, office space, legal support, access to the huge advisor network, and the opportunity to present to top-tier investors at the end of the program to gain more capital. (Called Demo Day). MuckerLab works with 5-10 companies twice per year
- Location: Westwood
- Focus: Web based Technology
- Program Duration: 90 days
- Mentors: Lots of mentors, each company will be paired with one that suits its needs
- Stake: 10% plus some warrants that only have value if the company raises additional money.
- Companies: Particle 5, PageWoo, Vioogo, Enplug, My Right
Each company will receive 20K in funding, legal support, financial advice, office space, collaboration with other startups, access to an alumni network, access to the top angel investors, and lunch and dinner with icons and leaders twice a week. They have social mixers.