The word “accelerator” has become so ubiquitous in the tech sector over the past year that I was taken aback recently when a friend asked “what’s one of those?”
I explained the basic premise, saying: “It’s somewhere young technology companies go to grow and develop.”
“Like a school for the next Facebook?” they asked, to which I replied, “Kind of.”
Writing in Innovations, a journal published by MIT, Professor Susan Cohen of North Carolina University gives a slightly more detailed definition. She defines an accelerator as a fixed-term, cohort-based programme, that includes mentorship and educational components and culminates in a public pitch event or demo day.
In exchange, start-ups are often required to give up a chunk of their business, typically eight to 12 percent, but not always.
Tech City UK CEO Gerard Grech told Techworld that accelerators are crucial in helping promising UK digital entrepreneurs grow their potential. He says they provide affordable work space, mentorship opportunities, the chance to collaborate and in some cases the early-stage funding that makes a concept reality.
Tech City UK, tasked by government with growing the UK technology sector, was unsure how many "accelerators" there are in the UK but it did say London is home to over 70 co-working spaces and "some" highly successful accelerators.
“The recent openings of Tech Stars, The Bakery and Microsoft Ventures Accelerator have enriched the community, while specialised accelerators like Level39 nurture the next wave of fintech innovation," claims Grech.
50 ACCELERATORS IN LONDON ALONE
Eric van Der Kleij, the British entrepreneur who leads the Level39 fintech accelerator programme for Canary Wharf Group, believes there are now around 50 accelerators in the capital.
To the average onlooker, it would appear as if every man and his dog is setting up an accelerator.
Large corporates like Barclays, the BBC, John Lewis, Tesco and Virgin say they are looking for new start-ups to partner with and learn from. For example, BBC Worldwide is working closely with CrowdEmotion through the BBC Labs accelerator to see how it can take advantage of the start-up's audience monitoring technology.
Then there are pure accelerators like Startupbootcamp and Wayra hoping the small chunks of equity they hold will one day turn into tens or even hundreds of millions of pounds.
All of the aforementioned accelerators are based in London and there are only a handful outside of the capital.
OUTSIDE THE CAPITAL?
Keen to portray that other UK cities are competing with London, Grech says: "As regional tech clusters continue to thrive, successful accelerators are growing up alongside them. From ignite100 in Newcastle and Oxygen Accelerator in Birmingham, to Dotforge in Sheffield and Idea Alive in Manchester, entrepreneurs can increasingly now get access to the benefits of accelerators across the UK.”
Other UK accelerators are looking to piggyback off the success of the companies spinning out of Britain's academic powerhouses. For example, ideaSpace is an accelerator looking to nurture start-ups coming out of the University of Cambridge, while SETsquared is an accelerator aiming to support similar companies emerging from the universities of Bath, Bristol, Exeter, Surrey and Southampton.
Competition for places in all of these accelerators appears to be fierce, with many saying they receive hundreds of applications for each of their programmes even though they typically only accept 10 companies per cohort.
But how good are these accelerator programmes and is it really worth sacrificing a chunk of a business just to be a part of one?
Many of them seem to be much of a muchness and when you ask the people leading them how their's is different to their neighbour's, they often struggle.
On the surface, most accelerators offer a small sum of money (around £10,000), some mentoring and some office space.
Hannah Blake, programme manager at BBC Worldwide Labs, says: "It’s important to pick your accelerator programme wisely and then after that focus on growing your business in the 'real world'. Accelerators can really add value, but if you continuously hop from one programme to another people will soon begin to wonder whether your company can survive outside of these programmes.
"The real proof of whether an accelerator works is based on what happens to the start-ups after they leave. If an accelerator provides funding then how much more funding has the start-up secured since leaving? If the accelerator provides partnership opportunities via a corporate accelerator like ours then how many more partnerships with other businesses has the start-up secured since leaving? It's these metrics that prove the value and will determine the success of an accelerator."
Van der Kleij also believes the more interesting accelerators help start-ups secure partnerships and contracts instead of just offering cash and mentoring.
"The Bakery specialises in getting the brands in and saying give a piece of procurement to our programme," he said. "That’s cool. That’s worth giving up some equity for."
Van der Kleij argues there aren’t enough accelerators specialising in certain verticals. “One thing there is a definite lack of is fintech accelerators. When you think about financial services, it’s the single biggest sector of GDP in London and the UK by far and there are only two or three fintech accelerators.”
Indeed, London was recently named as the fastest growing fintech sector in the world by Accenture, growing at 74 percent year-on-year since 2008, compared with 27 percent globally and 13 percent in Silicon Valley.
But Danielle Newnham, founder of digital innovation studio We Make Play, has been put off enrolling in a UK accelerator for a number of reasons.
"I think the biggest problem with London’s accelerators is so many are being set up for PR, rather than genuinely finding the next big tech start-up which solves a real problem or invents an incredible piece of technology.
"To spot, foster and assist innovative tech start-ups, you need to understand two fundamentals – technology and start-ups, hence why places like Y Combinator has done so well," she says, pointing to the accelerator's co-founder Paul Graham, who sold his software business for $49.6 million. "Having that experience is invaluable when evaluating and advising those wanting to follow a similar path."
She adds: "Tech accelerators have existed for far longer in the US and, in my opinion, are naturally much better set up in terms of the services they offer but, more crucially, they appear to have a far more rigorous interview process for both the start-ups they bring in and the mentors they take on. This of course makes a huge difference to both the type of start-ups they attract and their success rate. It almost feels like London is just jumping on the tech accelerator bandwagon, with little of the right ingredients in place, in many cases."
Many of the UK's accelerators are aiming to emulate the success of Silicon Valley accelerator Y Combinator, which counts Dropbox, Airbnb, Scribd, Reddit and Salesforce, among its graduates.
Unfortunately, it may not be possible to determine the true success of the UK’s relatively young accelerators until they are at least the same age as Y Combinator, which has been in existence since 2005. Until then, all we can do is keep a watchful eye on the companies coming out of them.
"Being so new to the tech accelerator game, I think there is definitely room to learn from our friends in the US and create and build accelerators which, one day, will compete with the likes of Y Combinator," says Newnham. "We just need the right people on board running these places, because the people capable of building great start-ups are out there, and not just in London either, but all over the UK."