seed accelerator rankings project -sxsw

SEED ACCELERATOR RANKINGS PROJECT

2013 Accelerator Rankings

Prof. Yael Hochberg

DIRECTORS

Emily Yee

RESEARCH ASSOCIATES

Dan Fehder

Prof. Susan Cohen

#SEEDRANK

@yaelhochberg

@susleec

“ THE GOAL OF THE SEED ACCELERATOR RANKINGS PROJECT IS TO

START A LARGER CONVERSATION ABOUT THE ACCELERATOR PHENOMENON,

ITS EFFECTS AND ITS PROSPECTS FOR THE FUTURE…”

WHY RANKINGS?

Guidance for entrepreneurs considering the various programs

Encourage transparency

Learn about the relative success of programs and of accelerators as a

“startup jumpstart” overall

Which programs excel on various important dimensions?

AFTER ALL… Accelerator participation

usually does not come cheap

Equity is the entrepreneur’s most valuable currency!

Average equity stake taken

6%

Average seed investment

$25k

75 Startups Set to Strut at Y Combinator Demo Day 8/21/12

Inside the Startup-Generating Secrets of Y Combinator 9/11/12

Top Startup Incubators And Accelerators: Y Combinator Tops With $7.8 Billion In Value 4/30/2012

Investment Firm Y Combinator Goes on Offensive Against Hollywood 1/20/12

Got the Next Great Idea? 7/19/12

Coding Start-Ups Compete for Booming Market 1/24/12

Silicon Valley Guru Blasts Y Combinator Hype 9/13/12

Y Combinator Founder Issues New Warning to Start-ups 9/6/12

Y Combinator: New Start-ups Borrow Proven Business Models 8/21/12

10 Start-up Incubators to Watch Future TechStars, Step Forward 4/2/12

Accelerators Become Networks for Alumni 10/25/12

Alexandra Starr: Incubating Ideas in the U.S., Hatching Them Elsewhere 09/11/12

LOTS OF PRESS…

…LITTLE RESEARCH LOTS OF PRESS…

A fixed-term, cohort-based program, including mentorship and educational components, that culminates in a public pitch event or demo-day.

ac·cel·er·a·tor

ac·cel·er·a·tor incubator =

Many, though not all, provide a stipend or small seed investment, and receive an equity stake in the portfolio company

Most offer co-working space and other services in addition to mentorship, educational and networking opportunities

Some also offer a larger, guaranteed investment

A fixed-term, cohort-based program, including mentorship and educational components, that culminates in a public pitch event or demo-day. ac·cel·er·a·tor

CRITERIA FOR INCLUSION IN THE RANKINGS IN 2013

Meet the definition of accelerator

Take an equity stake in the startup

Have graduated at least one cohort by 2013

Have at least 10 graduates

U.S.-based

There is wide variation in the amount and detail of data collected by programs

Spot checked against public and proprietary data sources

For programs that did not provide data, data was web-scraped by CrunchBase and supplemented with additional data sources

DATA PROVIDED BY ACCELERATORS

SUPPLEMENTED BY SURVEY ASSESSMENTS

INVESTORS STARTUPS

LET’S GET STARTED!

PAUL GRAHAM, YCOMBINATOR

"I think the way to measure ‘accelerators’ is by average VALUATION of the companies we fund. That's what we optimize for. That's the traditional measure of VC firms…, and though we disagree with VC firms about a lot of things, we agree about this."

VALUATIONS

This, of course, treats companies that raised money through a convertible note, or companies that never raised, as if they have zero valuation… which is not necessarily true…

Of course, this does not fully reflect the valuation the average or median entrepreneur entering the program eventually achieves…

AVERAGE VALUATION Conditional on raising a priced round or exit

1

2

3

4

5

…and s2ll doesn’t adjust for founding date differences.

AVERAGE VALUATION Across all por<olio companies

1

2

3

4

5

This, again, treats companies that raised money through a convertible

note, or companies that never raised, as if they have zero valuation…

AVERAGE VALUATION Across all portfolio companies 1 year post-graduation

1

2

3

4

5

VALUATIONS


1 year post-graduation

1

2

3

4

5

And this again does not fully reflect the valuation the average or median entrepreneur entering

the program achieves.

*for programs where valua2ons are available

AVERAGE VALUATION Across all portfolio companies 2 year post-graduation

1

2

3

4

5

VALUATIONS


2 year post-graduation

1

2

3

4

5

This, again, treats companies that raised money through a convertible

note, or companies that never raised, as if they have zero valuation…

And this again does not fully reflect the valuation the average or median entrepreneur entering

the program achieves.

“We measure our success based on number of start-ups funded, revenue and earnings growth in our portfolio as well as EXITS and shareholder value.”

VIC GATTO, JUMPSTART FOUNDRY

EVERYONE HAS THEIR EYES ON THE PRIZE…

BUT IS IT TOO SOON

TO TELL?

Historically, average seed stage VC investment takes 7-9 years to achieve successful exit

Oldest accelerator program is YCombinator, founded 2005

Average program: –  3.1 years old –  Graduated 6.6 cohorts

EXITS

Across all the startups in our sample

ONLY 2.1% HAVE HAD A MEANINGFUL EXIT

MEANINGFUL EXITS

% OF COMPANIES WITH MEANINGFUL EXIT ($5M+)

1

2

3

4

5

WHAT ARE COMPANIES WORTH

AT EXIT?

AVERAGE VALUATION across all exited companies

1

2

3

4

5

For top 5 programs

WHAT ARE COMPANIES WORTH

AT EXIT?

AVERAGE VALUATION across all exited companies (top 5)

$21m

“We measure our success based on number of START-UPS FUNDED, revenue and earnings growth in our portfolio as well as exits and shareholder value.”

VIC GATTO, JUMPSTART FOUNDRY

NOT EVERY STARTUP NEEDS EXTERNAL INVESTORS…

BUT MOST OF THE ONES THAT GO THROUGH AN

ACCELERATOR DO.

Across all the startups in our sample

59.3% HAVE RAISED SIGNIFICANT $$

Raised significant financing (>200K)

Doesn’t include guaranteed funding from accelerator or affiliated fund

FUNDRAISING

% THAT RAISED $$ 1 year after program

1

3

4

5

% THAT RAISED $$ to date

1

2

3

4

5

FUNDRAISING

AVERAGE $$ RAISED 1 year after program

1

2

3

4

5

MEDIAN $$ RAISED 1 year after program

1

2

3

4

5

Condi2onal on having raised outside capital…

FUNDRAISING

AVERAGE $$ RAISED 1 year after program (unconditional)

AVERAGE $$ RAISED 1 year after program (conditional)

Of course, this is conditional on having raised outside capital…

$1m $1.7m

Across the entire portfolio, with zeros for startups that did not raise.

For top 5 programs

FUNDRAISING

AVERAGE $$ RAISED to date (unconditional)

1

2

3

4

5

AVERAGE $$ RAISED to date (conditional)

1

2

3

4

5



FUNDRAISING

AVERAGE $$ RAISED to date (unconditional)

AVERAGE $$ RAISED to date (conditional)

$1.8m $2.8m



For top 5 programs

“….things like jobs created, BUSINESSES STILL IN OPERATION, talent retained in the region and new non-Brandery affiliated startups in town all belong on our scoreboard.”

MIKE BOTT, THE BRANDERY

But if you are going to fail, maybe it is better to fail fast… …and an accelerator may help you identify failure faster.

SURVIVAL

% STILL OPERATING (or ACQ) 1 year after program

1 100%

4 97%

5 96%

% STILL OPERATING (or ACQ)2 year after program

1 100%

3 95%

4 93%

5 88%

SURVIVAL

Incubators

time

startup trajectory

Accelerators

accelerate to escape velocity…. or fail/pivot fast

“long term…. we help startup communities

mature by organizing existing generations of

entrepreneurial leaders in those communities

to nurture the generation that follow. We are

building a MASSIVE INTERCONNECTED SELF-SUSTAINING NETWORK that is

changing the very nature of how startups are

built and supported in the future.”

DAVID COHEN, TECHSTARS

Network Size (# of graduates)

1

2

3

4

5

WHOM YOU KNOW MATTERS…

WHAT DO INVESTORS THINK?

Best Programs

1

2

3

4

5

INVESTOR OPINIONS

“It is also important to understand the

SATISFACTION AND EXPERIENCE OF THE COMPANIES that went through an

accelerator so that entrepreneurs

considering accelerators really understand

the best fit for them.”

JIM JEN, ALPHALAB

WHAT DO THE ENTREPRENEURS THINK?

11

Response rates were phenomenal.

PROGRAMS COVERED IN THIS STUDY AGREED TO PUSH OUR SURVEY OUT TO THEIR ENTREPRENEURS

of the 44

Mentorship

Management + Financial Issues Industry Specific Knowledge General

1

2

3

4

5

THE ENTREPRENEURS SAY…

SO IS IT WORTH IT? Let’s see what the entrepreneurs have to say.

90% SAY THAT THEY WOULD REPEAT THE EXPERIENCE

95% SAY IT WAS

WORTH THE EQUITY THEY GAVE UP

WOULD YOU REPEAT?

1 100%

2 96%

3 95%

4 93%

5 92%

WAS IT WORTH THE EQUITY?

1 100%

2 91%

3 88%

4 80%

WOULD YOU RECOMMEND TO OTHERS?

Net Promoter Score = %Promoters - %Detractors

How likely is it you would recommend the program to a friend/another entrepreneur?

10 9 8 7 6 5 4 3 2 1 0

Promoters Passives Detractors

* not all programs pushed the survey to their grads

WOULD YOU RECOMMEND TO OTHERS?

1 93%

2 91%

3 88%

4 80%

5 77%

OF COURSE, THERE ARE MANY THINGS WE CAN’T EASILY MEASURE…

“We also strive to help build the capabilities

of the entrepreneurs who go through the

program to help them as they build not

only their current companies but also their

next ones…one of our goals is to help grow

the startup community.”

JIM JEN, ALPHALAB

11

12

15

AND THE WINNERS ARE….

1

2

3

4

5

6

7

9

10

GOLD SILVER

BRONZE

SOME PARTING THOUGHTS

Program evaluation is a non-trivial task

Data, data, and even more data, is the only way we will be able to determine the contribution of accelerators

Programs should track a wider set of outcome variables

There is not one single ultimate way to measure success

“…an accelerator should be judged on how well it delivers on its promises to founders.

PATRICK RILEY, GAN

“If an accelerator says it is going to be good at mentoring, then excel at mentoring. If it says it is going to be good at bring investment dollars to companies, then excel at finding investors. Accelerators need to be upfront with founders about what they can and will deliver and be judged on those promises.”

PATRICK RILEY, GAN

CONTACT

Yael Hochberg [email protected]

Slides from today can be found at http://yael-hochberg.com/rankings.htm

Susan Cohen [email protected]

#seedrank

SXSW.COM/RATE

seed accelerator rankings project -sxsw

Documents