Numerous company accelerators (Microsoft, Telekom, Axel

Springer etc.) have developed over the past years. Are they
truly helping entrepreneurships overall or are they just a
marketing show for the companies initiating?

- Term paper at the HSBA Hamburg School of Business Administration during the
study course Master of Science in Global Management & Governance

Student:

Tim Decker

Registration number:

0616

Students date of birth

July 28, 1988

Module:

Specialization: Entrepreneurship

Lecturer:

Christoph Neuhaus

Date of submission:

March 14, 2016

Abstract
This paper aims to answer the question whether corporate accelerators actually help
the startups participating in them. Firstly accelerators are defined and distinguished
from other forms of early startup support, namely angel investors and incubators. In
a second step the advantages and disadvantages of an accelerator program for the
startups and the parent company are listed and assessed. To utilize the advantages
and mitigate the disadvantages certain conditions have to be present. For both sides
it is examined which conditions are conductive and how to create those. Later on the
influence of accelerator programs on the startup ecosystem are evaluated.

Table of contents
1.

Introduction ..................................................................................................... 1

2.

Impact of an accelerator ................................................................................. 2

3.

2.1.

For the startup ............................................................................................ 2

2.2.

For the corporation ..................................................................................... 7

Success factors ............................................................................................... 9

3.1.

For the startup ............................................................................................ 9

3.2.

For the parent company ........................................................................... 10

4.

Influence on the startup ecosystem ............................................................. 11

5.

Conclusion..................................................................................................... 13

6.

Limits of the Paper ........................................................................................ 15

List of sources .......................................................................................................... II

1. Introduction
Startup companies often face difficulties in funding their business. This is especially
true for early stage startups, which are still exploring their business model or want to
make the first steps on the growth path.1 Reasons for that are often underdeveloped
managerial skills of the founders and a lack of legitimacy with investors, customers
and other stakeholders.2
There are multiple institutions that try to address these issues, most notably
incubators, angel investors and accelerators. While all of them have some
similarities, there are important differences that set them apart.
Incubators support startups by providing office space, services, know-how and a
platform for networking. For this they charge rent and fees. A participant or tenant
stays with the program for an average of three years.3 They exist since the 1960th4
and a majority is publicly owned as well as non-profit oriented.5
Angel investors mainly provide investment capital and some support by mentoring
and access to the investors network. In exchange the angel investor receives an
equity stake in the startup. The help the angel investor provides is often
unstructured and on demand. There is no fixed timeframe for this type of
cooperation. The angel investor supports the startup as long as he holds the
shares.6
Accelerators offer groups of startups also called cohorts or batches an intense
learning experience, business infrastructure, network access and small amounts of
investment capital. The accelerator takes a small equity stake in return. Before the
program starts, there is an application process and for high profile accelerators less
than 1% of the applicants are allowed to participate. The program has a short and
fixed time limit of three to six month. The first accelerator (Y Combinator) was
founded in 2005. The corporate accelerator is a special form of accelerator. It is

1
2
3
4
5
6

Hoffmann and Radojevich-Kelley 2012, 54-56

Bingham, Cohen and Hallen 2014, 1
Aernoudt 2004, 127-130
Hoffmann and Radojevich-Kelley 2012, 57
INBIA n.d.
Cohen 2013a, 19-24

characterized by being owned or initiated by another corporation instead of being an

independent legal entity.7

2. Impact of an accelerator
2.1.

For the startup

One major part of this papers topic is the question whether accelerators help
startups or not. To investigate this further, the benefits and disadvantages of
participating in an accelerator will be listed and assessed.
Accelerators offer startups to meet a variety of mentors that give feedback on the
business idea, its execution, possible strategies and reflect on personal
experiences. These mentors can be entrepreneurs themselves, industry experts,
investors, management level employees or coaches.8 The access to mentors is not
astonishing in itself, but accelerators live up to their name by connecting startups to
up to 75 mentors in their first month.9 This leads to a phenomenon named mentor
overload, which describes rapid interactions with external advisors that prevent
immediate implementation of the suggestions. This forces the founders to first listen
to multiple views on a topic before drawing conclusions and making decisions.10
Others argue that most founders cant cope with the information overload and
actually learn less because they are overwhelmed.11 The mentoring aspect is one of
the most important benefits of accelerators. Angel investors usually give advice as
well and maybe even ask a few people from their personal network, but an
accelerator is able to gather a way larger base of mentors from which to choose the
most helpful ones. Some incubators also work with lots of mentors, but most
startups are not able to pay the fees associated with meeting many of them. In an
accelerator program startups are encouraged to meet with as many mentors as
possible and dont have to pay anything except the initial equity stake.12 In corporate
accelerators many of the mentors will be employees of the parent company. This
can be helpful if the startup and the corporate partner are a good match but may
otherwise narrow the fields of discussion.

7
8
9
10
11
12

Bound and Miller 2011, 8-11, Hochberg 2015, 24-25

Bingham, Cohen and Hallen 2014, 1-6; Hoffmann and Radojevich-Kelley 2012, 57-60
Cohen 2013a, 23
Cohen 2013b, 50-62
Bingham, Cohen and Hallen 2014, 3-4; Cohen 2013b, 17-20
Cohen 2013a, 20-24

In addition to one-on-one sessions with mentors, accelerators also supply formal

education for the participants. All participants of one batch can take part in
seminars that are given by accelerator employees or external guest speakers.
Topics range from how to pitch an idea, how to negotiate, what to look out for in
term sheets to human resource management, marketing or organizational
structures. The intense program that lasts only for a few months is often considered
a mini MBA. This part of the program is standardized to a certain degree and not
every idea and strategy may be helpful for each of the participating startups. It is
important to acknowledge this as a participating startup, otherwise it might follow
advice that is not tailored to its unique situation.13
Accelerators also provide the startups with the needed infrastructure to start
working. This includes office space, hard- and software, internet access, meeting
rooms and advisors for legal, regulatory and tax topics. This should replace the
stereotypical startup garage with a more efficient work environment.14 By joining
corporate accelerators, startups may even be able to utilize the parent companys
resources. This can be production machinery, scientific equipment, high speed
computers but also services the company usually sells like media budgets, design or
customer contacts.15
Accelerators furthermore ease the funding of further growth of the startups by
connecting them with investors. This is another very important factor for the
startups success. Even though the accelerator provides some investment capital
itself, it is crucial for the growth of a startup to secure additional financing rounds.
The accelerator acts as a hub were startups and investors meet. The startups get
the chance to meet investors that might otherwise never have responded when
approached directly and the investors are willing to come, because they can easily
inform themselves about multiple promising startups in one place. It is even more
efficient for investors to look for potential portfolio companies at accelerators, since
all participants have undergone a strict selection process. Venture capitalists and
business angels visit accelerators regularly to fill their deal pipeline. Many
accelerators end each cycle with a demo day, where the startups are able to present
their products and developments to a gathered audience of investors.16 In corporate

13
14
15
16

Bingham, Cohen and Hallen 2014, 2-3; Cohen, Hochberg 2014, 4-14
Hoffmann and Radojevich-Kelley 2012, 58-60
Villano 2013, 36-37
Bound and Miller 2011, 11-27

accelerators it is not as easy for external investors to spontaneously visit, since the
startups are often located in company buildings with restricted access. On the other
hand the parent company itself may become the next investor for a startup. If there
is a strong connection to the parent companys products or if there are strong
synergies with the startup, the parent company will most likely be interest in
investing or even completely buying it.17 This may have a downside for the startup, if
the parent company is not playing by the rules. If the company is interested in
buying the startup it may not invite the most promising investors to events and
meetings to reduce the competition in buying the startup. This could lead to a
reduced sale price for the startups shares.
An accelerator program is a great opportunity to build a professional network. Big
parts of that are the already mentioned in the mentor and investor aspects. The
mentors might become important business partners or can create connections to
their own network. In addition to these, startups will also be able to bond with their
peers from the accelerator batch. The intense time together creates a sense of
togetherness and willingness to help each other. Since everyone is in a similar
situation and facing similar problems this can be very helpful. At some point the
other participants might also be seen as competitors (e.g. when pitching to the same
investor) but this can be another source of motivation to keep up with them.18 The
contact is not limited to startups from the current batch, but alumni are encouraged
to come back to the accelerator to speak of their learnings, successes and failures.
Especially the last part is the kind of information that would not be accessible
anywhere else.19 Another benefit of having a huge network is that it gets more
dangerous for anyone to take advantage of the young startup company. Suppliers
and investors might think twice before offering a crooked deal to someone who will
tell all his contacts about it.20 It is also possible that startups get to know their first
customers and employees during the accelerator program. In a corporate
accelerator the startups will definitely be connected to the parent company. This can
be beneficial if it becomes a supplier or customer. It could also have the converse
effect, when the parent company (or the startup) decides against a partnership,
even though it might look like a profitable option from the outside. Then the startup
might be stigmatized and other market participants get reluctant to work with it. The
17
18
19
20

Villano 2013, 34-39, Cohen and Hochberg 2014, 7-9

Cohen 2013a, 22; Hoffmann and Radojevich-Kelley 2012, 57-58
Bingham, Cohen and Hallen 2014, 2-3
Bound and Miller 2011, 28

reasoning could be that, if the parent company, which has better insight and also an
equity stake in the startup, decides against it, there has to be something wrong. 21 In
addition to that, competitors of the parent company might be hesitant to buy
products and services that were developed under the influence of a competitor.22
Most accelerators provide the startups with some investment capital for the early
phase. This ranges from 10,000 to 50,000 $ depending on the accelerator. Even
though this helps to cover the living expenses of the founders and maybe some
small investments in the beginning, most of the time additional financing rounds are
necessary to grow the startup. In exchange for the participation (not only the
investment capital but mainly all the other services) the accelerator demands an
equity stake in the startup. This ranges from 2 to 10% and sometimes depends on
which services and how much capital the startup wants. Some accelerators offer
different packages of services for different equity stakes. In most cases the equity
paid is quite small compared to the value of all the services received. On the other
hand, by giving away equity this early the startups will complicate future financing
rounds, since there is one more party on the cap table.23
Having participated in an accelerator program is often seen as a seal of quality by
business partners. It is expected, that the selection process in the beginning will
weed out weak startups and that the stronger ones will be further improved by their
participation. The magnitude of this effect largely depends on the reputation of the
accelerator. The better the accelerators reputation, the stronger its radiance on the
startups. This perceived seal of quality can make it easier to get in contact and
contract with investors, customers, employees and journalists.24
Accelerator programs have a short and fixed duration. Most programs last between
three and six month. This forces the founders to commit all of their time to their
startup. If they want to make use of all the offered services and also continue to
develop the actual business this means the only two things they will be doing during
the program are working and maybe sleeping. While this is an unsustainable level of
work in the long term, it can be helpful for the short duration of the program. It forces
the founders to be disciplined to meet deadlines and to coordinate themselves in a
team to share the workload. The fixed duration also makes it easier for external
21
22
23
24

Villano 2013, 39
Ibid, 39
Bound and Miller 2011, 8-11; Villano 2013, 39
Bound and Miller 2011, 27-28; Cohen, Hochberg 2014, 5-6

supporters like mentors to commit to the program, since they only commit for a
limited timeframe.25 A disadvantage of the high pace of the program could be that
startups focus on suboptimal but quick solutions (better-done-than-perfect
mentality). This can impede the future development of the company, especially if
technical path dependencies are created, that hinder future adjustments.26
Most of the benefits listed above could be bought or otherwise acquired even if one
would not be participating in an accelerator. But even neglecting the costs, it would
take a great amount of time and dedication to gather all the parts of an accelerator
program. With the accelerator, everything is easily accessible for the startups and
again the accelerator lives up to its name by speeding up gathering the resources.27
To get into an accelerator each startup has to go through an application process. It
usually starts with an online application. Most accelerators expect a written letter
about the founders motivation to participate and a pitch deck to present the
company. Others ask for a video of the founders, where they pitch their key facts.
After reviewing the online applications, the most promising candidates are invited for
personal interviews. This process is time consuming and in the beginning the startup
cant be sure whether it will be accepted at the accelerator. For top accelerator
programs, less than one percent of the applicants are accepted. Many startups
apply to multiple accelerators to get a better chance to be accepted at all. This
increases the time they spend not improving their products and winning
customers.28
In a corporate accelerator setting it is also possible, that the parent company gives
advice and guidance with the goal to steer the startup in direction that is beneficial
for the parent. Depending on the situation that could mean closer to the parent
companys products to create synergies or further away to prevent competition. It is
also quite unlikely that a corporate accelerator would support a very disruptive
innovation, which would either change the market the parent company is in or has
no connection to the parent company.
When dealing with a corporate accelerator it is also possible for a startup to get
caught up in politics, dysfunctions and bureaucracy of the parent company. Further
25
26
27
28

Cohen, Hochberg 2014, 10-12

Bingham, Cohen and Hallen 2014, 3
Villano 2013, 38
Bound and Miller 2011, 9-10

investments may have to be discussed and decided in board meetings with fixed
meeting cycles. Company resources that are needed might be scheduled for month
or their use has to be approved by people who have no interest in the accelerator or
the startup.

2.2.

For the corporation

A corporate accelerator not only generates value for the participating startups but
also for the parent company. Again, benefits and disadvantages will be listed and
assessed. Depending on the goals of the parent company, the importance and
influence of the following points will vary.
Many big corporations have trouble creating true innovation in-house. Reasons are
gridlocked processes, fixed patterns of thought and long term amortization of R&D
projects that put pressure on quarterly earnings reports. This is why some
corporations decide to set up programs like corporate accelerators to get in contact
with innovative people that work in the same industry. Instead of (or in addition to)
investing huge budgets in R&D activities, funds are used to get to know, support and
get a stake in startups. The goal is to get new ideas, cooperate with startups or
integrate them. This could pave the way for new products, new target groups or
completely new fields of business. It can also be seen as some kind of insurance
policy, because the parent company can react faster in case of a market shift. Even
if the contact to the startup stops after the program, the founders will have spoken to
many mentors that are employees of the parent company. These should be able to
get new insights from the startup regarding market developments, customer needs
and potential products

29

Another important aspect for a parent company is the influence of an accelerator on

its brand image. Simply by surrounding the company with startups will generate
media appearances that link both together. This makes the parent company seem
younger and more innovative. Sometimes new products are co-branded (powered
by, supported by), especially if the startups rely on hardware of the parent
company. Such activities do not only affect the brand that is experienced by
customers, but also the employer brand. If the parent company is trying to attract
younger and more innovative employees, this could be one way to support it.30

29
30

Villano 2013, 34-36

Ibid, 36-37;

In addition to creating new products, startups can create add-ons or offshoots to

existing products of the parent company. This makes the base product more
interesting for customers and hopefully increases its sales. Facebook for example
supports startups that program Facebook apps. Mobile phone manufacturers profit
from startups that create additional accessories.31
Depending on the industry the parent company is in, it might also want to win the
startups as new customers. Law, PR and accounting firms are known to sponsor
accelerators in order to sell their services. Production companies should also be
interested in startups that use their products or components. Even if the startups are
small in the beginning and might not have a huge impact on sales immediately, their
goal is to grow fast and drastically, so they might become important customers in
the near future.32
An accelerator is also a useful tool to get in contact with competent and clever
individuals, the founders. It can be used for talent scouting and may even be seen
as a very long assessment center. After the program, the parent company could
offer the best and most compatible founders jobs in the company. It might be difficult
to dissuade a founder from staying with the startup, but with the right offer it might
work in some instances. Even if the founders dont become employees right after
the program, they could be invited again after the startup is sold or failed. Of course
this effect works both ways and it is just as likely that an employee of the parent
company is offered a job with one of the startups that participate in the accelerator.33
As stated above, the accelerators usually demand an equity stake in the startups
for their participation. If the startups are successful and make a profitable exit, the
accelerator will also get a part of that. Some accelerators make additional
investments in startups beyond the mandatory one at the beginning of the program.
After closely observing the startup during the program the accelerator has a much
better idea of the quality of the startup and whether it is worth investing further or
not. Some accelerators secure the right to also invest in the next financing round at
the same valuation of other investors. Even if the parent company is not interested
in the direct financial returns of the investment, having an equity stake makes it

31
32
33

Bound and Miller 2011, 10-11

Ibid, 11-12
Ibid, 11-12

easier to stay in contact with and gain information from the startup after the
accelerator program ended.34

3. Success factors
3.1.

For the startup

By now there are a great number of accelerators to choose from as a startup. Even
though most of them offer programs of a similar structure, there are important
differences to consider.
First of all the accelerator should be concerned with the industry the startup is
active in. Many of the mentors and network partners will be from the industry of the
accelerator or the parent company (in the case of a corporate accelerator). By
connecting with people from the same industry the startup will be able to get better
insights regarding customers, the target market and a more accurate validation of
the business model. It will also be easier to make use of the parent companys
resources, if it operates in the same industry. 35
As stated in chapter 2.1 the startup benefits from a positive reputation of an
accelerator. The signaling effect (called seal of quality so far) of participating in an
accelerator increases with its public awareness and prestige. An accelerator with a
good reputation should also have an easier time to attract competent mentors and
network partners to its cause. Because of this, accelerators with good reputation
receive way more applications and can only work with a small fraction of the
applicants. This makes it more difficult to get into the program in the first place, but
once a startup is accepted, it has the opportunity to work with high quality peers who
were also able to endure the selection process.36
Another interesting factor for the startup is for how long the accelerator is in
business already. Not only the startups learn but also the accelerators gain
experience and should be able to optimize processes and improve their network
over time. An accelerator that has a longer history will most likely also have a larger
network of alumni. This opens up the possibility to talk to more startups from the
same field and also to learn of longer term implications of decisions. The longer the
accelerator exists the higher the chance that some alumni have already made a
34

35
36

Cohen, Hochberg 2014, 14-15; Hoffmann and Radojevich-Kelley 2012, 58-61; Chesbrough and
Weiblen 2015, 87-88
Hoffmann and Radojevich-Kelley 2012, 63-64; Villano 2013, 39-40
Bound and Miller 2011, 27-28; Cohen, Hochberg 2014, 5-6

successful exit and hopefully will be willing to talk about how they did it or failed and
might convey their learnings from that.37
Even though the parent company should have an interest in supporting the startups
in its accelerator program, this may not be true for each employee or department of
the parent. Some might disagree with the goals of the program or fear threatened by
the startups, others are so caught up in bureaucracy and day to day business that
they might not be willing to help. One way to navigate this field is for the accelerator
to have great internal communication and act as an intermediary between the
startup and the parent company. If this is not a given, the founders should have a
fried or potential advocate in the company that can and is willing to do this job.38

3.2.

For the parent company

Just as the startups have to decide for an accelerator, the accelerators have to
decide which startups they want to work with. The accelerator should also structure
the program in a way that allows it to get the most benefits out of it.
In general the accelerator should be concerned with selecting startups that will
most likely be successful. It may also be possible to get meaningful insights from
failures, but learnings from successful participants and the long term cooperation
potential outweigh these drastically. Working with successful startups also has a
positive influence on the reputation of the accelerator and spillover effects to the
parent company. Most sources agree that the founders experience and capabilities
are the most important factors in determining the success of a startup. They should
consist of a team with complementing skillsets and at least one of the founders has
to have the necessary technical skills, since they are most difficult to bring in from
the outside. The team also has to be willing to learn and adapt since most business
models undergo drastic changes from the first idea to market entry.39
The industry match is just as important for the parent company as it is for the
startup. Only if the startup is active in field that is relevant for the company the
benefits of learning, further product enhancements or acquiring new customers can
apply.

37
38
39

Bingham, Cohen and Hallen 2016, 50; Bingham, Cohen and Hallen 2014, 3
Chesbrough and Weiblen 2015, 85-86 ; Villano 2013, 39-40
Bound and Miller 2011, 9-10; Hoffmann and Radojevich-Kelley 2012, 63-64; Cohen 2013b,
25-27, 75-83

10

Often it takes years until startups grow big enough to have any significant impact on
the business of the parent company. The benefits from knowledge transfer also
wont happen overnight. This is why it is important for the parent company to show
patience until the program pays off. This situation should be demonstrated in an
initial business plan for founding the corporate accelerator to calibrate expectations
within the parent company. This may prevent the closing of the program if the initial
years do not show immediate success. The time needed to show significant benefits
can be shortened by working with especially fast growing startups. It is also
important to keep in contact with the alumni to continue learning and cooperating
after the formal program.40
From an investment perspective accelerators have to weigh portfolio optimization
against other important aspects. For example the positive effects of portfolio
diversity can only be achieved if the accelerator invests in multiple industries. This
goes against the upsides of industry match explained above. To achieve benefits
from portfolio size, accelerators would have to invest in many companies. On the
other hand they want to build a reputation of only working with the best and a track
record, which shows that almost all participants will be successful.41

4. Influence on the startup ecosystem

From the authors point of view, accelerators ease the process of founding a startup.
This effect will lead to a higher number of startups being founded if accelerator
support is available. Even if the positive effects of the accelerator on startups
success cant be proven statistically (for more information see 5. Conclusion), it is
enough that many potential founders believe that they will have an easier time since
there are accelerators, to increase the number of startups. This impact will be even
greater if the number of accelerators increases as fast as it did during the last
years.42
The greater number of startups will not only force the absolute number of startups
that fail to increase but also the relative one. The reason for that is a gradual
decrease in quality the more startups are founded. This makes it more difficult for
angel investors and venture capitalists to choose the startups that are going to be
successful. A lower success rate might lead to reservations to invest in startups and
40
41
42

Chesbrough and Weiblen 2015, 77, 87-88 ; Hoffmann and Radojevich-Kelley 2012, 62-63
Kim and Wagman 2014, 6-16
Bound and Miller 2011, 33-34; Hochberg 2015, 1-7

11

reduce the access to capital in the future.43 On the other hand there are two other
effects of accelerators to compensate for that. They make it easier for investors to
get information about a startup before investing in it. Investors can visit accelerators
and get to know multiple startups that are interested in being financed in a very short
time. Demo days also enable them to attend many startup pitches in a very limited
amount of time. This should reduce the transaction costs of investing in startups and
thus increase the willingness to invest and the capital available to startups (as
explained in 2.2 this effect is reduced for corporate accelerators).44 In addition to
that, accelerators should increase the success rate of participating startups (for
details see 5. Conclusion). The question remains whether the gradual reduction in
quality through the increase in numbers can be offset or even overcompensated by
the increase in quality through accelerator participation and the ease of information
gathering for investors. It is reasonable to expect that the information gathering
effect can be experienced very fast while the others will take multiple years to be
measurable. The reason is that the success of investments can only be measured at
the end of the investment period, while the information is acquired in the beginning.
This might lead to immediate positive effects on funding availability that might be
reduced or completely negated in the future.
An increase in the number of founded startups may create a talent shortage. This
would influence existing companies as well as other startups operating in a similar
field.45 Then again this could also be framed as additional startups create new jobs
and grow the economy. To investigate this further one would have to measure
whether unemployment is more prevalent in groups of highly educated and creative
people (which are needed for fast growing startups) or groups of lower skilled
people (which are needed for day to day operations in established companies). The
author expects the latter, which would lead to the conclusion that a talent shortage is
the expected result.
The increased number of startups will also have a positive influence on
entrepreneurship culture and startup activity in the accelerators region. Additional
services and events for startups will be offered. This extends some of the effects of

43
44
45

Bound and Miller 2011, 33-36

Fehder and Hochberg 2014, 10-11; Shane 2015
Bound and Miller 2011, 32-33

12

the accelerator to the non-accelerated startups. These will also have an easier
time networking or getting in contact with investors and the media.46

5. Conclusion
From a descriptive point of view it is easy to come to the conclusion that an
accelerator is beneficial for the participating startups as well as the accelerators and
their parent companies because of the factors explained in paragraph 2. Even when
factoring in the costs of participating for the startup (time and equity shares) the
scale still looks promising. The costs for running the accelerator which are incurred
by the parent company cant be neglected so fast, since they can be quite
significant. To come to a conclusion one would have to put a value on each of the
benefits and costs and compare those. This is extremely difficult because different
startups and different parent companies have varying interests, which would have to
be reflected in the valuation. It is also difficult because the benefits include many
intangible services like knowledge transfer, image or contacts. This leads to another
approach to measure the accelerators influence:
An empirical approach could be to compare the success of startups that
participated in an accelerator program to the success of startups that didnt. This
approach comes with its own difficulties. Accelerators are a young phenomenon
which leads to a lack of data availability and the comparison of accelerator
participants to non-participants has an inherent sampling bias (these topics will
further be discussed in 6. Limits of the paper). So far there are three studies that try
to deal with the topic, two of which are written by the same authors but they come to
inconclusive results.
The first one by Hoffmann and Radojevich-Kelley from 2012 used a qualitative
case study approach and gathered data by interviewing and further online research
of five accelerators. Unsurprising this lead to the result that accelerators indeed help
the participating startups.47 The study is not very reliable because of the very small
sample size of participants and because all the information comes from
accelerators, which have an interest in portraying themselves in a positive way.
The second one was conducted by Bingham, Cohen and Hallen in 2014 and
compared the time needed to raise venture capital by participating startups to the
46
47

Fehder and Hochberg 2014, 25-26

Hoffmann and Radojevich-Kelley 2012, 59-67

13

time needed by similar startups that didnt participate. The quantitative study
spanned 500 startups that have raised venture capital, half of which participated in
one of eight accelerators. The results show that there is no general accelerator
effect over all participants. However there is a statistically significant impact from
some of the observed accelerators. These top accelerators differed from the rest by
being in business for a longer period of time. This supports the proposition that
accelerators have a positive effect on startups, but they need some time to develop
and hone the program.48 What makes the study somewhat less reliable is its very
simple definition of success as time to venture capital funding and a sampling bias
to only include startups that have received venture capital funding.
The third study was again undertaken by Bingham, Cohen and Hallen in 2016. They
compared 45 startups that participated in one of 13 accelerators to 217 that were
almost accepted by the same accelerators (they didnt make it through the final
round of the selection process). These startups were compared in several aspects
on a quantitative basis: If the startup was still in business at the time of the study,
number of employees, amount of investment capital raised, web traffic after the first
year, time until venture capital was raised, time to reach certain web traffic
milestones and time to acquisition (if applicable). The study shows that accelerator
participants perform significantly better in the first four categories than the almost
accepted counterparts. However they again come to the conclusion that the
acceleration effect (categories five to seven) is only caused by some of the
accelerators. These are again those accelerators that are in business for a longer
period of time.49 This study is the one that is most reliable in its findings but should
still be reflected on critically. The sample size of startups participating in
accelerators as well as the number of accelerators considered is quite low. The
authors also state that they had problems acquiring complete data sets for the
almost participants control group. These factors limit the validity of the study but it
still provides valuable insights to build upon.
With the existing research, there can be no clear answer since all studies have their
flaws and all of them focus on accelerators in general and not corporate
accelerators specifically. However there are many indicators that startups indeed
benefit from participating in corporate accelerators.

48
49

Bingham, Cohen and Hallen 2014, 1-6

Bingham, Cohen and Hallen 2016, 16-36

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6. Limits of the Paper

The main limitation of the paper is the lack of empirical research on the topic. The
existing studies are flawed in one way or another and to conduct an own study
would go way beyond the scope of this paper. The topic at hand is also very difficult
to research for various reasons:
(Corporate) Accelerators are still a young phenomenon and thus there is no long
history of programs, participants and their development. Especially compared to the
usual lifetime of companies or even the time needed for startups to grow into
established businesses, the accelerator model is still in its infancy. This makes it
impossible to gather data about the long term performance of participants. The next
difficulty is that very few of the startups that shall be observed are listed companies
and thus it is even more difficult to gather data, since they are not obliged to
disclose it. Even if a large portion of startups would be willing to share their financial
data with researchers, this would induce a new bias into the study, because those
who are withholding the information would most likely do so for specific reasons
(bad performance, fear of data abuse). So far there are no generally accepted
definitions for accelerators. This complicates things further, because some
incubators call themselves accelerators and the other way round. To negate this
effect, all accelerators to be included in a study would have to be hand-picked and
checked whether they meet the requirements.50
Another obstacle is to find a suitable control group for the accelerator participants.
So far all studies inherited a sampling bias because accelerators use a selection
process to only work with the startups they see the highest potential in. This means
that accelerator participants should be more successful than other startups, not
because they program helped them, but because they were the best to begin with (if
the selection process is efficient). One option would be to compare participants to
other startups that were admitted but then refused to participate. The problem is that
the number of startups for which this is the case will be extremely low. Bingham,
Cohen and Hallen used applicants from the final rounds of the selection process in
their 2016 study and found out that they do not significantly differ from the final
participants, which would solve this issue.51

50
51

Hochberg 2015, 11-13

Bingham, Cohen and Hallen 2016, 26-27

15

List of sources
Literature:
Bingham, Christopher B., Cohen, Susan L. and Hallen, Benjamin L.. Do
accelerators accelerate? The role of indirect learning in new venture development.
Working paper (Social science research network 2016). Accessed 03 March 2016.
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Cohen, Susan L.. How to accelerate learning: Entrepreneurial ventures

participating in accelerator programs. Diss. PhD, University of North Carolina at
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[https://www.inbia.org/resources/business-incubation-faq].
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Honorary declaration
I hereby declare that I
1. wrote this term paper without the assistance of others;
2. have marked direct quotes used from the literature and the use of ideas of other
authors at the corresponding locations in the paper;
3. have not presented this paper for any other exam.
I acknowledge that a false declaration will have legal consequences
Tim Decker

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