What makes a startup accelerator work? And why regional accelerators need to change.

Original post via i Business Angel

Business Angels and entrepreneurs are increasingly meeting in the context of a startup accelerator programme, so it matters greatly – to all of us – if the accelerator works or not.

(In fact, I have a vested interest here as I run Idea Alive – startup accelerator in Manchester, Liverpool and the NW of England.)

The doubt of whether accelerators work or not is beyond dispute in the US – where Y Combinators leads the way. However, doubts have been raised in the UK (and equally Europe) about whether this startup accelerator format can be transferred out of the USA.

The answer to which, I believe, is yes – but not in the same format!

Firstly, Y Combinators is a silicon valley based accelerator and as such is coloured by the nature of its local investor community.

After all, accelerators do exist because of – and for – their investor community whilst also being of great value to the local entrepreneurs.

The investor community in San Francisco might be contrasted with the business angel or early VC community in (say) Manchester, England. In Manchester, the business angel and early stage VC community wants to see revenue before investment.

Compare this to West Coast USA where hot ideas are backed with large sums of money before revenue. In the north England, it just isn’t like this.

Hence, entrepreneurs – based in Manchester – should move to Silicon Valley or Boston (or perhaps now London) if they want their project backed – pre-revenue.

The consequence of this difference is significant. Firstly, the scope of ambition in a pre-revenue startup in Silicon Valley – can be global or enormous – especially when the point of the business paying its way gets put back – such as Twitter – because additional funds can be raised on high levels of user growth.

Equally, the need to prove revenue early on typically means that the revenue driven business – found in UK regions and across Europe – will focus on a niche and then specialise.