Note: “Accelerating Hawaii” is a continuing series on the impact, importance, and structure of Hawaii’s startup accelerators and incubators. While some may be backed with private investment, at least two will be builtusing public funds. With startup accelerators being a relatively new concept, and totally new to Hawaii, I’ve started talking with local stakeholders and successful accelerators throughout the country to share ideas, set expectations, and elevate awareness for Hawaii’s entire startup ecosystem.
If you missed last week’s Wetware Wednesday, you missed a very detailed presentation by Shan Steinmark, Ph.D, Hawaii Angel, Tech Coast Angel, founder of STR Inc and Team 1:10:100, and researcher of all things accelerator.
Steinmark’s presentation on accelerators (embedded below) covered the gamut of incubators, angel funding, and accelerators, and dove deep into the weeds of how programs differ and how various aspects of the programs can be compared. From fundraising to the necessary components of a successful entrepreneurial team (yay, marketing!), Steinmark’s research is a good primer for those more interested in accelerators as well as those planning to enter accelerators.
One major point, on slide 17, looks at what we, the community, should expect from accelerators and from entrepreneurs in general. As covered in this overview of TechStars’ results, we can’t expect ten teams to enter an accelerator or incubator and then ten startups with billion-dollar-exits emerge a few months or years later. Steinmark posits that, from one million crazy ideas we can expect 1,000 incubator- or accelerator-ready startups that turn into 10 sustainable businesses. That’s a 1% accelerator success rate, and that’s what we should start to think of as a realistic metric.
Yes, we all want it to be much higher and it’s the responsibility of the accelerator managers to increase that success rate, but the whole purpose of this accelerator movement is to give startups a better chance of success, not an assured chance of success.
The truth of the matter is that MOST new businesses eventually fail. Statistics from the Small Business Administration show that 50% of businesses fail within the first five years (and 63% of “small businesses” have no employees…), and that’s across all industries, across the entire country. A study by Harvard Business School found that 30-40% of startups result in a total loss of investor money, and 70-80% fail to reach their projected return on investment.
Bottom line: Starting a business is a gamble. Entering an accelerator or incubator increases the entrepreneurs’ odds, and that’s great for Hawaii!