Accelerators and Incubators: Have They Jumped the Shark?
By Michael Burke
It seems lately that startup incubators and accelerators have become like belly buttons — everybody has one. The number of healthcare-specific platforms has increased dramatically over the past few years. A skeptic might ask if we are in an accelerator / incubator bubble. A more important question might be, “Why should I care?”
If you’re an aspiring startup founder, you may care. The well-known accelerator/incubator platforms like Techstars and Y Combinator can serve the same purpose for a startup founder as a Harvard MBA does for a young executive who wishes to climb the corporate ladder. They open doors and provide a measure of validation.
The jury’s still out on whether the newbie platforms will offer similar cachet. One of my fellow “villagers” at the Atlanta Tech Village, Kyle Porter (Founder/CEO of SalesLoft) mentioned that his experience at Techstars Boulder with Brad Feld immediately prequalified him and his company in the eyes of investors, partners and potential employees. He states:
“Accelerators taught us how to navigate the investor landscape, put together a presentation, and connect with relevant mentors. And the networking benefits are insane.”
If you are an investor, you definitely care. A friend of mine, Greg Gottesman, is uniquely qualified to comment. Greg is an informal advisor to Clockwise.MD (my startup), and he has a vested interest in the topic. In addition to founding Rover.com and serving as Managing Director of Madrona Venture Group, he also leads Madrona’s recent leap into the incubator world: Madrona Venture Labs. Here’s what he has to say:
“To the extent that accelerators and incubators enable more ideas to be tested quickly, I think they are a good thing. But most of these early concepts won’t and shouldn’t get funded with significant dollars. The best teams and ideas — the ones with customer traction and viable business models — will stand out relatively quickly. I wouldn’t look at the percentage of successes these accelerators and incubators create over time, but rather whether they can produce a small number of meaningful winners.”
Accelerators and incubators can clearly help investors sort the wheat from the chaff early in the life of a startup. David Cummings is a serial entrepreneur, partner in Atlanta Ventures (which has its own accelerator), and creator of the Atlanta Tech Village( a “community of innovation powered by a 103,000-square-foot building”). The Tech Village is a big laboratory of over 100 startups ranging from companies consisting of a single person to upwards of 50. In addition to the ping pong tables, gaming consoles, and free Cokes, there’s also a ton of exciting stuff happening — lots of big successes and big failures, all of which are observable to the community there. It’s not strictly an accelerator, an incubator, or even a co-working space. It sort of combines the best of all those platforms. David states the advantages simply:
“[These platforms] help bring structure to a messy process and increase the likelihood of success.”
That’s fine for an aspiring founder or an investor, but how does that help the purchasers of the innovation these platforms are supposed to generate? What’s in it for health IT customers?
My company has had a number of big customers choose us over larger competitors. These customers know that a startup (i.e., a company whose size makes them more flexible and responsive) can give them a greater measure of control over the process of solving a problem with technology. They assume (correctly) that they’ll have more influence over the final deliverable than they might if they worked with a bigger company. A startup from an accelerator, incubator, or “community of innovation” can – as David Cummings pointed out – increase the likelihood of success and mitigate the risks for the customer.
Donna Hyland is the CEO of Children’s Healthcare of Atlanta (CHOA). CHOA is one of the largest and most recognized health systems in the US dedicated to the care of children. She and her staff have been regular visitors to the Atlanta Tech Village and work with several companies from the village, including Clockwise.MD. Here’s what she has to say:
“Atlanta is very fortunate to have a burgeoning community of technology innovators and entrepreneurs. Children’s Healthcare of Atlanta is continuously looking for ways to better care for and serve our patients and families. We are working with companies from Atlanta Tech Village on great tools to improve care and the patient experience. We are grateful to have so much technology talent in our community.”
Back to the original questions. Are there too many incubators and accelerators? Do they add value?
I don’t know if there are too many of these platforms, but I suspect that many if not most add value. If we revisit the business school analogy, we see that not everyone can get into Harvard, but most will probably still get a great education at a lesser B-school. I assume the same is true for these innovation platforms. I further assume that accelerators and incubators themselves are subject to the same Darwinian forces that send the majority of startups out of business, and that we’ll see a changing of the guard, if not a thinning of the herd, over the next several years.
Michael Burke is an Atlanta-based healthcare technology entrepreneur. He previously founded Dialog Medical and formed Lightshed Health (which offers Clockwise.MD) in September 2012.