Narrator (00:00:09) - Hello and welcome back to Bringing Your Ideas to Life, the podcast from the innovation consultancy Accenture. This time around, we'll be talking about how we can make accelerators as effective as possible for startups and entrepreneurs. What are the main benefits and limitations? Are their variances internationally and where do they fit in to the development ecosystem? Taking part in this debate, which was recorded at the end of last year, we have Accenture's current head of entrepreneurship, Fabio Bianchi, and Accenture's former director of development, Tim Hart, who is now a director at Warwick Innovations, part of the University of Warwick. We hope you enjoy everything that's been discussed and perhaps you've got some questions or some points you'd like to reflect back to us. So please do get in touch and we'll be coming back with some details of how you can do that at the end of the episode. But for now, listen in and enjoy. Fabio. I've I've been thinking about accelerators, right? I mean, there's a lot of them. In fact, there's over 1300 across the world and they pop up everywhere.

Tim Hart (00:01:10) - And we've seen this and they continue to pop up even in our own city. They appear where they didn't before. And and I thought we could take the opportunity to think about what's their role in the grand scheme of supporting entrepreneurs and startups. Are they here to stay? What's their function? Are they going to evolve? How useful are they? Is it time to review and consider more refined or alternative interventions for startups and entrepreneurs? And I'll I'll start with one fact that an observation that's been made and that according to a recent Wall Street Journal article, 45% of startup accelerators have yet to produce a single entrepreneur who successfully raise venture funding. After the process. I guess the question to start with is, is, is are they the most effective intervention that we can develop? I think so. I think I think.

Fabio Bianchi (00:02:18) - We've become too focused on, uh, accelerators becoming some sort of beauty competition for, for aspiring entrepreneurs who can raise the most venture capital, who can, you know, shout the loudest in their marketing platforms because they're part of Y Combinator or some sort of high quality accelerator.

Fabio Bianchi (00:02:40) - What I think we've lost is helping individual entrepreneurs one on one with the fundamentals, with market validation, with product market fit, with, with, with communicate, communicating what problem they're actually solving. And it's going back to those basics where I think accelerators should be moving, moving away from the sort of glitzy competition like thing and becoming more about really helping on those fundamentals because you and I have seen this so many times where there are so many early stage entrepreneurs who are taken in by this whole idea of of of raising capital even before they actually done anything. And that's the main focus. And they're so technology driven that they lose track of what the market actually wants. And so if accelerators can actually go back to to helping develop the fundamentals of especially technology based and early stage businesses, which again is actually showing that you're solving a real life problem and showing that there are people willing to pay for your solution. Yeah, then I think they may go towards a again being useful for that ecosystem building aspect.

Tim Hart (00:03:49) - But we've we've, we've uncovered quite an interesting issue here, which is that there is perhaps more value in accelerators in supporting ecosystem development and perhaps keeping them local.

Tim Hart (00:04:01) - Right? I mean we've all lived through the world where we've had to work more remotely. We've seen the emergence of international accelerator programs. We have pursued those interests too. But but is there a more productive, effective structure of accelerators where we keep them purely local? We've spoke before about the value of training versus the value of of of that concept of places where you have local people who support the development of multiple entrepreneurial experiences. And, and, and maybe, maybe there is more value in in developing more locally based accelerators because they're far easier aren't they, for entrepreneurs to interact with, for mentors to support where they're physically close to each other.

Fabio Bianchi (00:05:06) - Yes, I think so. I think that works. If you have a good enough infrastructure within your ecosystem. You need to have the mentoring capacity. You need to have access to that market validation. So you need to be in a place where you can actually go out and do that. You need to have access to capital because in the end capital, although it may not be, I'm not advocating for it to be the main focus of accelerators.

Fabio Bianchi (00:05:30) - It's an important element of it still. So so yes, you're right. But the risk of that is that it becomes a bit elitist in terms of ecosystems that works in in a developed ecosystem. It works here in Oxford, it works in San Francisco, it works in Mumbai, it works in places where there is concentration of resources. Yeah, and maybe accelerators do have a role in attracting ideas that that that come out of smaller ecosystem or less developed ecosystems. And maybe that's the issue maybe is that today everyone is trying to set up an accelerator program at any university, any local government, because there is public funding that has with it, because there is because it's quite easy to do. Yeah. And I think the value of that is limited. If you don't have that strong, solid, resourceful ecosystem behind it. Yeah.

Tim Hart (00:06:23) - Yeah. I mean, using accelerators to try and deliver impact both to the entrepreneurs and to to the development of the ecosystem is it takes me back to what we always tend to go back to, which is this this enormous complicated jigsaw.

Tim Hart (00:06:39) - And it's just one piece of the jigsaw. And we're constantly trying to look at how we can bring other people's jigsaws to an ecosystem to try and support its development without having to go down decades, if not multiple decades of of of investment and support to develop an ecosystem from scratch. We're trying to we're trying to accelerate ecosystems with accelerators anyway. Maybe you maybe you have an interesting observation about I'll tell.

Fabio Bianchi (00:07:14) - You a factor I'll tell you two facts, actually. One is that the I don't know if you knew, but in the UK, the number of accelerator programs has increased since 2014, year on year by 78%. Yeah. Does that do you think there is enough demand and that there is enough impact shown from these accelerators to justify that? Or do you think there is some sort of accelerator bubble existing in the UK and possibly in the rest of the world? I don't know the statistics for the rest of the world.

Tim Hart (00:07:48) - I'd like to think there's an accelerator bubble. I. I get concerned when I think through our own accelerators as if I'm within an ecosystem.

Tim Hart (00:08:05) - And if I if I look at it from an investor's perspective and I'm interested in finding opportunities to invest in. Are they really going to be developed in a time frame? I'm prepared to look at within an accelerator program? Or should I be looking and can I expect them to come out of a cohort? Is the timing kind of work for me?

Fabio Bianchi (00:08:31) - Well, I'll give you another statistic on that. Did you know that companies attending accelerators on average raised 44% more money That's done on startups who do not attend accelerator programs.

Tim Hart (00:08:45) - You see that that relates back to the the inherent value of preparing opportunities for engagement with the investment community or engagement with the market. There's there's no doubt since before accelerators existed, there has been value in that preparation and support.

Fabio Bianchi (00:09:08) - And also on average, startups that go through accelerator programs. Are there. Valuations are 75% higher than startups that don't go through accelerator.

Tim Hart (00:09:17) - Now, now, now, now. Is that a true reflection of the impact of accelerators on the developing the value proposition for the spin outs, or is that just part of the hype of being an accelerator program where you're pulling together investors who compete for opportunities? That's a good question.

Tim Hart (00:09:42) - And does that does that cause some does that have some impact on valuation which can't be justified?

Fabio Bianchi (00:09:49) - I think so. I agree. I definitely think that that that it it kind of hyper inflates valuations. And we've seen that and we've seen that slowing down because of the recent general sort of recession and financial crisis. And I think actually for the early stage investment scene, it's probably a good thing that it's slowing down.

Tim Hart (00:10:12) - You raise a really important point, which is very topical because this could be the direction of travel, which is some economic slowdown. Right. And what's crucial and what many governments, including our own, believe in is that the way out of economic slowdown is to invest and support the development of high potential growth businesses like technology businesses. Do accelerators have a real role in trying to keep together the activity within this sector? Right? Because we know accelerators de-risk opportunities. We know that they can be made more palatable, more investor friendly. Are they an important part of helping keeping, bringing investors and opportunities together so that they can be supported through times of economic slowdown?

Fabio Bianchi (00:11:20) - Possibly? I'm not sure.

Fabio Bianchi (00:11:23) - And actually, this would be something really interesting to discuss with some of our partners and some of the people we work with and some of the people who are working on this. I mean, potentially we could open this conversation to to to some of our corporate partners as well as some of the investors we work with and maybe even government and see what they think about this, because I think it's an open question. I think I think the jury's out on whether this is the right way of of dealing with sort of economic turmoil for early stage businesses. There's definitely I think there is value in, as you said, sort of. So sort of grouping together a business as under some sort of umbrella. But again, what we said earlier is also that maybe we kind of overshot the need a little bit and now we're in some sort of sort of stabilizing phase of of of the sector. So we'll see. But it will be interesting to to hear from some other people who work in this area and see what they think.

Tim Hart (00:12:26) - Yeah, I mean, one of the things for sure, right, is that we are in a state of change. Change within country, Change between countries change. Change is good. Change is good for entrepreneurs. We know that it's good for the environment. But maybe that is a great role for accelerators in that they help us nurture and encourage change, which can which can be then developed into investable opportunities for for our investment community. So maybe the more we think about this, maybe maybe accelerators have a much wider role to play. They help support local development and they help manage and maintain growth in times of change.

Fabio Bianchi (00:13:23) - I think so. And I think the offering of accelerators can be shaped to to to to do that, to to foster what you just said. Right. I mean, if you look at this report that released by the Center for Entrepreneurs a couple a couple of months ago, actually only a very small percentage of accelerators actually directly offer funding or equity investment. Yeah, I think it's around 15, 20% of UK based accelerator program is actually directly offer that, whereas something like 9,095% of them offer things like peer networking opportunities.

Fabio Bianchi (00:14:04) - I think that's also a bit of a of a mismatch and something which we will hopefully see a readjustment towards because. Running accelerator programs as effectively de-risking programs, investment derisking programs, and potentially venture building programs for investors. Given the current situation and the current uncertainty we face could be a really strong tool to build far more solid value propositions and far more solid investment opportunities. Yeah, so so maybe there will be a readjustment. And I know we've been talking to some investors around about this and there is initial signs of some appetite, but not yet sort of full conviction that venture capitalists should be venture building rather than trying to to sort of source opportunities from various accelerators and actually running your own accelerator program as a way of doing your due diligence and building ventures in the image of something you want to invest in is potentially the future direction of the sector.

Tim Hart (00:15:11) - Yeah. Yeah. I mean, that raises a very important point because when we look at an investor and we look at their investment strategy, investors will be attracted to the most promising opportunities and they may not always fit well with their investment strategy.

Tim Hart (00:15:28) - Science parks have to fill space and they may not always fill the space with the right companies that fit their strengths, their strategy, the regional focus. Can you use accelerators to help investors develop more competitive, productive portfolios? Can you use accelerators to help science parks develop more critical mass around a strategic theme or strength within the region? And so, you know, the more we talk about this, the more we think that accelerators have roles way beyond simply supporting entrepreneurs to secure investment.

Fabio Bianchi (00:16:24) - And I think that's that's the takeaway from from from this chat is that more and more accelerators are part of that ecosystem building and more and more they need to be directly organised and funded by those who then provide the capital for the development of those of those opportunities.

Tim Hart (00:16:45) - Yeah, it's a public private sector effort. 

Fabio Bianchi (00:16:48) - Correct. 

Tim Hart (00:16:49) - Okay. 

Fabio Bianchi (00:16:51) - Thank you, Tim. 

Tim Hart (00:16:53) Thank you. 

Narrator (00:16:55) TThank you very much for listening to this episode of Bringing Your Ideas to Life. If you have any questions or queries or ideas that you'd like to discuss with us on the podcast, then please do get in touch at Ideas Pods Intercom.

Narrator (00:17:04) - That's Ideas Pod Adults Intercom. We'll be back soon with fresh episodes for you to enjoy. Thank you very much. Bye for now.