Accelerators have become a key tool in economic development and social entrepreneurship. Pioneered by Y Combinator a decade ago as a way to turbocharge startup ventures, they have become de rigueur in nearly every town, city and region around the world looking to spur new businesses and solutions to social and environmental challenges. But just how effective are these programs? Are they benefiting social enterprises?
The answer, according to a new book, is they’re helpful in growing revenues—but only for a small portion of entrepreneurs enrolled in these programs. And to be successful, accelerators have to adapt their structures to the local entrepreneurial environment, especially in emerging markets.
“The accelerator model has proliferated so quickly around the world, we felt we needed the ability to see in a rigorous way if there is a value add,” says Matthew Guttentag, director of research and impact at the Aspen Network of Development Entrepreneurs (ANDE), which is a partner in GALI, along with Emory University. “The data clearly lets us see patterns and a starting point for digging deeper.”
Called Observing Acceleration: Uncovering the Effects of Accelerators on Impact-Oriented Entrepreneurs, the book’s authors—Peter W. Roberts, professor of management and organization at Emory University’s Goizueta Business School, and Saurabh Lall, assistant professor of social enterprise and nonprofit management at the University of Oregon—analyzed 52 accelerators and 5,614 ventures, tracking how they fared over a one-year period. That included enterprises rejected by programs, for comparison purposes. Research was conducted by and written as part of the Global Accelerator Learning Initiative (GALI).
In the aggregate, social impact accelerators drive growth. The authors found that, during the first year of participating in an accelerator program, accelerated ventures on average experienced more growth in revenues, full-time employees and investment, such as debt, equity or philanthropic support, than rejected enterprises. Specifically, those participating in the accelerator had an average revenue growth of 26% more than those in the comparison group and equity growth of nearly double the non-participating ventures.
Women-run ventures had a harder time attracting investment than male-run enterprises. All-women teams got less than one-third of the investment of all-male counterparts. All-men teams averaged more than $53,000, mixed gender $40,000 and all-women $16,000. But once they cleared the initial investment hurdle, those female-headed ventures received the same levels of equity as ventures headed by men.
Top performing entrepreneurs reaped an outsized proportion of the benefits. That is, they experienced almost all of the growth. Strikingly, about 10% of the accelerated ventures in the sample were responsible for all of the net benefits. Those 10% had an average revenue growth after one year of $266,232, while the rest of the ventures had a slightly negative average revenue increase. “A small number of ventures grew a lot and a much larger didn’t grow at all,” says Guttentag.
The lesson: “Accelerators are very good at accelerating ventures with a great business model,” says Guttentag. “As for the others, they fail faster than they otherwise would have.”
In emerging markets, accelerators drive revenue growth, but not outside equity investment. That’s undoubtedly because these areas lack a lot of early-stage venture capital. The finding also means that, in these countries, accelerator programs need to rethink the traditional curriculum, which usually works towards a final investor pitch day, according to Guttentag. “It isn’t a plug and play. The structure needs to be adapted to the local ecosystem,” he says.
Pictured, at top: Matthew Guttentag (standing, second from left), Saurabh Lall (seated, far left), Peter Roberts (seated, second from left). Photo: ANDE
Anne Field is a New York-based journalist who writes about social enterprise and impact investing. A version of this article originally appeared on her Not Only For Profit blog on Forbes.com.