In 2005 a new way of supporting startups was born with the launch of Y Combinator in Cambridge, Massachusetts. The first accelerator programme of its kind, it invested in a small batch of promising startups – including Reddit and mobile location startup Loopt, which sold for $43.4 million in 2012. Using a lean startup approach, it worked intensively with them for three months to prepare them for pitching to an invite–only audience of venture capitalists.
Less than ten years later, and this model has been replicated, adapted and developed by accelerator programmes the world over. The largest – such as Silicon Valley’s 500 Startups, and US and London–based Techstars – are able to pick from thousands of entrepreneurs and founding teams, all vying to gain the advantages their programmes can provide. Many more are also on the look–out for the next big thing, and a new wave of programmes – known as impact accelerators – are using the model in order to find startups with the promise of social as well as financial return.
This explosion of startup accelerator programmes is not altogether surprising. Advances in digital technology have led to huge decreases in the cost of launching a business, and the corresponding increase in startups means that developing effective ways of incubating early– stage businesses is more relevant than ever. At the same time, the decrease in startup costs has created the opportunity to invest much smaller amounts of money than previously.