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Latam Accelerator Report 2015 - Fundacity

#UsaCanadaAcceleratorReport

The region

Startup accelerators play a major role in today’s tech world and new accelerator programs are launched almost everyday. According to Natty Zola (TechStars, MD) they became, “a proven way to quickly grow a startup by learning from experts, finding great mentorship and connecting to a powerful network. They provide resources that reduce the cost of starting a company and the early capital a team needs to get their venture off the ground or to achieve key early milestones. They have become the new business school.” In many ways, accelerators have become a rite of passage for thousands of entrepreneurs across North America and around the world.

The USA & Canadian Accelerator Report 2015 from Gust and Fundacity provides an exclusive inside look at accelerator programs in both countries. This report’s objective is to understand how the accelerator industry has developed in the region, how accelerators are funded and monetized, while providing insights on the direction of the industry in the near future.

To create this report, we surveyed 232 organizations, out of which 111 qualified as accelerators and shared their data with us.

Total investment in the region

US$90,295,774

in 2968 startups

by 111 accelerators

  • 901

    398

    206

    206

    197

    155

    139

    66

    66

    66

    48

    47

    43

    42

    40

    38

    38

    33

    30

    26

    18

    17

    15

    15

    14

    14

    12

    11

    10

    10

    9

    9

    9

    8

    8

    6

    North America

    Acceleration map

    • Top states by investment

      • United States
      • CA

      • US$35,370,000

      • United States
      • NY

      • US$8,765,000

      • United States
      • TX

      • US$6,044,000

      • United States
      • HI

      • US$5,695,000

      • Canada
      • BC

      • US$4,605,990

    • See the full list

    • All states by investment

    • 1

        United States
      • CA

      • US$35,370,000

    • 2

        United States
      • NY

      • US$8,765,000

    • 3

        United States
      • TX

      • US$6,044,000

    • 4

        United States
      • HI

      • US$5,695,000

    • 5

        Canada
      • BC

      • US$4,605,990

    • 6

        United States
      • MA

      • US$3,624,000

    • 7

        United States
      • MO

      • US$2,325,000

    • 8

        United States
      • CO

      • US$2,290,000

    • 9

        United States
      • WA

      • US$2,160,000

    • 10

        United States
      • IL

      • US$1,450,000

    • 11

        United States
      • MI

      • US$1,425,000

    • 12

        United States
      • KS

      • US$1,200,000

    • 13

        United States
      • PA

      • US$1,127,500

    • 14

        Canada
      • QC

      • US$1,080,000

    • 15

        United States
      • OR

      • US$1,025,000

    • 16

        United States
      • GA

      • US$1,000,000

    • 17

        United States
      • WI

      • US$930,000

    • 18

        United States
      • UT

      • US$930,000

    • 19

        United States
      • NC

      • US$695,000

    • 20

        United States
      • OH

      • US$625,000

    • 21

        United States
      • MD

      • US$464,284

    • 22

        Canada
      • ON

      • US$400,000

    • 23

        United States
      • TN

      • US$350,000

    • 24

        United States
      • KY

      • US$325,000

    • 25

        United States
      • VT

      • US$300,000

    • 26

        United States
      • NE

      • US$260,000

    • 27

        United States
      • SC

      • US$250,000

    • 28

        United States
      • NV

      • US$220,000

    • 29

        United States
      • IA

      • US$160,000

    • 30

        United States
      • NJ

      • US$120,000

    • 31

        United States
      • VA

      • US$100,000

    • 32

        Canada
      • NB

      • US$50,000

    • 33

        United States
      • NM

      • US$50,000

    • 34

        United States
      • CT

      • US$35,000

    • 35

        United States
      • AZ

      • Undisclosed

    • 36

        United States
      • FL

      • Undisclosed

    • Top countries by investment

    • Chile

      US$11,896,929

    • Brazil

      US$6,092,300

    • Mexico

      US$2,702,592

    • Argentina

      US$2,385,700

    • Uruguay

      US$1,573,900

193

Startup Exits Reported by accelerators in 2015

TOP 10 SEED ACCELERATORS

By capital investments

    • United States

    500 Startups

    US$18,750,000

    United States | Private fund

    • United States

    Techstars US

    US$17,880,000*

    United States | Private fund

    • United States

    AngelPad

    US$7,000,000

    United States | Private fund

    • United States

    Plug and Play

    US$5,600,000

    United States | Private fund

    • United States

    Energy Excelerator

    US$5,000,000

    United States | Mix fund

    • Canada

    Alacrity Foundation

    US$3,605,990

    Canada | Public fund

    • United States

    Boost VC

    US$1,500,000

    United States | Private fund

    • United States

    K5 Launch

    US$1,500,000

    United States | Private fund

    • United States

    MassChallenge

    US$1,500,000

    United States | Mix fund

    • United States

    Amplify

    US$1,240,000

    United States | Private fund

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EVOLUTION OF THE ACCELERATOR INDUSTRY IN THE REGION

  • New accelerators

  • Year

  • Most people agree that the first startup accelerator is Y Combinator, created by Paul Graham in 2005. Y Combinator was launched in Cambridge, Massachussets, and soon moved and established itself in Silicon Valley.

  • The boom in the growth of new USA and Canadian accelerators peaked in 2012, ahead of all other regions around the globe whose growth rates peaked in 2014 or later.

  • Growth in the number of new accelerator programs continues to be high in the region.

  • Out of the 15 USA and Canadian accelerators launched in 2015, 8 are focused on specific niche markets, including Health, Food, Neuroscience, and others.

PROFIT OR NOT-FOR-PROFIT?


  • Almost 2/3 of the region’s accelerators are for-profit ventures. Typically, for-profit accelerators are funded with private capital by investors who aim to generate profit in the long-term, mainly through startup exits (acquisitions, IPOs) within their portfolio.

  • Not-for-profit accelerators generally do not take equity, and tend to focus on industries with a specific public benefit, such as Health Tech and Edtech. They may also focus on providing new opportunities for minority groups. They may be either privately or publicly funded. Not-for-profit accelerators represent 60% of all accelerators in Canada

  • For-profit
  • Not-for-profit
  • United States

  • Canada

SOURCES OF FUNDING


    • 100% Private funding

    • 100% Public funding

    • Mix of both (Public/Private)

    • Other sources


  • Accelerators stimulate growth of companies and this leads to job creation. In addition, they lead to innovations that can solve important problems faced by society both locally and globally.

  • Accelerators are difficult to monetize and fund in the short term (within 12 months) because early stage ideas usually require many years before they provide returns to shareholders. To support this period of growth, governments around the world provide subsidies and grants to stimulate new accelerators and help them operate.

  • In the USA and Canada 36% of accelerators reported that they either received a mix of private and public funding or are 100% publicly funded. Public funding typically comes in the form of government grants and subsidies. Governments around the world are increasingly seeing innovation as a key factor for maintaining economic competitivity. One way of doing so is to create their own public programs and funds or reinforce existing programs so that they can have a bigger impact on the ecosystems they serve.

  • 56% of USA and Canadian accelerators reported that they are funded only with private capital. These accelerators are usually funded by high net worth individuals, angel groups, private investors (angel groups, VC investment funds) and corporates. These investors hope to make a profit through positive startup exits (acquisitions, IPOs etc..) and having early access to high potential tech companies.

HOW DO ACCELERATORS GENERATE REVENUE?


    • Short term

    • Long term


65% of USA and Canadian accelerators are for-profit. How do they generate revenue?

  • Many USA and Canadian accelerators follow the traditional “cash for equity” model, first established in 2005 by Y Combinator. In exchange for investing a small amount of seed money into a startup (around $25,000 on average), accelerators will receive equity in the startup (usually between 5% and 10%).

  • USA and Canadian accelerators realize that exits take time and the current economic environment makes IPOs difficult to anticipate, therefore only 34% of them expect to earn revenue with startup exits in the next 12 months. However, over the long term (12 months or longer), exits become the source of revenue upon which 62% of the accelerators surveyed rely upon.

  • Since cash flow is typically re-invested by startups to grow the business rather than pay dividends and exits usually do not occur earlier than 3 - 5 years into a startup's lifecycle, accelerators generally would not make a profit on investment for several years. To make up for the expensive day-to-day upfront costs of operating their programs, accelerators have recently begun exploring new models that allow them to generate revenue. These alternatives include mentorship fees, renting out office space, hosting events, and corporate sponsorships and partnerships.

  • 87% of USA & Canadian accelerators plan to increase their revenue in the short-term by incorporating alternative revenue models apart from exits.

  • A large number of USA & Canadian rely on corporations for revenue generation. 32% of the accelerators surveyed reported that corporate partnerships are an important revenue channel in the short term (within 12 months) and 38% in the long term (greater than 12 months). Similarly, corporate sponsorship also plays an important role for accelerator revenue generation: 55% of accelerators reported relying on corporate sponsorship in the short term and 46% in the long term.

  • We predict that the relationship between accelerators and corporations will grow significantly in the US and Canada. An increasing number of corporations - both large and mid-sized - are looking to startups as a source of innovation to help improve operational efficiency. Startups are also increasingly looked towards for new or differentiated products that they can bring to market.

TOP 20 ACTIVE ACCELERATORS

By number of startups accelerated in 2015

    • Country

    • Accelerator

    • Startups accelerated in 2015

    • United States
    • MassChallenge

    • 128

    • United States
    • Tech Ranch

    • 75

    • United States
    • Thryve

    • 60

    • United States
    • Capital Factory

    • 50

    • Canada
    • [email protected]

    • 40

    • United States
    • Alchemist Accelerator

    • 36

    • United States
    • German Accelerator

    • 36

    • Canada
    • Accelerate Tectoria - VIATEC

    • 36

See the full list

    HOT MARKETS

    in the region for the 2016

    % of accelerators that reported an interest in investing in these markets in the next 12 months

    • Big data analytics

      71%

    • Internet of things

      68%

    • Saas

      67%

    • Mobile apps

      63%

    • Health

      62%

    • Cloud services

      55%

    • Education

      54%

    • Fintech

      54%

    • E-commerce

      54%

    • Wearables

      36%

    • Adtech

      36%

    • Drones

      33%

    • Biotech

      29%

    • Social media analytics

      29%

    • Cleantech

      26%

    • Real estate

      25%

    • Real estate

      24%

    Big Data Analytics and SaaS are the two hottest markets where accelerators stated an interest in investing in startups from, with Big Data Analytics being the most popular and SaaS as a close second. The universal prominence of Internet of Things is reflected in the investment focus of North American accelerators where it is in the top 4 hottest markets with 62% of accelerators being interested in this space.

    THE LOCAL INSIGHT

    "How do you think accelerators in your country are doing compared to the rest of the world's accelerators and what competitive advantages do you think they have?"

    • Andrew Ackerman - Dreamit Ventures
    • Andrew Ackerman

      Managing Partner Dreamit Ventures (United States)

      There is the perception that starting an accelerator is easy; get some space, hire a halfway successful entrepreneur to run it, rustle up a little cash for stipends and you are good to go. This misses the point entirely. The primary asset of an accelerator is reputation. Only the best accelerators signal anything to investors and the best entrepreneurs only want to join top accelerators. That's why you see a lot of new accelerators launch to great fanfare, run 1 or 2 cycles of mediocre companies that fail to get funded, and then quietly fade away.

    • Marcus Daniels - Co-Founder & CEO, HIGHLINE
    • Marcus Daniels

      Co-Founder & CEO, HIGHLINE (Canada)

      The Canadian startup acceleration scene growth stems from an evolution of needs within the ecosystem. Top Canadian founders are demanding access to pre-seed capital, corporate connectivity and specialized programming over one-size-fit-all general experiences which is forcing the industry to adapt. Specifically, more corporate-sponsored programs and academic based incubators are popping up to create new value propositions for founders. The government has created the Canadian Accelerator & Incubation Program (CAIP) to help fund the growth and sustainability of programs across the country. The next phase of growth will be determined by more transparent measurement of which programs truly add value to founders and drive impact over activity in the ecosystem. Ultimately, top founders have choice and will ultimately determine the growth or fate for the industry in Canada.

    • Marcus Daniels - Co-Founder & CEO, HIGHLINE

    CONCLUSION

    The accelerator industry was born in the USA with the launch of Y Combinator in 2005. In total, $90,295,774 was invested into 2968 startups by 111 accelerators in 2015. As expected this is higher than in any other region globally.

    However, the acceleration of innovative tech companies is not limited to Silicon Valley, Route 128 Corridor around Boston or North Carolina’s research triangle. The acceleration industry is growing across the USA and Canada and are beginning to come out of Utah, Minnesota, Maryland and Hawaii.

    We are seeing a shift from the traditional exits-focused model towards a more diversified accelerator business model. USA & Canadian accelerators rely heavily on corporate partnerships and/or sponsorships to monetize. 63% and 57% of the accelerators relied on revenues from this channel in the short and long term respectively.

    THE REPORT

    • 232

      Institutions contacted

    • 134

      Replies

    • 111

      Accelerators

    • 2

      Countries

    Due to a current lack of consensus on the exact definition of an accelerator, it was important to define as clearly as possible what an accelerator was to compile the report.

    We used the following definition from Miller and Bound (2011), who define accelerators as having the following 5 features:

    1) An application process that is open to all, yet highly competitive.
    2) Provision of pre-seed investment, usually in exchange for equity.
    3) A focus on small teams and not individual founders.
    4) Time-limited support comprising programmed events and intensive mentoring.
    5) Cohorts or ‘classes’ of startups rather than individual companies.

    To collect data, we reached out to two or more team members from each organization. Not all accelerators replied and thus our data is not complete. Organizations contacted were asked to confirm whether they qualify as an accelerator based on the definition above. The data itself was self-reported by the accelerators via an online form. Fundacity and Gust have neither audited the data nor request any supporting documentation.

    Accelerator programs by country

    • United States

      98

    • Canada

      13

    Report by

    • Gust

    Created By Sebastien Brunet, Miklos Grof and Diego Izquierdo

    Collaborators: Julien Tubbs, David Blake, Tina Glickman, Greg Young, Zigis Switzer.

    #UsaCanadaAcceleratorReport

    Gust

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