There are around 100 startup accelerators in Europe and this number seems to be growing every week; one of the latest new entrants being Pi Labs – a property-focused tech accelerator based in London. Accelerators, despite their business model being relatively young in Europe, seem to have established themselves as an attractive first investor for many early-stage startups. Are they? As an increasing number of startups go through European acceleration programs, we should be getting more data about the value of each program and the viability of the accelerator business model on the continent in general. However, in order to assess these programs we first need to have an answer to the following question:
[Tweet “How do you compare startup accelerators and measure which one is successful?”]
This issue was tackled recently by professors Yael Hochberg and Susan Cohen, who prepared the ranking of the best accelerators in the US. It was based on quantitative data from Crunchbase and qualitative data from interviews, focusing particularly on:
- valuations accelerator portfolio companies achieved in the years after graduation
- the number of exits an accelerator has had
- whether or not startups received additional financing rounds after the programs
- the percentage of startups still up and running
- how venture capitalists feel about the programs
- how the entrepreneurs in the programs feel about their experience.
Looking at these criteria it’s clear that in the US accelerators are assessed primarily as seed-stage investors. How about in Europe? Unfortunately most of the above criteria are difficult or even impossible to apply for European accelerators, primarily because the startup ecosystem in Europe is still very young and there is simply less data to analyze. Great example of this is the exit criterion. According to Seed-DB data, only eight European accelerators have had exits so far. Seedcamp is the leader with 9 exits, LeCamping has two and the remaining six – Eleven, Ignite100, StartupYard, Startupbootcamp Mobility, Startupbootcamp Madrid and Searchcamp – each have one. That doesn’t seem impressive, especially if compared with US based Y Combinator or Techstars Boulder, which have had 89 and 20 exits respectively, which is enough data to assess the quality of these two programs.
If not exits, what alternative metrics should be considered when deciding which European accelerators are successful? During this year’s Accelerator Assembly event, which brought together around 80 accelerator directors and managers, policy makers, corporate representatives, investors and entrepreneurs, to discuss best practices, future trends and policy initiatives to strengthen the support for European startups, the key success metrics discussed were startup funding rates, partnerships created, jobs created and the overall impact on tech adoption and growth of local startup ecosystems. The latter criteria were more important to the accelerators operating outside of the main tech and investor hubs, or those at least partially funded by governments or EU money.
Some of that data is however hard to quantify and thus compare. For that reason, in the absence of exits, looks like follow-on funding is the second best metric to determine whether an accelerator is successful. That was in fact a common conclusion from the study undertaken by The Cambridge Accelerator Project, in which all participating accelerators indicated that investor returns (i.e. exits) and follow-on funding are the key success metrics. Why is that? Third party funding provides an external validation that the accelerator team is successful not only in attracting good teams and accelerating them into successful ones, but also getting them to the next round of funding, which should be the most important goal for accelerators when managing their portfolio. Finally, more funding increases not only the startup’s chance of survival, but also the odds of a future exit.
However, even if follow-on funding is a good metric, when determining the quality of the acceleration program, it needs to be analyzed in a wider context:
- It’s important to look not only at total funds raised, but also the funding ratio i.e. startups that received follow-on funding vs. the total number of startups that have participated in the acceleration program so far.
- As many of the European programs are very young, the numbers can be easily skewed by outliers. For example, OpenFund in Greece has one big success story with only a handful of graduates. For that reason, it is important to look at the overall number of startups accelerated to-date, as well as the average amount of funding received per startup.
- Finally, the funding data should exclude funding obtained from the accelerator’s own funds, as it obviously does not constitute external validation.
So, which are the top European accelerators based on the above criteria? Using funding data from Seed-DB (as at 13 Oct 2014), the list of top European accelerators is the following:
- Seedcamp (London)
- Techstars (London), which merged in 2013 with Springboard.
- Startupbootcamp (vertically focused accelerators in 8 cities in Europe)
- Rockstart Accelerator (Amsterdam)
- Wayra (accelerators backed by Telefonica in 6 European cities)
- Bethnal Green Ventures (London)
- Le Camping (Paris)
- Eleven Startup Accelerator (Sofia)
- LAUNCHub (Sofia)
- Ignite100 (Newcastle)
- StartupYard (Prague)
- Axel Springer Plug and Play (Berlin)
- Propeller Venture Accelerator (Dublin)
- Startup Wise Guys (Tallin)
- Microsoft Ventures Accelerator (Tel Aviv)
Even though Seed-DB (using in large part Crunchbase data) is adding more transparency to that area by collecting information about funding, there is still not enough data to actually rank the accelerators based on external follow-on funding criterion described earlier. However, we have, or will be reaching to these accelerators asking for that information, hoping to present rankings in the near future.
In the meantime we would like to open a debate about accelerator success metrics. Also, if your accelerator is not here and you think it should be, or you can provide more up-to-date information about funding, please let us know below in comments or write to Adam [at] Fundacity.com.