The greater Washington region has an accelerator problem and we have to fix it if we want to grow the next generation of technology businesses.
A business accelerator is a term used to describe a broad range of business models that share characteristics: assisting a founder form a new businesses through mentorship, partnership connections, access to related expertise (for example, how to set up a limited liability company or a sales team) and access to investors.
Many accelerators get equity ownership, licensing revenue, rental fees or membership dues from the fledgling businesses. Accelerators tend to be of more use to inexperienced start-up founders since experienced entrepreneurs often already have the skills and networks to cultivate a smart idea.
Steve Case, one of the region’s most forward-thinking innovators made headlines last month by teaming up with others to invest $7.2 million in start-up incubator 1776. Accelerators help businesses scale while incubators often focus on innovation. Both are life-lines for many brilliant young local companies, and we should be doing more to follow Steve Case’s lead.
Because accelerators and incubators serve innovators our region wants to support, we sometimes equate them with the Washington region’s ability to shine as a hub for innovation.
Yet, when national surveys rank the best accelerators, ours rarely make the list. For example, the Harvard Business Review recently identified the top 20 U.S. accelerators, but ours were nowhere to be found.
Our accelerators are well-run and provide great value for start-ups. So, why are they not more highly rated? In my opinion, the problem is based on the metrics being used to measure accelerator success. Often, rankings look at how much capital is raised and whether a company goes public or is sold after “graduating” from the accelerator program. Based on these metrics, ours suffer in comparison to programs based in places like California or Boston because none of our accelerators has achieved similar success in a merger/acquisition or a company going public.
But there are other reasons we could be doing better. First off, our region doesn’t get a lot of venture capital: roughly only two percent of all venture capital last year. The “chronic” shortfall of venture capital in our region is exacerbated by applying acceleration models that require venture capital to grow. We are accelerating into a brick wall and creating frustration for our entrepreneurs, and a large measurement challenge for our accelerators.
Secondly — and in some ways more importantly — we don’t have a large base of established companies keeping a close eye on how they can be using the impressive innovation coming out of our start-ups.
We are creating companies whose natural buyers are elsewhere. We should focus our acceleration efforts more squarely on innovation development that matches our strengths. Acceleration will better foster lasting start-ups in our region when our largest companies start looking directly to our accelerators for innovation. Regional leaders should support our best-run accelerators by sharing names of established businesses looking for new technologies and companies to buy.
Because accelerators and incubators usually serve entrants to start-up business and innovation, their success (or failure) will have an effect on our ability to strengthen our region as it competes in new industries. After all, our goal is to balance our economy away from government services and into technology products.
The acceleration movement is not distinct and separate from our broader business community. It is a living, breathing part of its core today, and a glimpse into where our success will be tomorrow. We must support accelerators built within our region’s image and with metrics that are relevant to our communal success. I call on our larger companies to engage with accelerators in related industries to better foster innovation in the years ahead.
Jonathan Aberman is a business owner, entrepreneur and founder of Tandem NSI, an Arlington-based organization that seeks to connect innovators to government agencies. He is host of “Forward Thinking Radio” on SiriusXM, a business and policy program, and lectures at the University of Maryland’s Robert H. Smith School of Business.