Startup Boot Camps Seek Army of Entrepreneurs

Business accelerators are spreading across the U.S. as early stage investors, entrepreneurs, and policymakers try to speed how long it takes to create new ventures—from years to months

By John Tozzi

Some 500 people have signed up to test Benjamin Reece's service to help indie filmmakers distribute their movies and merchandise online, a business he began working on six months ago. Reece and his co-founders now hope to get a working version of the software running, with the help of mentors and peers over the next seven weeks in Launch Pad Ignition, a startup accelerator in New Orleans. His company, Kinio, will work alongside five other startups, attend weekly pitch sessions, and network with veteran entrepreneurs and investors. "It's this huge pot of resources that are just dropped in your lap," says Reece, 28.

Since the first accelerators, which put small groups of entrepreneurs through intensive training, appeared in the mid-2000s, entrepreneurs and investors in dozens of cities have adopted the model. They're typically geared toward Internet startups that can build products fast and cheap. David Cohen, co-founder of TechStars accelerators in Boulder, Colo., and three other cities, estimates that there are now 110 programs globally that use similar methods, most less than two years old. Bloomberg Businessweek has found some 50 accelerators altogether seeking more than 500 startups for their programs this year.

Unlike traditional business incubators, in which companies can share offices for years, accelerators are structured like camp sessions designed to turn inchoate ideas into prototypes or market-ready products in a matter of months. "Between where you come into the program and where you leave, there should be an exponential level of growth," says Kerry Rupp, managing partner of DreamIt Ventures, a four-year-old accelerator in Philadelphia.

What began as an experiment in seed investing is maturing into an established model being replicated by universities, economic development groups, and venture firms. TechStars and Boston accelerator MassChallenge are among the partners in Startup America, a White House-backed campaign announced in January to support high-growth companies. Along with the Kauffman Foundation, TechStars is developing a common application entrepreneurs can use for several accelerator programs at once.TechStars also formed a network with 20 affiliated accelerators in January. "We got a lot of calls over the last four years from people saying, 'How can we do what you've done in Boulder?'" Cohen says. His response: "Why not take what TechStars is and just open-source it?"

More Help Than Funding

The programs combine small amounts of funding with large amounts of help. Accelerators typically invest $25,000 for a 6 percent ownership stake. Selected startup teams (most accelerators favor groups over single founders) work with experienced entrepreneurs as mentors to build their products and learn business skills such as marketing and managing cash flow. They're expected to learn from peers as well. The programs conclude with a pitch day during which teams show off their products to potential angel or venture investors.

Accelerators also confer a pedigree that can help startups get buzz, clients, or funding. Investors Yuri Milner and Ron Conway in January offered a $150,000 convertible loan to all new graduates of Paul Graham's Y Combinator, one of the highest-profile accelerators.