Are accelerators the new MBA schools?

Accelerator programs such as Techstars, Y Combinator and 500 Startups have become the breeding ground for a new wave of entrepreneurs.

For decades an MBA has been almost mandatory if you want to get into the upper echelons of business. But now a new sort of training, springing from the world of high-tech start-ups, is moulding the entrepreneurs of the future.

Accelerator programs such as Techstars, Y Combinator and 500 Startups have become the breeding ground for a new wave of entrepreneurs in the US. The model is spreading around the world, with Australian examples including BlueChilli, Startmate and Telstra-backed muru-D.

There are plenty of differences between an MBA and an accelerator, but the main one is this: an MBA serves to grow a person’s skills, an accelerator grows an entire company – often from scratch – with a focus on developing teams.

The co-founder of Sydney-based accelerator muru-D, Annie Parker, says the basis of her program is “learning by doing”.

“This isn’t just case studies. This isn’t just you building a numerate business case to prove that you are able to construct really complex ideas,” Parker says.

“This is about you then taking that complex business case and presenting it to a bunch of potential investors and customers or potential employees, and convincing them.

“That real world experience isn’t something you can learn in a lecture.”

Incubators vs accelerators – which is right for you?

Accelerators are an evolution of the tech incubators that first emerged in the US in the late 1950s. While both models generally offer entrepreneurs low rent and access to mentors and potential funding, an accelerator is a fixed-length program, while incubators generally place no such limits.

Hugh Mason, chief executive of Singapore accelerator Joyful Frog Digital Incubator (JFDI), says an incubator can be cosy and collegiate, but an accelerator is more of a high-pressure boot camp. There’s no danger of that co-dependency which can develop within incubators, where participating companies find themselves unable to leave.

“You go all-out for growth with those businesses, and you accept that not all of them are going to make it,” Mason says. “But the objective of acceleration is to either make or break a business.”

Calculate your MBA ROI

Accelerator programs can run anywhere from 12 weeks to six months. The muru-D program, for instance, is for six months, and includes grounding in the basics of business, such as IP management, recruitment, financial control and cash flow management.

Access to technical skills is also important. Sydney’s BlueChilli accelerator maintains its own in-house technology development team, allowing non-technical founders to develop their products and services from within the resources of the accelerator.

Learning lean and agile

The lessons taught at accelerators are very different to those of a traditional business school. Accelerators generally stick to the Lean Start-up method that’s popular in Silicon Valley. This drives the business to start by creating a minimum viable product (MVP) and testing it against the market as soon as possible.

They also commonly include concepts of “Agile” project management, which uses highly collaborative teams, minimal upfront scoping, very short project cycles – usually less than a month – and constant feedback to bring ideas to fruition fast.

But it is the entrepreneurial skills that participants develop which prove the most valuable, says Parker. And being able to make a few mistakes without costing a huge amount to your brand reputation or to your business can be priceless.

“Community is the secret sauce. Everything else is open source.” – Hugh Mason, Joyful Frog Digital Incubator

“What you learn through an accelerator is how to distil down what went wrong and figure out the data that can help you infer the next right move to make,” she explains. “It’s not really about getting used to failing; it’s about getting used to what you do when that happens, so you make sure you’ve learned from that and move on.”

Start-up veteran Alan Jones, who holds the role of “chief growth hacker” with BlueChilli, believes one of the key benefits of an accelerator is that you can find out if an idea is truly viable before too much is invested – especially as most ideas change significantly between conception and execution. A key part of the process is “growth hacking”, which Jones describes as testing ideas in the real world using a series of marketing experiments.

“You are going to need to go through several pivots or iterations to find the right mix of features or benefits and also the right target customer who is going to pay to use this,” Jones says.

But while the lessons are important, so too are the community and alumni of an accelerator. Mason says an accelerator’s true value is what happens outside of the curriculum.

“Through very intensive mentoring, with people who have done it before, we help share not just the facts, but we also help people share the patterns they have seen in life,” Mason says.

“Community is the secret sauce. Everything else is open source.”

Learning to think like a start-up

The success of accelerator programs is usually measured by the quality of the companies that emerge from them. Notable alumni from Y Combinator include internet stars Airbnb (now valued at US$20 billion), Dropbox and Reddit.

While not all companies that are born in accelerators succeed, the skills they teach can be just as valuable used inside larger organisations that want to behave more like start-ups. Some of the methods that accelerators teach have now caught the interest of large Australian businesses, with Sydney-based Pollenizer now specialising in developing accelerator programs for corporates.

Pollenizer co-founder Phil Morle says his firm has also developed a semester-long program to be delivered by one of Australia’s universities in 2015.

“We describe it as a management discipline that has come out of start-ups but which is highly relevant to all of us that need to build commercial operations in a world that is changing so fast,” Morle says.

December 2021
December 2021

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