Teaching Innovation: Rice Professor Reviews Accelerator Programs

Houston — Entrepreneurship is considered the fuel that drives economic growth. But what are the best ways to help entrepreneurs be more successful—and what are best practices for startup accelerator programs?

Those are questions, among others, that Rice University professor Yael Hochberg wants to try to narrow down. She is investigating which parts of the educational programming offered by the nation’s myriad accelerators and incubators actually have a material effect on successful startups. To help her do so, she has received a $1.5 million grant from the Ewing Marion Kauffman Foundation.

“We’re thinking about questions around how you do effective entrepreneurship education—especially at the level of accelerators that claim to take entrepreneurs and, in the course of three or four months, mentor and teach them skills to make them better entrepreneurs.”

Certainly, she’s not questioning the value of the networks of business contacts that such programs can offer to young entrepreneurs. Her questions are about the educational content. “What is the best way to teach those skills that doesn’t require two years to an MBA?” she asks. “We don’t know whether these short-term programs can be effective, and what parts of them are the most effective.”

Her plan is to assess these programs in a way that’s similar to how drug candidates are evaluated for efficacy. Hochberg plans to lead a five-year randomized control trial, starting with a pilot program this summer at 1871, a tech hub based in Chicago. (Hochberg formerly taught at Northwestern University.) The complete trial should include 15 locations nationally in which about 400 startups would be tracked for three years, during which time founders would be asked to complete a detailed survey about hiring decisions and how they are measuring success.

“Half of them are going to be randomly offered a set of workshops that represent the training,” Hochberg says. “Then we’ll see where the outcomes diverge.”

Hochberg is still working out details of her study, but generally speaking, a closer look at the phenomenon makes sense. In the last decade, the number of accelerators, incubators, and other startup-focused programs has bloomed, with seemingly every major metro area sprouting new programs. Nationally, there are the well-known institutions such as Y Combinator and the various Techstars diaspora.

In Texas, a number of accelerators have been launched in recent years, targeting energy (Surge Ventures), biotech (TMCx), and a variety of technology sectors—Tech Wildcatters and Capital Factory, to name just a few. It’s likely too early to assess their legacies but, notably, Surge founder Kirk Coburn announced last September that the four-year-old accelerator would be put on pause and not take on a new class in 2016.

The ever-increasing popularity of such accelerator programs prompted my colleague, Wade Roush, to write that a startup bubble was forming nearly five years ago. What he saw was that the numbers were expanding to the point that there likely wasn’t enough room in the early stage innovation ecosystem to support the dozens of startups these programs were creating (or the programs themselves).

“The more startups that these programs launch each year, the harder it is for any one of them to get noticed by investors, journalists, or customers,” he wrote. “One side effect of this growth is that the time allotted for each company’s Demo Day pitch keeps getting shorter and shorter.”

In 2013, TechCrunch reported that just 27 percent of startups from accelerators were able to secure outside funding in a year. In essence, the publication reported that startups that went through accelerators, and didn’t get investor interest quickly, failed within a year or two. Interestingly, PitchBook reported last week that one-third of U.S. startups that raised a Series A round in 2015 had graduated from an accelerator.

For her part, Hochberg, who also leads the Rice Entrepreneurship Initiative, is not questioning the numbers of programs out there. But, given that they exist, she wants to unearth best practices for educating their startup leaders. “Even if you can’t teach them the material in a deep way, you can teach them what they don’t know,” she says.

Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah

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