Accelerator Program Design — Wharton School's Valentina Assenova

Fred Schonenberg
Hello, everyone, and welcome to the Venture Fuel Visionaries podcast. I'm your host, Fred Schonenberg. I'm so excited today to have Valentina Assanova, Edward B. and Shirley R. Shils Endowed Term Assistant Professor of Management at the Wharton School, University of Pennsylvania. 

Valentina is renowned for her insightful research on entrepreneurship and innovation, particularly in how cultural and societal factors influence entrepreneurial ecosystems around the world. She recently released a study “Exploring the Relationship Between Accelerator Program Design and Startup Performance.” It's something near and dear to my heart at VentureFuel and something we think a lot about, so I can't wait to dive into this with her. 

She has a PhD from Yale, an MBA from the University of Cambridge, and has collaborated with organizations like Finca International and the U.S. International Development Finance Corporation to advance entrepreneurship globally. 

We're going to talk about accelerators, their impact, their design, and why it matters for startups and everyone within the ecosystem that is around entrepreneurship. So please join me in welcoming Valentina. Professor, welcome to the show.

Valentina Assenova
It's a pleasure to be here, Fred. Great to connect.

Fred Schonenberg
Well, it is great indeed. And I would love it if I gave a little bit of it, but if you could start with your background, how you first became interested in entrepreneurship and innovation, and then maybe a little intro into the work you're doing at Wharton. 

Valentina Assenova
Of course. So my story goes all the way back to banking, actually, that exciting world. So I worked in equity investments for Bank of America Merrill Lynch, coming right out of Wharton. That's where I did my undergraduate studies. And at the time, I became very interested in venture finance, primarily from the angle of renewable energy. 

We ended up investing in some of those companies, and it was a really exciting time. And I realized, wow, capital and ideas are truly transformative. They're transformative for generating jobs. They're transformative for the economy. I can't really say, kind of having been trained as an economist, that there's any minus to studying ventures and entrepreneurship. So it was all very exciting. And in the process, I got involved with some pro bono work for Thinker International in DC. 

And I also did some additional work with the U.S. Development Finance Corporation, which at the time basically supported American-based entrepreneurs going overseas and kind of developing solutions that were, again, American companies going overseas to really find new markets. So all of that led me to the work that I'm doing now, which is looking at startups and how we can support them and the various tools available to policymakers, to founders as well, to everybody looking to enable kind of a flourishing startup ecosystem. So I study accelerators and incubators, and I also study institutions and their policies and how they affect founders and the growth of their startups. 

Fred Schonenberg
I love it. It's such a dynamic world and so important to have someone like you doing the work of understanding what moves the needle, what actually impacts both the economic development but the startup founders' success. One of the things during the research of talking with you, we came across an article, knowledge at Wharton article that was do accelerators improve startup success rates? I would love to know the answer to that question. I would assume it is yes, but curious about your take on it. 

Valentina Assenova
Well, the answer is yes on average, but there's a lot of variation in the design. The design of the program really and truly makes or breaks that value for founders in particular. So we largely took a founder's perspective on these programs and we looked at various outcomes. We looked at one-year post-acceleration, what happens, what happens long-term in terms of generating revenue and growing that revenue in terms of hiring more employees, in terms of securing additional venture capital and equity finance. And what we found was that the program features really made a huge difference and that was a very large variance. Some programs have very little benefit and other programs are really groundbreaking and very formative for those startups.

Fred Schonenberg
Were there any features in particular that stood out as best practices or on the flip side, things that did not seem to add value or maybe even took away from the impact? 

Valentina Assenova
Yeah, well, there was a lot of variation in multiple features, but we looked at three things that really seemed to matter. And when we looked at these different sets of outcomes consistently across programs, across geographies, so keep in mind, we had a really large sample of startups and a really large sample of accelerators. 

First, the biggest differentiator there was just the cohort of peers. Who else is participating in the program with you? It makes a huge difference. We know from anybody having done an MBA, your cohort, your network of peers, that's a huge value add. And that's not something that's easily replicable. So even from year to year, that can be a very different experience or cohort to cohort. So in general, having a cohort with more knowledgeable peers, those that have perhaps prior entrepreneurship experience, deeper networking, I guess, from industry experience. That's a huge value add for founders. 

Fred Schonenberg
Yeah.

Valentina Assenova
The other thing we found was what really distinguished the best programs were a number of these, what we call knowledge building activities. So the point of accelerators is not just to secure funding and it's not just to secure mentorship necessarily, because perhaps we'll touch on this with AI. There's a lot of advice. There's a lot of stuff out there. And the question really is, where does that value add come from? 

And it really comes from deep insights and deep consultative feedback that these programs provide. And ultimately, if those are not translating into learning for the founders, some level of insight, aha, we're going to do this differently. This is how we're going to change our strategy or how we're going to approach our product market fit. Then these programs can be of little value. So these knowledge building opportunities include, in some instances, having more structured curricula that really cover in depth various aspects of business development. In some cases, they also offer opportunities for networking and sort of branching out and getting additional advice or additional perspectives. Those are a real differentiator. 

And the last thing, actually, maybe not surprisingly, was the program duration. So we found that there was a lot of variation in terms of how long these programs were. Some of them were really short, basically nothing more than a demo day and maybe really just a couple of weeks commitment. And some of the programs were much longer. And not surprisingly, given that peer interactions matter, given that deep mentorship matters in strategy formation, and that learning and insight, that all takes time. So it doesn't necessarily come over a weekend. And so programs with longer durations enabled founders to not only gain that insight from the depth of knowledge in their cohorts, but develop those relationships with the mentors, many of whom are former investors, angel investors. They deeply care about other entrepreneurs. They deeply care about an industry or sector that they want to disrupt in some way. So that was one of the other differentiators.

Fred Schonenberg
Very interesting. One of the elements you mentioned when you were looking at success, when I've looked at some of these studies before, I was always kind of disheartened because the only metric they tracked was did the founders raise a subsequent fund? I'm sorry, a subsequent round of financing, equity financing. And that was like the criteria for whether it was successful. 

And that was one of the things I always think about is like, well, what about commercialization? Is it about revenue generation? So I'm curious. And you mentioned that it did. But how did your work look at revenue? And then did you look at the accelerators, whether they were actually accelerating commercialization in any way?

Valentina Assenova
Yeah, that's a really great question, because when we think of startup success, there are many, many different indicators of that. And it's so industry specific. It's so technology specific as well. It's hard to come up with a universal single metric that really can tell us this is the value add for a founder. 

We actually looked at a number of different things that were indicative of organizational scaling. So actually getting more people on board, which usually means that you're at a stage where you are, you have a pretty consistent customer stream. You know that you can hire more people. You're doing more business. Perhaps you're also growing your revenue. We did actually look at revenue growth as one of those metrics. 

And it turns out that particular types of programs are better geared for founders that are at that stage of their startup development. And I think this is where there's quite a lot of heterogeneity in who the applicants are to these programs. Some people come in with little more than an idea. And obviously, if you're just developing an idea, it's very premature to talk about scaling your revenue. But if you are coming in with a more developed idea, you've already done your MVP testing, you have a pretty clear sense of what you're offering, then scaling revenue is a really important step in general for growth. Because ultimately, if you're not profitable, if you don't have the right unit economics, it makes no sense to keep getting investment. 

And what's the point? So we do find industry-specific accelerators, those that are focused on a niche sector, a niche industry. So biotechnology is a great example. AI, actually, although AI can be across multiple industries, they tend to bring in mentors and they tend to bring in startups at a later, kind of a later, more mature stage of their development. And they tend to provide deeper insights that are more relevant when it comes to gaining that traction, growing the revenue. And really achieving, for some startups, achieving that product market fit, really thinking about commercialization seriously. 

There are other programs that are more, I would say they take more of an industry agnostic approach to the way that they select their startups. And those tend to be good, particularly if they have a strong reputation, strong cohort intake. They tend to be good for attracting very prominent investors. And those startups are usually associated with a higher likelihood of getting seed funding afterwards or VC funding afterwards. But really, for growing revenue, it's those industry-specific programs that are really best suited for founders at that stage.

Fred Schonenberg
It's really interesting, your research. I started the company 11 years ago at VentureFuel, and we've always been in this ecosystem of how startups and corporations work together. We find the startups through the VC. So we're sitting in the same center of the Venn diagram. And one of the things that surprises anybody I talk to about this work is there are so many different stages of startups and what they need at each stage is very different.

That idea is to go to business school. It's like, how do I run a company if they're not first-time? Or sorry, if they are first-time founders. But as they get later, the need gets more and more specific. And then it moves more to the commercialization element and less about how do I put together a pitch deck? So it's very interesting to hear your research is sort of reflecting a lot of what we've experienced. When you talk about the niche part of this, I know from an academic lens, you did not look at corporate accelerators, but I'm curious if you have any thoughts about that. Because to me, that's the ultimate niche.

And I would say specifically corporate accelerators where there's one corporate, where it's not like an industry, hey, we're attacking FinTech and we've got five banks involved, but more where it's owned by one company. Did anything come up there that maybe was outside of the research itself that you thought was interesting or worth sharing?

Valentina Assenova
Yeah, I think the corporate accelerator model is very attuned to the sort of industry-specific accelerators that we've looked at. And there, I would say there's an added layer of corporate accelerators that can be very powerful. They can be really important for keeping an eye on emerging technologies and startups. But they have to be aligned with a company's strategy and innovation goals. I think sometimes in my experience, interacting with corporate accelerator managers, where things can go wrong is when there's not a very clear vision for selecting those startups and cultivating them and sort of the objectives of ultimately the corporate partner.

So to create that win-win, there needs to be, I think, real alignment where the founders, you know, if you think about a high-quality startup with a real potential, why would they choose a corporate partner versus Y Combinator or an accelerator that may not be as restrictive, maybe, what they have in mind afterwards. So I think it's a consideration on both sides. For founders, it's a consideration of what we are getting from this partnership in terms of additional expertise, maybe even ability to commercialize.

That could be a potential reason why somebody might go with a corporate partner if down the line you actually do see yourself selling your company to that corporate partner and bringing them early on board can give you access to a variety of resources that you would not normally have access to as a founder can really expedite that commercialization process. And on the other hand, if there's not a lot of alignment and the partner doesn't really have a clear sense of how this accelerator fits in with the overall strategy and innovation goals, that can be, I think, a harder partnership and probably less valuable for both.

Fred Schonenberg
Oh, yeah. I mean, it's crazy. When I started VentureFuel, it was after a conversation with a founder who told me about an accelerator, and I'd never heard the word before. And I won't say the name of the accelerator operator, but they basically said, yeah, we got some money, we gave up a chunk of equity, and we now have junior people at this very large company who have never run a startup, have never been an entrepreneur, and they're the ones advising us.

And maybe we might get introduced to a decision maker at the end of the program. And I was like, whoa, there's a better way to fuel your venture. And so VentureFuel's name actually came from the advice I gave this founder years ago. But I do agree with you that a poorly run corporate accelerator is almost worse than a poorly run accelerator, because there is restriction, there is the strategy piece of the corporate that comes into play. 

I'm curious, one of the things that comes up a lot for us is the word accelerator. I feel like, as you noted in your research, it can mean so many different things. There's so many different types. People think of it as different things. How did you come across any of that sort of even like what is an accelerator actually? And that negative connotation that sometimes goes with it, that it's basically a startup petting zoo.

Valentina Assenova
Yeah, well, yes. The general definition, at least on the academic side, that's broadly accepted comes from my colleague Susan Cohen's work at the University of Georgia. And she was one of the pioneers, actually, of research on this topic. And the way that we generally define these programs is in terms of a fixed cohort intake of startups with a limited duration of a program and typically focused on largely entrepreneurial learning. 

So the biggest value add for these programs, even though there is a funding component, there's a capital component, it's an entrepreneurship development program. Fundamentally at its core. And it's doing it in a way that's very competitive, that's very intensive, unlike incubators, which are much more about nurturing startups. 

And then everything else that comes along with it can, there can be a lot of variation, whether it's in person. These days, some programs are not. How big the program is, how big the cohort is, who the sponsors are, whether it's government run or university run or independent, all those things can make a difference for founders. But at the core, those are the three main features of these programs. 

Now, you mentioned the bad reputation that some of these programs might have, and I think some of that comes from just the variance in quality and the variance in experience that founders can have. So participating in an accelerator as part of a university, for example, that has a very vibrant startup ecosystem like Berkeley Skydeck, that's a very different experience from maybe participating in a corporate accelerator that's poorly run or participating in Y Combinator. That's, again, a very different experience. 

So I think for founders, a lot of that comes down to finding the right fit, the right fit for the stage of development, for the idea that they're developing. Are they looking for deeper insight where being in an industry-specific program might matter? Are they willing to give away equity? Some of these programs take equity. Some of them don't. Like a university accelerator is more likely to provide grant funding for the startups and a lot of other, quote unquote, freebie resources that might come because universities are, they want their alumni to succeed.

You know, if you're part of MIT or if you're part of Berkeley, you want your alumni to go on and do great things with their startups. So that's a very different experience. And I think that quality and that individual experience can influence how these programs are seen by founders and investors.

Fred Schonenberg
Yeah, it's very interesting. I mean, we wrestled with the equity or no equity and a lot of the duration, a lot of the things you were mentioning are levers. And we've actually come to the conclusion that it has to be customized for each corporation that we work with on it because it has to be aligned to their strategy, and what they're trying to get out of it. Then we recruit the startups that fit that strategy versus, hey, it's for anybody. And like, by the way, here's our, this is how we run this play always, right? Like it's a little bit more bespoke, which I think is really interesting based on some of the research that you've had. 

I'm curious, in some of the writings I read of yours, there are so many. I was surprised at how many accelerator programs there are. I'm wondering if you feel after seeing this, that the market is saturated at this point, or if there's still room for more accelerators or how you're thinking about accelerators as sort of a business.

Valentina Assenova
Yeah. Yeah, there are more than 2000 programs globally and growing by the day or by the hour. So it is definitely saturated in quantity, but not necessarily in quality. And I think many programs don't deliver meaningful value. I have some ongoing research looking at different types of founding teams and who tends to benefit most from these programs. 

There's actually a lot of variations. So there are some startups and founding teams where there's pretty much no difference whether you go to an accelerator or not. Like your startup outcomes are pretty much identical. And then there's startups for whom it really is a game changer. So I think that there's still room to develop programs that really focus on outcomes and execution and not just on the optics. And that's really ultimately where reputation comes from. Having those alums who can vouch for this was an amazing experience. It really helped us, you know, in whatever milestones we wanted to reach next with our venture.

Fred Schonenberg
Is there… I couldn't agree with you more, by the way. Curious if you were giving advice to founders, how can they start to evaluate whether this is the right accelerator for them? Obviously there's the Y Combinator, right? Where it's sort of like if you get into Wharton, you go, right? Kind of vibe, right? But I would say like the tier, there aren't many that have that stamp where you're like, oh, this is obviously a signal to the market that we're legitimate. So we should go.

Are there things people should look at if they're a founder looking at these programs? Because they all sound good when you first go look at them. How would you advise a founder to make a decision on when they have options of different accelerators?

Valentina Assenova
Yeah, I would say look for three different things. Number one, look at the alumni outcomes. Many accelerators keep track of their alumni. Good accelerators definitely do. So they do follow-up surveys. They try to stay in touch and try to talk to some of those alums and see what their experience was like and how are they doing now in terms of follow-on funding, revenue growth, customer wins, all the things we've been talking about. 

The other thing is to look for the substance in the curriculum. So what exactly are you covering? Where are your gaps? It's really hard sometimes as a founder to know your blind spots. But part of what you're going to an accelerator for is to be able to gain greater awareness of those and to be able to reconfigure your strategy, learn things that you would not have normally learned in the course of your normal operations. And this is why you're willing to take away the cost of the money and the time to participate in these programs. 

And then finally, check who's involved. So who exactly are the mentors? Who are the investors? Who are the partners? What are their incentives for helping you do well? I mean, if they have skin in the game, obviously, then incentives are aligned and we're looking in the same direction. What are their expectations of startups? Is it the kind of environment where founders are really, they're given all the resources to succeed, but they kind of have to go out and look for them or kind of pick and choose? Or is it the kind of environment that gives you a lot of leeway and you're just getting, you're getting that brand name and maybe an alumni network? So thinking about yourself as a founder, being introspective about what are your needs for your startup? What do you need to get to that next stage? And what do you hope to get out of that program? 

Fred Schonenberg
I love it. That's great advice. Well, Valentina, this has been amazing. Thank you first for all the research that you're doing, because I feel like this space needs that desperately and it's really insightful. Where should people go to learn more about your work or to read more about this? 

Valentina Assenova
Yeah, so I often do segments on knowledge at Wharton. They could look at my faculty profile. Most of my research is open access. So if you're interested in the results and you want to dig deeper they can also connect with me on LinkedIn. So I'm always happy to connect and chat more.

Fred Schonenberg
Wonderful. Well, thank you so much for your time today and everything you're doing to spark change in the very exciting ecosystem of entrepreneurs and innovation.

Valentina Assenova
My pleasure, Fred. Thank you for having me on the podcast.

Fred Schonenberg
Great. That was terrific.