How Do Accelerators Impact the Performance of High-Technology Ventures?
Forthcoming, Management Science
55 Pages Posted: 3 May 2015 Last revised: 1 Aug 2019
Date Written: August 1, 2016
Accelerators aim to help nascent companies reach successful outcomes by providing capital, enabling industry connections, and increasing exposure to investors. Critically, however, accelerators also provide informative signals to founders about the probability of success. Founders use this information to decide whether to continue or shut down. In order to better understand these issues, I provide a model of accelerator participation and performance and then test empirical predictions from the model using a novel dataset of approximately 900 accelerator companies across 13 accelerators and 900 matched non-accelerator companies. I find that through accelerator feedback effects, accelerator companies close down earlier and more often, raise less money conditional on closing, and appear to be more efficient investments compared to non-accelerator companies. Additional analysis using a separate sample of rejected accelerator applicants further supports these findings. These results suggest that accelerators help resolve uncertainty around company quality sooner, allowing founders to make funding and exit decisions accordingly.
Keywords: accelerators, startups, value of information, information provision, feedback, entrepreneurial finance
JEL Classification: M13, O32, L26
Suggested Citation: Suggested Citation