The role of Canada’s Startup Accelerators

The National Post published two articles (here and here) this week questioning the role / impact of Canada’s startup accelerator programs. In the first article The Post asks “Is Canada’s Accelerator Model Broken?”. In the next it goes on to say that “accelerators are failing to produce the next Hootsuite or Shopify“.

Having been deeply involved in FounderFuel, one of Canada’s leading accelerator programs, I’ve got some thoughts on this.

First, it’s important to understand the role of accelerators, especially in geographic markets outside of places like Silicon Valley. In my view, these programs are not meant to help investors discover the next giant. They are there to help investors and mentors identify, nurture and develop talent. In smaller markets like Canada’s, we are sorely lacking in proven, been there, got the t-shirt talent. This is why historically many of our more successful startups have moved to the US – making the talent shortage a self-fulfilling and perpetual issue.

In that context, accelerators are performing well. We have had 30 companies and well over 100 entrepreneurs cycle through FounderFuel since inception. Regardless of whether the companies / projects that they came in with are still running every single one of those people has a better appreciation of what it takes to build and ship great products and what it takes to get funded. And every one of them is more fundable as a result.

What we are lacking here in Canada is density. We need more founders, companies, big companies, investors, exits, the list goes on. Accelerators are not the cure all for these shortcomings, but they help fill the top of the startup ecosystem funnel. They help get more founders in a place where they can build more and better companies.

Even the mother of all Accelerators, YCombinator, is not a producer of tech giants. They have funded over 400 companies, and by Paul Grahams’s own admission, two of them – Airbnb and Dropbox – account for 75% of the portfolio value. ¬†According to Graham, the entire portfolio was worth $ 10B last year. If you remove the two giants, then the average portfolio company was worth just under $ 6M.

The other thing to remember is that good (and by that I mean BIG) things take time. Our company FreshBooks is 10 years old and is just getting started. Hootsuite and Shopify have also been around far longer than any of our accelerators.

The whole notion that in 3 months you can figure out your path towards building a market leader is crazy. And anyone who thinks that will only be¬†disappointed. Acceleration is great, but there’s no substitute for being in the market day in day out trying to find and delight customers.

My final thought is that there are far too many accelerators out there. So, I’m in full agreement with the Post on this point. Entrepreneurs should only choose to work with the top few if they hope to go on to raise venture capital. Being part of the lower tiers is a negative signal.

It’s a stereotypical Canadian reaction to question and doubt what we are doing. Let’s not pass judgment on Canada’s accelerators yet. It’s way too early! And let’s remember why they exist and measure them accordingly.