Matt Kern recently tweeted:
Realizing that what startups need is *not* more accelerators. What they need is bigger ideas.
… with some followup on Facebook:
I mean too many startups are aiming for quick exits and minimal innovation. Paul Graham wrote a great essay this week about big ideas that’s worth a read. For god’s sake, now Microsoft has it’s own “accelerator” even.
Separating this into it’s constituant parts:
- The market for accelerators has peaked; there’s little incremental value (to startups) to be had in starting new accelerators.
- Startups should pursue bolder ideas with higher risk-reward profiles.
What we do, we have to do in person. We would not be doing a startup a favor by not making them move.
I think the real question here is whether or not communities outside places like the Bay Area, New York, and Seattle can incubate (and keep!) enough viable startups to sustain an accelerator program. Or, conversely, if an accelerator program can be run efficiently enough that it can work with the startups available within it’s local community. I don’t have an answer to those questions, which is why I’m excited to see how things turn out with VentureBox.
Regarding #2, there are two facets to this. First is the question, “Does it make sense for startups to pursue big ideas?” In looking at Graham’s Big Idea list, the common theme is a dependency on radical social and technical innovation. That’s an essential element of a big idea, of course, but such changes are difficult or impossible to control. My favorite example of this these days is the Lytro camera – a new kind of camera that let’s you decide what to focus on after you’ve taken the shot. It’s got a killer coolness factor but is Lytro a good investment? I’m very skeptical. They need to somehow garner the support of consumers and the entire photo industry (you know, all the sites and services that let you do stuff with your photos once you’ve downloaded them). Developing that support is by far their biggest challenge, and they need to do it in a timescale consistent with their investors’ expectations. Wanna know how that sort of thing has turned out in the past? Check out TiVo – a crazy innovative product at the time but not the best investment because of first-mover disadvantages.
Second, riffing on the above… does it make sense for accelerators to drive startups to pursue Big Ideas? I would argue this only makes sense for the most elite of programs, who already have broad portfolios that can mitigate the risk. This is what we’re seeing with Paul Graham and Y-Combinator. They’ve reached a point where Paul has the luxury of going about how nobody is doing anything really “Big”, and even playing matchmaker between teams and ideas. But that strikes me as a very special case. For most accelerators, I think they need to stay focused on startup-plays that have a timeframe consistent with they’re investor expectations.
Does this drive accelerators to prefer startups with smaller, less interesting ideas? Yeah, probably. But I don’t have an issue there. I don’t think the problem is a lack of big-idea startups, it’s that there’s so many more small-to-middlin’ idea startups these days. But there’s nothing wrong with that. I suspect the real problem is that Y-Combinator has gotten to the point where they’ve realized they can’t scale the number of companies they invest in, they can only scale by investing in larger magnitude companies.