Life in the Fast Lane: The Added Value of Finnish Startup Accelerators

Abstract

The accelerator phenomenon has experienced explosive global growth in recent years. Yet, very little is known about the accelerator’s role within the overall entrepreneurial ecosystem. This study aims to explore beyond the prevalent descriptive accelerator research by examining the underlying attributes of both accelerators and their portfolio companies with the objective of uncovering the factors that contribute most to the value creation process of Finnish accelerators.

This study argues that accelerators are a distinct concept among entrepreneurial support organisations with their unique value proposition and objectives. Based on rigorous review of literature, the following definition of an accelerator is presented: A fixed-term, cohort based, selective programme including intensive mentorship and educational components culminating in a periodic graduation event.

Data for the quantitative empirical analysis are collected from accelerator managers and their respective portfolio firms via questionnaires. A hierarchical multiple linear regression is used as the main statistical method for hypothesis testing and additional descriptive data are collected to examine how exactly the Finnish accelerator industry has adapted to fit local market characteristics. The unobserved variable of perceived value is operationalised by adapting techniques from prior venture capital added value research.

Statistically significant results at the P <0,05 level were not found to support hypotheses that the following variables would have a positive relationship to value created: (1) meeting the defined accelerator criteria; (2) startups with mobile or web products; (3) vertical specialisation of accelerator and finally; (4) receiving direct seed funding from the accelerator. However, the notion was supported that later-stage ventures that had revenues prior to acceleration would have a negative relationship to value creation.

It was discovered that Finnish accelerators have distinctively adapted to fit local market conditions. The seed accelerator model that is prevalent in the U.S. has not gained similar popularity in Finland. Less than one third (28%) of accelerators reported receiving an equity stake from accelerated ventures. Government and other public bodies were found to be the most important financier of domestic accelerators. Finnish accelerators have created the greatest perceived value to their portfolio companies in the domains of network building and mentorship. However, only 16% of alumni companies reported to have received external investment that could be attributed to the acceleration experience. Furthermore, accelerator managers did not consider their role as facilitators of follow-on investment to be as important as their clients.