Tracking Global Growth in Seed Accelerators
In the summer of 2005, Paul Graham and three partners kicked off the “Summer Founders Program.” They aimed to combine seed-stage investing in start-ups with mentorship for young entrepreneurs. What made this program unique was that investments occurred synchronously via “classes” of start-ups funded at the same time and advised together. Their program became Y Combinator.
Their success kicked off a global movement of institutions that combined funding and education for entrepreneurs, commonly known now as seed accelerators. Seed accelerators are invaluable to generating economic growth and fostering entrepreneurial culture in communities. To demonstrate their importance, I created Seed-DB to track programs and the companies that have graduated from them. As of today, we’re tracking 134 seed accelerators in 33 countries. These accelerators have funded over 2000 start-ups, and seed companies have raised over $1.6 billion in funding. One hundred of these companies have already sold for an estimated total of over $1 billion.
In a thesis I wrote on seed accelerators in 2009, I surveyed entrepreneurs who had gone through seed accelerators. One of the more interesting results was that the funding they received was the least important aspect of the program. What mattered more was the community they were accepted into via the accelerator. As more and more start-ups go through each program, the alumni network becomes bigger, more diverse, and stronger. Thus, each class of start-ups receives more value than the class before it, building a virtuous circle.
Seed accelerators also affect their local economies through job creation. New jobs in the SMB sector are very important to society: Between 1980 and 2005, all net job growth came from firms younger than five years old. And in times of economic downturns, small businesses can buck overall trends by creating new opportunities instead of scaling back.
The start-ups that have gone through seed accelerators have created over 4800 jobs. These are brand-new, high-value knowledge worker jobs. And even if an individual start-up fails, founders’ experiences will be very valuable to traditional corporate employers.
Though the data in Seed-DB isn’t 100 percent complete (it relies on start-ups self-reporting), some important conclusions can be made. Seed accelerators are a new kind of institution that promote and celebrate a culture of entrepreneurship. Most programs fund 10 to 20 start-ups per year, educating between 20 and 50 entrepreneurs. Programs and entrepreneurs support each other through challenges, make key introductions for each other, and build communities that give start-ups the best chance of success. Were all accelerators to self-report, I estimate the number of jobs created would be more than 7000.
From just one accelerator in 2005, to a handful in 2007, to over 130 around the world today, seed accelerators — and the jobs they create — are a positive change in the economic infrastructure of the technology industry.
Jed Christiansen is Head of Channel Sales for Emerging Markets at Google and founder of Seed-DB.