StartX is the future of accelerators

StartX is a relatively new accelerator out of Stanford University. I believe that their model is superior to the leading accelerators that exist today, including YC, TechStars, DreamIt, AngelPad, etc. Not only are they competitive on industry table stakes, they also have key advantages that put them out ahead: 

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Accelerator Table Stakes

1. Mentorship - Perhaps the most valuable aspect of accelerators is the access to top tier mentors and founders. YC is known to have the best mentors in the game; however I feel that over time, Stanford will have access, through their alumni network and deep connections, to an equally respectable roster of mentors.

2. Resources/’Back-office’ - Another perk of accelerators is the access to office space, legal and HR resources, food, etc. All the top accelerators in the world provide this, and StartX is no different. 

3. Investment/Seed Capital - Almost all of the top accelerators provide some nominal investment (typically $10k-$50k, sometimes more) to pay the founders a small salary, pay for company expenses, etc.; however this obviously comes at a significant cost in terms of equity. More on that later. Although StartX doesn’t do this, they do provide the option to apply for financial aid (a small living stipend of sorts). An interesting approach indeed, and one that I think is advantageous for founders. 

4. Demo Day/Access to Capital - The best accelerators provide a big stage for their startups to meet prospective investors. The best investors go to the best Demo Days. How do you get the best investors to attend your demo day? You earn it. StartX is well on its way. StartX companies have raised $350M in follow on funding from the likes of A16Z, Google Ventures and Greylock in just four short years, with $1.8M being the average. TechStars for comparison, often considered the 2nd best accelerator to YC, has an average of $1.5M raised/company. Furthermore, this recent news doesn’t hurt. Having one of the largest endowments in America cutting checks should help out significantly. 

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So if StartX is competitive on table stakes, what is different about StartX? Why is it better?

1. Equity - StartX doesn’t take equity. This is huge. As I mentioned, most accelerators give participating startups a small investment. This at first may seem great, but this small investment comes with a significant cost in terms of equity. Traditionally, startups will give up 2%-15% of their company. The reality being that the equity taken is not only an exchange for the investment, but an exchange for mentorship, the back-office, and access to follow on capital. 

However if you talk to most founders, this investment is less valuable than the mentorship, access or connections, and often times the capital is not even needed. They typically see the equity they are giving away as a trade-off for these non-monetary benefits.

So if I offered you all these things without taking any equity, wouldn’t that be a better offer? That is what StartX is working towards. 

2. University Research - Some of the best technologies and breakthroughs have been the product of university research. Universities have long been a hot bed of innovation in America, and especially top universities such as Stanford. Having an accelerator closely working with a research university is an immense value add, especially in the fields of biotechnology, computer science, and material science, where the leading minds in those fields are typically in universities, not in the private sector. 

3. Alumni - University alumni networks are one of the strongest social and business networks in the world. If you are founder that is attending or attended a university that has a StartX of their own, it would be a compelling offer. Connecting your company to a network of alumni could help pave a path to mentorship and fundraising. In my own personal experience, I have found alumni more eager to help out than even close business connections. 

Although I believe this model is extensible to other universities, Stanford is a perfect place to test it. Its location, history and alumni are more involved in technology than any other institution. Plus, its alumni raise more venture capital than any other school. 

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In summary, I am not arguing that StartX is currently the best accelerator in the world, but I am arguing that because of this superior model, it could be someday. However these things take time develop; it’s still early. And though some of the points above are specific to Stanford, I in no way believe this model is limited to just Stanford. This model could be successful in the many great universities across this country.

The simple idea of providing mentorship, access to follow on capital, small living stipends, and a back-office, all without taking equity, is a powerful one. And colleges are a great place to enable this. With a relatively small investment from Stanford in terms of resources, they gain startup cache, attract better applicants, and with the option for Stanford to invest directly into StartX companies, the potential for significant financial gain. 

It should be noted that StartX is also partially funded by Kauffman Foundation, Microsoft, Blackstone Foundation, Cisco, Intuit, Greylock Ventures, and AOL, which further helps to reduce the cost to run this program for the university. 

I look forward to watching the accelerator wars and seeing how this industry evolves. 

3 responses
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Nice post, Chad. I'd argue that the "Future of Accelerators" isn't an accelerator at all. I believe that, given access to the right tools, startup communities themselves will find ways to incubate and accelerate their own members. This has all of the advantages you describe and doesn't require an elite university to explicitly nurture companies -- something only perhaps MIT and Stanford have any business attempting in the first place!
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