Over the past few years, startup incubators and accelerators have popped up like weeds. At last count, there were 150 in Canada.
They let entrepreneurs and wanna-be entrepreneurs shape their ideas and establish their businesses. Featuring reasonable rents, good amenities, and the opportunity to collaborate with other entrepreneurs, incubators and accelerators are a comfortable place to hang out.
But here’s the thing: the success of incubators and accelerators depend, in man ways, on the success of the companies being nurtured. If not enough startups are successful, it’s difficult for incubators and accelerators to thrive financially.
At some point, the business model doesn’t work.
So, it begs the question: are the good times over?
If you’re a pessimist, the demise of Wavefront in Vancouver suggests the good times are over.
In theory, incubators and accelerators are necessary parts of the startup ecosystem. They allow entrepreneurs to learn, grow and turn ideas into businesses. They bridge the between the gap between a concept and an entity that develops and sells a product, employs people and pays taxes.
But incubators and accelerators operate in a high-risk environment. Most of their portfolio companies will fail. It’s startup mathematics. It means the financial viability of incubators and accelerators hinges on a few being successful and one or two out of 10 being wildly successful.
If that doesn’t happen, the doors have to close, unless there is corporate, institutional, or government support.
Here’s the big question: are we going to see a consolidation of the incubator and accelerator landscape? It’s relatively easy to launch an incubator and accelerator but staying operationally viable is a challenge.
My hunch is there will be more Wavefronts. There appears to be too much competition and uber-enthusiasm. At some point, a “correction” will happen. The weaker players will disappear while stronger and niche players, which have financial patrons, will stick around. At the same time, I believe large accelerators such as TechStars, Ryerson Futures, L-Spark, Founder Institute and 500 Startups will dominate the Canadian market.
What do you think? Are there too many incubators and accelerators?
I work with B2B technology companies looking to generate more high-quality leads. Through strategic planning and tactical services, I help clients drive brand awareness and customer engagement. I recently published an eBook on how to create a marketing strategy in eight steps.