Waiting for the Accelerator Bubble to Pop

"There are already signs of paring back. In December, Y Combinator’s Graham wrote about his accelerator’s decision to reduce its class size, from 84 companies in the summer 2012 class to less than 50 in the current session."<p>This was nothing to do with any overall trend. It was just because YC's then structure couldn't deal with so many startups.<p>The other thing this guy doesn't seem to grasp is that we didn't decrease the size of something homogenous. This is not like a restaurant cutting back from 84 tables to 46. Essentially we picked the best 46 out of 84. And in any group of 84 startups, the top 46 will have 100% of the success.<p>There are so many of these things now that I wouldn't be surprised if a lot of them die off. But if that happened I don't think it would affect us.

The research behind this article is pretty flakey. Measuring accelerator success by exits only works when you do cohort analysis, not when you compare companies created 6-7 years ago (YC and TechStars) against companies created in the last couple of years (the others accelerators).<p>YC's scaling back of class sizes wasn't anything to do with the quality of the cohort dropping, but rather due to YC's ability to handle a cohort of that size.<p>First-time startup founders tend to make the same mistakes as each other, and that's one area in which it's easy for accelerators to add value (some do and some don't).<p>Clearly some accelerators are better than others, and some will undoubtedly fail, but this article doesn't really provide any compelling argument for it.

Why do they call this a bubble? Almost all startups fail, and this has been true since the beginning of time. If there's suddenly a glut of seed investors willing to give startups a shot at survival, we're only increasing the chances of unearthing another dropbox.<p><a href="http://www.paulgraham.com/swan.html" rel="nofollow">http://www.paulgraham.com/swan.html</a>

I think incubators (except for truly valuable ones) are doomed because have these options:<p>a) raise seed money from an angel<p>b) develop a mvp, show some traction and raise money from VCs<p>c) bootstrap a profitable product<p>or d) go to an accelerator<p>from my expirience almost all accelerators have will present you with a bad deal (say 10-20k and office space) and claim to provide you with more value by helping you out with their expertise in other areas. In exchange they want a 20-30% equity cut. BUT the value add through their network (for most accelerators) will be negligible that's why it is a bad deal. Every other option is better:<p>a) Angel -&#62; can be a vocal defender and loyal partner or early adopter of your product<p>b) VC -&#62; You get money at a fair valuation<p>c) Bootstrap -&#62; Keep all the equity and stay hungry<p>So for what it's worth I think reducing the number of accelerators would not be a bad thing for the startup eco system.

Then you also have companies like Scion using the incubator concept as a marketing campaign where they do provide a small amount of seed funding, and mentoring to young entreprenuers, but dont take any equity in return. So instead of selecting the business most likely to gain a return on their investment, they select companies that best represent their brand and the image they are trying to create.

I don't have any counter-evidence to show if the incubator trend is a bubble or not so I am not going to argue along those lines.<p>I have a very different perspective to offer. I live in Pakistan where there is an energy crisis so serious we don't have electric power half the day. It is in these challenging conditions that we are trying to establish ourselves as a tech startup. Perhaps this is not such an issue in SV but incubators can play a very crucial role in places where the conditions are not so ideal .<p>For example the incubator we have here, apart from providing seed money and mentoring, provides 24/7 power supply, connects us with businesses abroad (huge benefit, because no one wants to do business with a Pakistani startup, right?), is <i>trying</i> to get some foreign investors on board, etc. In effect, an ecosystem is being built and I dont see how it could have been possible without an incubator at its center.<p>Perhaps in SV these things dont even matter but they can be the difference between survival and failure in lesser developed ecosystems.

I'd never heard of "Unreasonable at Sea" -- this seems like a really interesting concept.<p>Another thing I've been thinking about is renting some houses in Hawaii, Thailand, etc., where teams could work for ~3-4 weeks on a new project (1983-Apple-Mac-team style), and then bring their friends/families for a week or so at the end.

Failure is not the reason of blow up. Fragility is. That is pretty simple for those who are familiar:<p>Mathematical Definition, Mapping, and Detection of (Anti)Fragility Nassim N. Taleb, Raphael Douady<p><a href="http://arxiv.org/pdf/1208.1189v1.pdf" rel="nofollow">http://arxiv.org/pdf/1208.1189v1.pdf</a>

Unrelated note... On first load of the page in Chrome, could not scroll. Reloaded. Several times. Scrolling finally works. Decided tl;dr as the story is of little interest to me. Back button redirects back through a huge array of page elements that you have to go through before returning to the actual previous page. How did this garbage make it out of testing? I'll be avoiding bloomberg news links in the future.