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Research Finds Conventional Accelerators Aren’t Good Fit For Social Entrepreneurs


Are startup accelerators useful for social enterprises, especially those focused on reviving struggling urban areas and economic development? Suntae Kim, assistant professor of management and organization at Boston College, spent eight years researching two accelerators in Detroit to find out, working much of that time with Anna Kim, assistant professor in management for sustainability at McGill University.

Their conclusion: To succeed, social enterprises need a different approach from the one typically espoused by a conventional accelerator. The key is building deep relationships within their communities, instead of chasing after venture capital.

We talked to Suntae Kim to learn more about his findings.

Can you tell us about your research?

This started as part of my dissertation at the University of Michigan in Ann Arbor. I did two years of ethnographic research embedded at two new business incubators, both looking to revitalize Detroit. After I left Michigan in 2014, we followed up with the entrepreneurs in the programs over the next six years or so.

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One was what I’d call a traditional accelerator modeled on the Y Combinator approach. The other, what I’d call an alternative accelerator, initially was in the process of figuring out how best to incubate a new business. They had a pretty strong resistance to the traditional model.

Why?

They’d seen many entrepreneurs who went though accelerators, got funding and went bankrupt the next year. They felt the model wouldn’t work in Detroit. Maybe in San Francisco, where entrepreneurs, if they fail, can move to another venture or get a job, especially if they, say, have a masters in computer engineering from Stanford. But if you’re an entrepreneur from Detroit, if your business goes under, you’re out of luck. Partly because of that, they dissuaded entrepreneurs from taking investments early on.

But also, their philosophy was that growing a business is like a living organism, like oak trees getting energy naturally from sources around them. It’s what I call local bricolage. That’s an anthropological term meaning that entrepreneurs use local resources instead of looking for venture capital investment. They solve problems with resources they have at hand.

In what other ways did the alternative accelerator differ?

The alternative accelerator had mentors, like other accelerators, who would work with entrepreneurs every week. But there were differences. The duration of the program was much more flexible, customized to the needs of the business, following their philosophy that every living thing in nature has its own time to grow.

Another difference was that, along with entrepreneurs, community participants would also take part. They could be local activists, family members—a group of 10 to 15 people who went through the process with the entrepreneur.

What about funding?

These ventures primarily used resources that existed in Detroit—the bricolage I talked about. For example, there was one organization trying to help food entrepreneurs of color who didn’t have a lot of education, but knew how to make good food. They repurposed licensed kitchens in local churches, local daycare centers that didn’t need to use those facilities all the time. Another example was an organization trying to sell fresh food in food deserts in Detroit. At the time, there was no major grocery chain in the area. They turned community centers, local schools, gas stations into distribution hubs for their fresh food.

The way these startups get resources is by building relationships with the local community. That’s hard to accelerate. But because the startups weren’t looking for funding from VCs, they didn’t have to worry about scaling quickly. So they could focus on nourishing rich and deep relationships with local actors.

The two factors that led them to grow were temporally long and spatially focused. That’s what I call scaling deep, rather than scaling up. Scaling up is the opposite. It’s temporally compressed and spatially wide. So you have to expand to national and international markets quickly so you can create a return on investment.

So both accelerators started out with a focus on revitalization, but that changed, at least for the traditional accelerator?

Both said their focus was on revitalization. And the startups were not generally tech-focused ideas. But because of this pressure to scale quickly, in the traditional accelerator, their business models morphed into something requiring more technology. They may have intended to hire real people but they would be advised that their original business model couldn’t be scaled fast enough. Those plans morphed into something that could be welcomed by VCs.

Almost all the companies in the traditional accelerator left Detroit, the place of their core origin. And most failed very quickly. In the alternative accelerator, some of them failed, but many were still operating as of the end of my research.

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