Do you run a growth accelerator, incubator, co-working space, shared maker-space, or other entrepreneurial ecosystem organization? If so, you might be eligible to compete for a $50,000 prize from the government.
Last week, the Small Business Administration (SBA) launched its Growth Accelerator Fund Competition for the third year in a row. Each year, the agency awards $50,000 prizes to selected organizations to help cover part of their operating budgets. Last year, the SBA doled out $4.4 million to 88 different entities across 39 states, Washington, D.C., and Puerto Rico. This year, the agency has a total of $3.95 million to award.
The broad goal of the competition is to get an extra infusion of capital to qualified acceleratorsand the burgeoning ecosystems they support, which, in turn, provide resources to boost the startup and entrepreneurship communities around them. The competition also aims to address two major challenges to building strong startup ecosystems in every city in America. First, not all geographic areas have access to venture or angel capital. We have heard this first-hand from the startups we work with around the country, and the data validates it it: the average venture capital investor resides within 70 miles of his or her portfolio companies and 75 percent of all VC funds go to companies based in California, New York, or Massachusetts. The SBA’s competition review panel gives particular attention to accelerators that support geographical regions that lack access to traditional funding sources.
Second, women and minorities have historically been largely excluded from traditional funding sources: female-owned companies are 18.7 percent less likely to raise a successful venture round than male peers, and less than one percent of VC-backed internet seed and Series A companies have a Black founder. The competition has an explicit focus on awarding funds to accelerators that are either headed by or support women and other underrepresented groups. In 2015, 44 percent of award recipients were female-run and 41 percent were classified as underrepresented groups.
The SBA competition helps fuel a market that’s exploded in recent years: in 2008, just 16 accelerators existed. Today, there are over 170 nationwide. While accelerators have been largely lauded for their role in helping startup ecosystems build a more robust entrepreneurial support network, it’s important to note that the extent of their impact on individual startup performance is still being explored. Ian Hathaway of the Brookings Institute explains that the systematic information available about the impact of accelerators is as yet thin and fragmentary. Early analysis has shown that accelerators may help to attract seed and early-stage financing, as well as new investors to a community, but accelerators’ direct impact on startup participant success remains inconclusive. It’s an area researchers are just beginning to more rigorously investigate.
Despite some mixed results in the wider accelerator space, the outcomes of the SBA’s competition have been positive thus far. The program requires that at the 3, 6, 9, and 12 month marks, participants report metrics on jobs created, funds raised or dollars invested, startups launched, and community impact, among other things. Since its inception, winners of the SBA’s competition have created or sustained over 14,000 jobs and served over 3,400 startups that have raised $850.5 million. Hopefully data from the SBA’s program can continue to help to inform the broader discussion around the efficacy of accelerators in helping startups grow and thrive.