The Startup Landscape Has Shifted Dramatically: Accelerators Must Adapt to Remain Relevant
This article discusses the current state of venture capital (VC) and accelerators, highlighting two possible scenarios for the future. Here are some key points:
Scenario 1: Diminishing Effect on Accelerators
- The number of unicorn startups has increased significantly in the last five years, leading to successful exits and more operators founding or joining funds.
- YC is the only accelerator actively producing unicorns in the last five years.
- Successful founders may exit their current company and join or advise their alma mater accelerator, but could also be competing with funds they start.
Scenario 2: Decrease in LP Capital for VCs
- The zero-interest-rate period of 2020-2022 increased investment in VC, leading to an abundance of capital and decreased diligence.
- Now, there is more capital than ever in early-stage VC, pushing pre-seed/seed valuations higher and making it more expensive for funds to hit ownership targets.
- Dull returns and high interest will deter LPs from investing in VC.
Common Themes
- Both scenarios suggest that the number of early-stage funds will decrease in the future.
- Accelerators must adapt to the changing environment and provide value to investors, as well as founders, to remain relevant.
- Founders should have a strong filter for who is bullshit (ineffective or dishonest) and who will roll up their sleeves (effective and committed).
Key Takeaways
- The venture capital landscape is changing rapidly, with an abundance of capital and decreased diligence leading to increased competition and valuations.
- Accelerators must adapt to the changing environment and provide value to investors to remain relevant.
- Founders should have a strong filter for who is effective and committed when seeking investment.
Future Implications
- The decrease in LP capital for VCs could lead to fewer early-stage funds, increasing the need and value for accelerators.
- Accelerators must continuously iterate on how they compete for and attract early-stage investments, adding value to the ecosystem and investors.
- Founders should prioritize effective and committed investment partners, conducting thorough investor discovery.
