The Startup Landscape Has Shifted Dramatically: Accelerators Must Adapt or Face Extinction

The article discusses the future of venture capital and accelerators in the startup ecosystem. Here’s a summary:

Scenario 1: Accelerator Dominance

• The number of unicorn startups founded in the last five years will lead to successful exits, and operators may start or join funds to support founders.
• Y Combinator (YC) is the only accelerator actively producing unicorns in the last five years.
• Successful founders may exit and join or advise their alma mater accelerators, but could also be competing with funds they start.

Scenario 2: Decrease in Early-Stage Funds

• The zero-interest-rate period of 2020–2022 increased investment in venture capital, leading to a decrease in LP capital for VCs.
• Many VCs have failed to obtain returns competitive with the S&P 500, and the abundance of capital has pushed pre-seed/seed valuations higher.
• Dull returns and high interest will deter LPs from VC, leading to fewer early-stage funds in the market.

Common Themes

• Accelerators must adapt to the changing environment by adding value to the ecosystem and investors.
• Founders should have a strong filter for selecting investors who can provide more than just capital.
• The competition between accelerators and VCs will lead to increased scrutiny of both parties’ performance.

Key Takeaways

• YC is likely to be the only accelerator standing in the future, given its unique ability to produce unicorns.
• LPs are becoming increasingly picky about investing in VC funds due to poor returns.
• Accelerators must innovate and add value to remain relevant in a changing market.

Additional Insights

• The article mentions that some successful founders have exited their companies and joined or advised their alma mater accelerators, but could also be competing with funds they start.
• This highlights the blurred lines between being an investor and being a founder, and the potential for conflict of interest.
• The article also notes that the decrease in LP capital for VCs will lead to fewer early-stage funds in the market, which could create opportunities for accelerators.