From idea to funding

: accelerators as catalysts for equity investments in start-ups

Abstract

Early-stage start-ups are characterized by high levels of uncertainty. Incubators and accelerators aim to guide founders through the development phase and prepare fledgling companies for fundraising. Therefore, selection criteria and program design can have a significant impact on graduating start-ups for acquiring follow-on investments. This dissertation used 14 interviews with VC experts and program managers, and a survey with entrepreneurs with experience in incubator/accelerator programs. Findings revealed that selection criteria for admitting into a program tend to focus on team, market opportunity, and the solution the firm is offering. Team quality was considered the most important factor at early stages, but investors do not solely base decisions on this, despite this factor accounting for up to 80% of program managers' selection criteria. Further findings highlight the subjective nature of the decision-making process in early-stage start-ups. Our results reflect that VC investors prioritize technical skills and founder-market fit as primary investment criteria for early-stage start-ups. Incubator/accelerator programs, despite being sector-agnostic, significantly help with management skills, documentation preparation, and expanding founders' networks. Thus, program managers must address gaps in technical skills while improving industry specialization. The study suggests that accelerators and incubators can affect investor decision-making, depending on their reputations. This accrues from a track record of successful portfolio companies and stringent selection criteria for program entry. Overall, this study suggests that a delta between accelerator selection strategies and investor selection due diligence criteria can impact the success/failure of start-ups in acquiring follow on investment.

Date of Award	8 May 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Peter V. Rajsingh (Supervisor)