How to Invest in the Right Incubators/Accelerators to Create a Rich Entrepreneurship Ecosystem

In their quest to drive more small business growth, city leaders across the country continue to invest public dollars in incubators and accelerators. But are they doing this wisely and maximizing the impact from their investment? Not all incubators and accelerators are equal. The organizations obviously vary in terms of programming, capacity, and effectiveness, but there are also important differences in mission and ultimately impact. ICIC has created a typology, captured in our new infographic, to help differentiate incubators and accelerators by their potential impact.

We identify three categories of organizations: sector-specific, demographic, and place-based.

• Sector-specific incubators or accelerators are designed to serve entrepreneurs within a target industry such as technology or food.
• Demographic incubators or accelerators are designed to serve a specific group of entrepreneurs such as women, minorities, or veterans, regardless of the industries their businesses represent.
• Place-based incubators or accelerators are created to drive local economic development. They may serve businesses across a diverse set of industries in order the meet the needs of the entrepreneurs that exist in the surrounding community or they may have a sector focus that represents an economic development objective.

To illustrate the nuances of this typology, and differences in potential impact, we highlight examples of each in San Francisco. As one would expect, San Francisco is a hub of sector-specific incubators and accelerators focused on tech. Yet, perhaps surprisingly, it is also home to non-sector specific incubators and accelerators contributing to a rich entrepreneurial environment in the city.

One such organization is 500 Startups, a venture capital fund and tech startup accelerator that was ranked the eighth-best U.S. accelerator in 2015 by the Seed Accelerator Rankings Project. 500 Startups was co-founded by two former tech industry professionals, Christine Tsai and Dave McClure, to be primarily a venture capital fund to invest in early-stage, tech startups. Their four-month accelerator program also offers mentorship, educational sessions with startup experts, and office space.

Although it is sector-specific, 500 Startups has made a name for itself for its diversity, as highlighted in our Creating Inclusive High-Tech Incubators: Strategies to Increase Participation Rates of Women and Minority Entrepreneurs report. Their classes are made up of 30-50 percent women founders and approximately 15 percent African American founders and 10 percent Hispanic founders.

Less than a 10-minute walk from 500 Startups is Equita, a demographic accelerator focused on women entrepreneurs in the technology sector. Equita was founded by Annamaria Konya-Tannon and Roxana Dantes in 2014 to help level the gender balance of the tech and venture capital communities they encountered in Silicon Valley. Equita’s business accelerator offers an educational program tailor-made for women, a network of mentors, investors and customers, a work space with childcare and other services that create a family-friendly work environment, and seed capital investments available to graduates.

Place-based incubator La Cocina is located in the diverse, economically vulnerable Mission District neighborhood of San Francisco. Although the neighborhood thrives in part due to the many small, informal food businesses in the community, few of the community’s food entrepreneurs were launching formalized businesses because of the industry’s high cost of entry. In response, a number of community-focused organizations, such as Arriba Juntos, The Women’s Initiative for Self-Employment, and The Women’s Foundation of California, created the kitchen incubator because they recognized a need to formalize Mission District’s food businesses in order to create more opportunity and help drive economic growth in the neighborhood. La Cocina’s mission is to “cultivate low income food entrepreneurs as they formalize and grow their businesses by providing affordable commercial kitchen space, industry-specific technical assistance and access to market opportunities.”

As these San Francisco examples illustrate, high-capacity incubators and accelerators are not only fulfilling their mission, but are also creating secondary impacts that cut across the three categories in our typology. In order to maximize impact, city leaders should look to invest in and cultivate all three types of incubators and accelerators to grow a rich, diverse entrepreneurial ecosystem in their cities.