Similar to the startups they support, accelerators are iterating and adapting to meet the needs of their markets.

Pat Riley, Executive Director of the Global Accelerator Network (GAN), was at the Communitech Hub on Tuesday, a visit that happened to coincide with the launch of Communitech’s new Rev accelerator later that day. Rev’s predecessor, HYPERDRIVE, was a seed accelerator and GAN member, and Rev is also part of the network.

GAN was born out of Techstars, an accelerator program co-founded by Brad Feld and David Cohen in Boulder, Colo., and was later spun out as a standalone initiative. It brings together similar accelerators from around the world, including Rev, and sets high standards for such programs.

During his Communitech visit, Riley spoke at a session about Canada’s Startup Visa program, hosted by the Canadian Association of Business Incubation. He then sat down for a chat about the current state of the world’s accelerators.

Q – What does it mean to be a GAN member, and what is required for an accelerator to be considered?

A – I would define an accelerator how Susan Cohen and Yael Hochberg do; they do the top 20 accelerator rankings. They define it as a short-term industry-driven model that has terms favourable for the entrepreneurs.

Those are the two criteria that we’re looking for in the network – so, accelerators that follow the three-to-six-month-long model, and bring in about 10 companies in at a time, and those companies also have about 80 mentors. And you give a ton of terms that are favourable, like giving some seed capital around $25,000 and taking small equity stakes of around six per cent.

Q – What perspective did you bring to CABI’s startup visa session today?

A – The first thing is that in the States, it’s a bit of a struggle right now; we don’t have a good startup visa program and we’re actively working with the government to figure out what we do and how it looks.

I’m excited and I was telling the group that I was on a call with the White House. I ended the call with them and the thing they asked was, “Can we talk to the Canadians as soon as possible, and who is your connection there?” So I connected them with CABI, knowing that they have done a lot of work on this startup visa stuff.

And in many ways, I think that Canada is ahead with this startup visa stuff.

Q – Are there GAN accelerators that have been successful outside of the major markets? How do they compete?

A – Our accelerators have been extremely successful. We have 74 accelerators in the network in 104 cities around the world, and most of them are located outside of the large cities that we would think of; outside of Toronto, outside of New York City, outside of San Francisco.

What they are doing really well is bringing together startups in a really effective and efficient way. So instead of every startup having to go outside to talk with 20 different investors, and 20 different mentors, and 20 different corporate partners, they are all coming to the accelerator space. Therefore, it makes it a really efficient place to work and get stuff done.

And the results have been phenomenal: The average company leaving a GAN accelerator is raising about $790,000; accelerators have been around in our network for up to seven years and 80 per cent of the companies that have gone through are still in business; the average company has seven employees.

We’re just seeing acceleration work, at least in the network.

Q – What are your thoughts on the idea of sustainability, where the role accelerators play in a startup community is no longer needed? Have you actually seen it work?

A – I think that a city still needs some bones, meaning that I don’t think that you can just have a program, whether it’s Startup Weekend or an accelerator or some conference, and startups are going to be there and jobs are going to be created.

I think it’s a bigger question with a lot of moving parts that have to come together in order for it to be a vibrant ecosystem. But I think things like accelerators are incredibly helpful to be the building blocks of a successful ecosystem.

What an accelerator is doing is putting 10 companies in place; people are excited to come help them, and once a startup company is successful, they want to give back, and so you have created this great cycle.

But I also think that there have to be jobs coming in. So you have to wonder if they are getting jobs from a [local] university, or are they poaching people from other cities?

Is there money coming in? The money doesn’t have to come from the city; startups could go elsewhere to get money.

I’ll give you a quick example. There’s an accelerator in our network called Coolhouse Labs in northern Michigan, and their whole thing is they have startups in a resort town.

What they do is they say, “You’re going to be heads-down for four months and all these rich people are going to come in and vacation, but they are going to be your mentors and your investors.”

They really leverage the strengths of the town, but at the end day, there are no universities, so people have to come in from outside.

Q – What trends are you seeing in the accelerator space?

A – I’m seeing lots of things.

First of all, I am seeing more accelerators. My encouragement to accelerators is to really tell what they are good at and not good at. I think that it’s really hard to be an accelerator and be really good at mentorship, and be really good at corporate connections, be really good at investment and be really good at helping your companies.

So, I think accelerators need to do a better job of saying what they are good at and what they aren’t.

At the same time, I think we are seeing many more of the good accelerators come up.

Some more general trends: Valuations are going up; we are seeing the average valuation in the States, coming out of accelerators, at about $3.5 million, and that’s up from $3 million last year.

We are also seeing the amount of money coming into companies after that seed phase go up; last year it was $710,000 and this year it’s $790,000.

We are seeing more corporates get excited about acceleration. We had this thing called the Global Insurance Accelerator, where five insurance companies are coming in and the whole thing is that they are getting excited to watch 10 companies.

We’re also still seeing many angels in this space, so the level of investment isn’t dying down.

Q – What are the big issues the network is facing as a whole?

A – The first one that comes to mind is finding good talent and getting good people. We are actively involved in the visa and immigration discussions, especially in the States.

I think the second thing that we as a network are working on is, how do we make companies that are in places like Omaha, Nebraska get funded. Because there are incredible companies coming out of there, but there’s not as much money as in places like the Valley.

Q – With Rev launching tonight, what are your thoughts on one of the latest accelerators to join the network?

A – I’m really impressed with Rev.

They have also thought well about how the next evolution of their accelerator looks and they have landed at a great place to help their companies that need the support.

I am super excited about them and the model they have chosen for their accelerator.

Q – What are your thoughts on the Waterloo Region startup community?

A – I am incredibly impressed.

It’s a vibrant and well-thought-out ecosystem and you can tell that this didn’t just all happen; you can tell there are a lot of people who put a lot of thought into who is here and why they are here.

But not only that, it’s the design for how people are bumping into one another. I can walk downstairs and there’s Google and Canadian Tire, and Deloitte and then Microsoft. You guys have created a great system for the corporates to interact with one another, and then right next door, you’re having these great collisions with startups.

I am impressed overall with not only what has been done at Communitech, but also what the larger city has done too, and that tech is actually working in this city.

Photo: Pat Riley, Executive Director of the Global Accelerator Network (GAN), in the Rev space at Communitech.