The COVID-19 pandemic resulted in the loss of 225 million jobs around the world.
Younger people have been significantly affected, particularly in industries stalled due to restrictions caused by the pandemic. Many businesses did not survive and unemployment is expected to push more people into entrepreneurship.
These entrepreneurs will need support to survive and thrive after the pandemic. Innovation and entrepreneurship will be essential for economies to recover and build resiliency. Therefore, how these entrepreneurs and their new ventures are supported is important.
Business accelerators, a mechanism to support and grow new ventures, will need to evolve post-pandemic to support new entrepreneurs.
What are business accelerators?
Also called seed accelerators or accelerator programs, business accelerators support the growth of new ventures. Though they differ from business incubators in several ways, hybrid and evolving business acceleration models abound.
Read more: Corporate accelerators: bringing together startups and large firms to foster innovation
Accelerators emerged in the early 2000s with the launch of Y Combinator in the United States, considered the most successful accelerator. Accelerators are generally for-profit and often hold equity in their client’s firms. Accelerators use a time-limited, cohort-based approach to focus on accelerating the growth of selected technology-based startups from a broad range of industries.
For instance, B4C is a social venture accelerator, while the Canadian Creative Accelerator aims to increase the scope and global reach of Canadian television, film, music and new media production firms. Business accelerators are becoming increasingly popular in the startup ecosystem of many countries. There are currently more than 3,000 accelerators worldwide.
Why accelerators must evolve
COVID-19 has resulted in reduced customer demand, lack of employee availability and disrupted supply chains, all of which have threatened business survival.
Amid such uncertainty, starting a new venture is more challenging. Turning an idea into a viable and sustainable business model is more complex. Funding might become scarce and investors more risk-averse. Some industry sectors may no longer be considered attractive.
That said, new opportunities are emerging from COVID-19 for innovative entrepreneurs. Consider for instance health-care needs, the accelerated use of digital technologies and opportunities related to the work-from-home trend. Accelerators must evolve their business models to support their portfolio of startups now and post-pandemic.
A three-step approach to deal with COVID-19 promoted by the Organisation for Economic Co-operation and Development is applicable to accelerators.
First and foremost, rapid response, recovery and resilience are necessary. Accelerators worldwide had to quickly undertake rapid response as a first step during the pandemic given restrictions related to social distancing and health guidelines. For example, Canadian Creative Accelerator went entirely online.
Easily replicated model
In an article published in the Multidisciplinary Business Review, a colleague and I proposed a post-pandemic accelerator model for South America, focusing on the recovery and resilience steps. This model can easily be replicated elsewhere in the world.
The model considers the impact of COVID-19 on startups, accelerator processes and services in three areas:
Global environment: Governments worldwide have developed policies and measures to reopen their economies and support recovery. With their intimate knowledge of their own entrepreneurial ecosystems, accelerator managers can support government efforts to spur rapid recovery and growth. This enhanced advocacy role is particularly important since many government programs are designed for established firms in specific industry sectors rather than for startups aiming to capitalize on opportunities in sectors emerging from the pandemic.
Accelerators therefore must ensure the sustainability and performance of these firms to secure funding. They will likely need to seek new sources of funding, particularly because governments have amassed large deficits. Accelerators should also put more emphasis on seeking new international partnerships to reduce costs, access new funding sources and create synergies.
Startups: Post-pandemic, emerging trends will generate potential entrepreneurship opportunities. Healthcare, IT solutions, online services, digitalization, enhanced cyber security services and opportunities emerging from the accelerated deployment of 5G infrastructure are examples. Accelerators might have to revise their startup selection criteria to identify the most promising industries.
Accelerator processes: The first step of the three-step model aimed at dealing with COVID-19 — rapid response — resulted in accelerators moving online and staff working remotely. Demo days, hallmarks of accelerator programs, went online, were pushed back or cancelled. Some of these modified processes might become permanent and turn into positives. For instance, online processes can save time and facilitate more introductions among investors, founders and mentors. More foreign startups could be accepted in remote programs. With more online activity, accelerator managers will need to foster close collaboration among stakeholders and seek rapid feedback on proposed changes to their business models.
Accelerator services: The pandemic has provided an opportunity to revamp the services accelerators offer. For instance, startups will need crisis and risk management training to foster resilience and techniques to identify and pursue new market opportunities. Entrepreneurial approaches like effectuation and bricolage will become more critical post-pandemic. Both emphasize flexibility and improvisation of existing resources to deal with an unpredictable future. New programs tailored for woman entrepreneurs might be developed because more women lost their jobs than men during the pandemic, and more women entrepreneurs were affected.
Challenges will remain in place
The pandemic created a litany of entrepreneurship challenges, and they’ll remain in place even after the crisis has passed.
More than ever, entrepreneurs and business accelerators must ensure they share the same goals and objectives when they decide to work together.
In particular, entrepreneurs should pay close attention to the selection and exit policies of accelerators, the nature and extent of services provided and what might be more or less efficient in post-pandemic world. They need to diligently assess the quality and availability of their partners. In turn, accelerators can recover and become resilient by following the suggestions from the post-pandemic accelerator model.