Hearing examines how accelerator programs can foster innovation and promote diversity
Washington DC- At a hearing today before the House Small Business Committee, Democrats examined one of the current fastest growing mechanisms for entrepreneurial growth—business accelerators. Described by Committee Ranking Member, Rep. Nydia M. Velázquez (D-NY) as “the best of both worlds”, accelerator programs simultaneously spur new businesses and reward investors.
“Beyond promoting business expansion, growth accelerators also bring benefits to the communities in which they are located in the form of economic development and job opportunities,” said Congresswoman Velázquez.
Just like their name, business accelerators have grown in popularity, nearly doubling each year between 2008 and 2014. Throughout the hearing, Democrats focused on the power of accelerators to empower entrepreneurs, foster technological innovation, and diversify startups.
“Business accelerators help high-growth start up enterprises develop their products, identify promising customer segments, and secure resources, including vital capital and potential employees,” said Velázquez. “It is clear that they serve an important role in innovation.”
In 2015 alone, over $90 million was invested throughout the U.S. and Canada, stemming from 111 accelerators into nearly 3,000 start-ups. Silicon Valley firms accounted for over one-third of that investment, while New York totaled about $9 million within nearly 400 startups.
Dr. Stephen Tang, President and CEO of the University City Science Center in Philadelphia spoke to the powerful role business accelerators play in advancing the high-tech sector.
“At the Science Center, we cultivate and expand the possibilities that open up when research moves out of the lab and into the marketplace,” said Dr. Tang. “Over the past 54 years, 442 companies have received incubation and acceleration services from the Science Center. Today, 155 of those 442 firms are located in Greater Philadelphia and account for 40,000 direct and indirect jobs – or one out of every 100 jobs in the region.”
Since forty-three percent of millennial adults are people of color, Democrats relayed the importance of reaching minority communities when searching for the next successful start-ups and businesses. According to the Small Business Administration (SBA), fourteen percent of the winning enterprises from the 2014 Growth Accelerator Fund competition are run by members of underserved communities.
“We must consider ways to see a greater presence of accelerators in underserved and rural areas outside of the popular innovation hubs,” said Congresswoman Velázquez. “Another area of improvement is reaching entrepreneurs who have traditionally been disadvantaged. Evidence shows women and minorities are not participating at the same rate as their white, male counterparts.”
Testifying on behalf of the Minority Business Accelerator (the “Accelerator”), an initiative of the Cincinnati USA Regional Chamber, Darrin M. Redus, Sr. shared his perspective working to target African-American and Hispanic entrepreneurs for accelerator programs.
“As large corporations and other institutional buyers increasingly operate in a global marketplace, minority‐owned enterprises and small businesses as a whole, must continue to expand their capacity and scale to remain viable strategic partners for these larger institutional clients,” said Mr. Redus.
In addition to people of color, female entrepreneurs are also underrepresented in the business economy. Of all businesses in America, only eighteen percent are owned by minorities, while twenty percent are owned by women.
“If women and men participated equally in the entrepreneurial ecosystem, the United States' GDP could rise by $30 billion. Yet in spite of this, less than 5% of venture capital goes to female founders,” said Carolyn Rodz, founder of Circular Board, an accelerator focused on female founders.
As a unique model, accelerator programs have the potential to enhance the scope of start-ups and bolster the economy. In the hearing, Democrats called for the necessary resources to support these accelerators, while working to ensure that they continue to reach minorities and underserved communities.