Unparalleled contrasts have marked the last decade and a half — from the devastating plunge of a major housing crash to the soaring heights of the longest bull market and the unforeseen havoc of a global pandemic. Amid these turbulent times, the VC accelerator industry has emerged as a stalwart player. Fueled by a zero-interest landscape in 2020, it has surged, giving rise to an ever-growing array of funds. That said, a paradigm shift of the broader venture landscape could be on the horizon.

Starting a tech company today costs 99% less than it did 18 years ago when Y Combinator was started (today and 2005), largely due to the emergence of cloud technologies, no-code tools, and artificial intelligence. There is an unprecedented amount of information or knowledge that is now freely available to guide founders (e.g., the free YC Startup School courses). Network effects have evolved, moving away from the traditional physical spaces to digital ones. Digital communities and social platforms such as Twitter, Signal NFX, YC’s co-founder matching, and Slack communities (e.g., Flyover Tech) have played a significant role in this shift. At the start of 2022, there were $1 trillion in assets under management (AUM) and $230 billion in VC dry powder, figures that dwarf the prefinancial crisis AUM by a factor of five. Concurrently, the number of funds raised in the eight-year period up to 2022 was 2

The Changing Landscape of VC Accelerators

The last decade and a half has been marked by significant contrasts in the venture capital (VC) accelerator industry. From the devastating housing crash to the longest bull market and the unforeseen havoc of a global pandemic, VC accelerators have emerged as stalwart players. Fueled by a zero-interest landscape in 2020, the industry has surged, giving rise to an ever-growing array of funds. However, a paradigm shift may be on the horizon for the broader venture landscape.

The Evolution of Tech Startups and Network Effects

Starting a tech company today costs 99% less than it did 18 years ago, largely due to the emergence of cloud technologies, no-code tools, and artificial intelligence. This has made information and knowledge more accessible to founders, with platforms like YC Startup School offering free courses to guide entrepreneurs. Additionally, network effects have evolved from traditional physical spaces to digital communities and social platforms. Twitter, Signal NFX, YC’s co-founder matching, and Slack communities have played a significant role in this shift.

The Growth of VC Funds and Changing Competitive Landscape

At the start of 2022, there were $1 trillion in assets under management (AUM) and $230 billion in VC dry powder. This marks a significant increase from the pre-financial crisis AUM. The number of funds raised in the eight-year period leading up to 2022 has also seen a substantial increase, with crowdfunding witnessing a 2.4x growth from 2020 to 2021. Angel investments, family office investments, and corporate venture investments have all risen, opening new capital avenues for founders.

The competitive landscape has also undergone significant changes. There are now 2,900 active VC firms, marking a 225% increase since 2008. This influx of funds has propelled platform VCs to step up their game, nurturing their portfolios and aggressively pursuing deals. Furthermore, the talent pool for tech startups has broadened, thanks to factors like remote work, offshore development, and the growing labor pool of software engineers.

The Rise of Platform VCs and the Question of the Value of Accelerators

The traditional accelerator model has enjoyed the fruits of these potential paradigm shifts. The number of accelerators has more than doubled since 2014, and the number of accelerator-backed startups in the U.S. has nearly quadrupled in the same time period. However, founders are now confronted with a key question: Are there too many accelerators now, and is joining an accelerator even needed anymore?

Accelerators are facing competition on all sides. The idea that accelerator funds have little value has grown in popularity, especially during the pandemic when capital was abundant, and first-time founders bypassed accelerators altogether. Furthermore, rumors of unethical behavior at accelerators have surfaced, damaging their reputation. The fall of players like Newchip and On Deck testifies to the growing realization that accelerators increasingly compete with other established VC firms.

Platform VCs, on the other hand, have gained traction by offering more favorable terms and building communities around their accelerator model. Brand name VCs have also launched platforms, attracting quality founders with their strong brand, capital, and support. As a result, every VC will soon have a platform or studio component to compete in the market.

In conclusion, the VC accelerator industry is experiencing significant changes. The landscape has evolved with the rise of platform VCs, the growth of VC funds, and the broadening talent pool for tech startups. Founders are now questioning the value of accelerators and considering alternative options. Network effects and knowledge sharing are highly valued by founders, and accelerators must find ways to deliver these benefits without consuming excessive time and equity.

Short Takeaways:

• The VC accelerator industry has surged in the last decade and a half, fueled by a zero-interest landscape and the emergence of new technologies.
• The number of funds, assets under management, and crowdfunding have all seen significant growth, opening new capital avenues for founders.
• The competitive landscape has changed, with an increase in the number of active VC firms and the rise of platform VCs.
• Founders are questioning the value of accelerators and exploring alternative options that offer network effects and knowledge sharing without consuming excessive time and equity.