A Conversation on VCs and Accelerators

A conversation about VCs and Accelerators.

I asked Twitter for some topics for todays post. There were a few interesting ones. Global warming vs. Bitcoin, Bitcoin being Alta Vista. Acceptable Age for VR. Accelerator vs VC fund model. Biggest fear. Why I ran out of ideas at day 49 of the newsletter :)

Today I am going to post about the Accelerator vs. VC (BTW, Boost VC is a hybrid now).

Short answer: Accelerator invests in founders, Venture Capital invests in companies.

Before founding Boost VC, I co-founded a startup called Xpert Financial with Thomas Foley, David Pearl and Annie Pearl. We collectively were young, and made a lot of mistakes starting a secondary market for private securities, here is a list of learnings I had while building in a regulated space 10 years ago:

Needless to say we made a lot of mistakes (for the record we did a lot of things right also), at that time, I started to mentor a few startups and I actually invested as an angel investor in my first company ever: Path co-founded by Shawn Fanning and Dave Morin. I realized that my experience building Xpert Financial could help early stage startup not make decisions that could set themselves back months, and found my professional purpose.

Eventually I left Xpert Financial and launched what became Boost VC, because mentoring startups in bulk is called an accelerator.

“Ok Adam, I don’t care about your history, get to the point about the difference between Accelerators as a business model and Venture Capital as a business model.”

Fundamentally there is no difference between an Accelerator and Venture Capital fund, they both invest in startups. It would be the equivalent of looking at a Tiger and a Lynx and saying “they are both cats.” Or more like tacos and burritos, fundamentally they are all the same ingredients. They accomplish the same goal, but have different feature sets, and thus people perceive them differently. They both manage other peoples money and deploy that money into early stage startups.

It isn’t an either Accelerator OR VC, it could be both, it could be one. It isn’t Accelerator vs. VC, it’s mostly collaborative.

The reason Boost VC started as an accelerator model was that it accomplished a goal for us, we had a limited amount of money, and we wanted to help as many startups as we could. The accelerator model is a perfect way to do that. For me, it wasn’t a choice between the accelerator and venture capital, I wanted to mentor a bunch of early stage startups, I had raised $500k (For a crowdfunding platform called BoostFunder), and I converted that investment into a fund structure.

YC founded the model that Boost VC uses (we forked it). We decided to provide housing and office space, and I believe we were one of the first specialized accelerators (Focused on Bitcoin) ever.

An accelerator is a venture capital fund, but a venture capital fund is not an accelerator.

The result is the same, invest in startups, with different philosophies. The philosophy of the accelerator is the portfolio network become a competitive advantage, where in Venture Capital the companies don’t connect with each other. This is the major philosophical difference: yes dollar amount is different, yes there is a time based program that the startups are required to be a part of. But the general difference is that the Venture Fund model dictates that they are the value add, where an accelerator dictates that the network is the value add.

By Adam Draper

I ponder as a VC.

It's a quick one minute read to make you think, smile, or laugh.

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