Investment Accelerators

Abstract

This Article documents and explains the legal and extralegal dimensions of Investment Accelerator systems. Accelerators are a new class of institution that supports entrepreneurs and early stage startups. Investment Accelerators take an ownership stake in companies that participate in an intensive, time limited program. Interviews reveal the surprising extent to which parties in many Investment Accelerators exchange economic value in the absence of formal agreement. Startups share proprietary information with highly accomplished mentors who, in turn, contribute their time and connections without direct compensation. This under contracted and informal arrangement raises concerns about opportunism. Data from an original investigation presents a description of Investment Accelerator organization and its effects. Research reveals three notable findings about how IAs organize resources in the service of innovation objectives. First, Investment Accelerators mingle formal and informal mechanisms to assemble a system of stakeholders that spans an entrepreneurial community. Second, informal mechanisms attract a wider pool of mentor participants, including desirable professionals who would not participate as full time hires or as contributors pursuant to a contract. Third, Investment Accelerators show that, under certain circumstances, informal network governance constrains opportunism, even where a network is rapidly assembled and new entrants are included.