How Business

Accelerators Can
Boost Startup
Growth
EMERGING MARKET BY SANTIAGO REYES ORTEGA AND DAVID HARRISON

INSIGHTS
A good business idea can strike anywhere. But
IFC’s Economics and
Market Research where it lands often determines how easily it
Department can be turned into a thriving business.

Promising firms are more likely to thrive and grow

in advanced economies than in emerging markets.
Studies have found that young firms in Colombia,1
Mexico, and India2 grow more slowly than those
in the United States, and they are less likely to
develop into superstar companies.
Business environments3 shape how entrepreneurs
turn an idea into a productive business. While one
in 1,000 young firms in advanced economies attracts
outside investment, only one in 36,800 achieves this
in developing economies. The gap widens further:
44 percent of funded firms in high-income countries
secure follow-up investments, compared to 34 percent
in developing countries.4 But success is not just about
financing—it requires know-how, networks, and
market visibility.
Accelerators offer These barriers can hold back economic growth.
mentorship, networks, New, dynamic firms make an outsized contribution
and funding to to job creation and productivity growth.5 Nurturing
entrepreneurs. That successful young businesses is fundamental to
can make their firms economic development in emerging markets.
more productive. Business accelerators offer a promising solution.
Accelerators scout for high-growth potential
entrepreneurs and provide training, mentorship, and
networking, often alongside seed capital. They help
entrepreneurs grow their business faster, or recognize

FEBRUARY 2025
Emerging Market Insights | February 2025

FIGURE 1

Securing Outside Investment Is Harder for Startups in Developing Economies

1 in 1,000 1 in 36,800
young firms attracts young firms attracts
outside investment in outside investment in
ADVANCED ECONOMIES DEVELOPING ECONOMIES

Source: IFC estimates based on Crunchbase and IFC’s Firm Demographics Database

when their ideas are not viable, encouraging them programs are the same. Accelerator effectiveness
to pivot or exit the market.6 Successful participation hinges on organizational practices, selection criteria,
in recognized acceleration programs also signals and incentives.
quality to investors, helping promising firms secure Accelerators’ holistic approach tackles multiple
additional funding. challenges entrepreneurs face in developing countries.
Accelerators often represent the first step in a startup’s Evidence from a government-led program in Chile,
financing, typically investing between $30,000 and which offers funding and shared workspace to all
$100,000. This prepares entrepreneurs for larger participants plus acceleration services to a select
rounds from angel investors and venture capital funds few, shows strong results: Entrepreneurs who barely
as they grow. In this way, they serve to build a pipeline qualified for acceleration raised three times as much
of investment-ready startups in developing markets. capital and doubled their workforce compared to
similar entrepreneurs who barely missed the cut.7
Breaking Growth Barriers: On the other hand, firms that received only funding
showed no significant difference in performance over
Evidence on Business Accelerators those that received no support.
Recent research shows accelerators can unlock The benefits extend beyond financial support. Evidence
startup potential in emerging markets. Beyond capital, from a business acceleration program that provides
accelerators equip entrepreneurs with networks training, mentorship, visibility, and networking—but
and intangible skills such as market understanding no funding—also shows enduring results.8 Three years
and decision-making. Their impact also extends after acceleration, participating startups had grown
to the startups’ employees, helping them boost sales 2.7 times faster than comparable firms excluded
their skills and future earnings. However, not all due to biases in the selection process.

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 Emerging Market Insights | February 2025

FIGURE 2

Startup Funding Stages in Developing Markets

Business accelerators $30K–$100K

Angel investors $200K–$1M

VC funds (early stage) $1.5M–$10M

VC funds (late stage) $5M–$40M

$10M–$100M
Private equity

$0M $50M $100M

US dollars

Business accelerators

Angel investors

VC funds (early stage)

VC funds (late stage)

Median Mean
Private equity

1 2 3 4 5 6 7 8 9 10 11 12 13 14
Firm’s age in years

Source: IFC calculations based on Crunchbase

The research revealed that experts’ individual scoring from entrepreneur and team characteristics to business
biases can significantly affect which startups join ideas—while identifying ventures’ most pressing needs.
acceleration programs. Some judges consistently grade Accelerators’ influence extends into the broader
more strictly or leniently, leading to the occasional economy through the startups’ employees and the
rejection of high-potential ventures and acceptance of dynamism of the entrepreneurial ecosystem. Novel
weaker ones. Accounting for these evaluation biases data on skills and career trajectories10 show that
proves fundamental for accelerators’ core mission of employees at high-growth potential firms develop
identifying promising entrepreneurs. valuable cross-functional skills (working across multiple
Follow-up research9 reinforces the importance of the areas of the firm) and move out of technical roles and
selection process. Accelerators excel at helping high- into more managerial and entrepreneurial positions.
potential startups overcome growth barriers rather than These skills are rewarded in the labor market after they
transforming average ventures into high performers. leave the startup, earning 8 percent more in wages.
Successful accelerators evaluate multiple dimensions— This premium jumps to 15 percent for accelerated

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Emerging Market Insights | February 2025

FIGURE 3

Career Paths of Employees of Accelerated Startups

Basic skills Cross-functional skills

BEFORE (BASELINE) AFTER

1.24 Resource management
Employees of firms that
take part in an
1.15 Systems accelerator move on to
1.12 Process more managerial jobs
that require a broader
understanding of the
business model.

1 1.01 Content
1 Complex problem solving

And move out of more

0.79 Technical technical jobs.

Source: Gonzalez-Uribe et al., 2025. • Note: The skills index is constructed based on the skills required according to employees’ job titles
before and after acceleration. Baseline skills are normalized to 1. For resource management skills, systems skills, technical skills (negative), and
social skills, differences relative to a group of employees working at similar, non-accelerated, firms are statistically significant.

startup employees, suggesting accelerators’ knowledge Maximizing the Impact of Business

and networks benefit both firms and their workforce.
Accelerators in Developing Countries
Skill development on employees could spread through
emerging economies. As accelerator-trained workers Business accelerators have expanded rapidly across
move to other firms, launch their own ventures, or developed and developing countries, with governments
nurture new talent, they spread valuable capabilities and aid agencies spending more than $1 billion a year
across the business landscape. Such knowledge on training entrepreneurs.13
diffusion could help promising young firms establish But accelerators come in diverse models and vary
themselves more readily in emerging markets, making widely in their effectiveness. Corporate accelerators
the overall economy more productive. seek industry-specific solutions, while programs backed
U.S. evidence shows accelerators in nascent startup by investors, universities, and public funding focus on
hubs help develop early-stage financing by attracting broader goals. Their offerings range from seed capital
new local angel investors and venture capitalists.11 to network access and expertise. This diversity raises
Moreover, ventures from more developed ecosystems questions about which approaches work best in
show higher success rates,12 suggesting a virtuous cycle different developing market contexts.
in entrepreneurship development. While promising, Recent evidence underscores how these differences
these ecosystem effects need further study in shape outcomes. A study of 408 accelerators across
developing economies.

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 Emerging Market Insights | February 2025

176 countries reveals that while accelerator programs Peru’s accelerator program offers lessons from a
generally deliver positive results, their impact varies public policy perspective. When launched in 2013,
significantly based on participant selection and services the government provided grants for new and
provided.14 Early-stage companies benefit from gaining existing accelerators. By 2018, officials shifted to
business know-how, while more mature companies a pay-for-performance model that tied grants to
value networking and access to investors. startups’ outcomes and accelerators’ organizational
In the United States, investor-sponsored accelerators improvements.19 Under this approach, accelerators
help startups raise more capital and achieve qualified for grants based on meeting specific targets
higher valuations than government or non-profit like implementing rigorous selection processes with
accelerators.15 This pattern emerges in developing industry leaders, achieving external financing goals for
countries too. Data from Peru16 reveal accelerators portfolio companies, and helping startups reach sales
with stronger private-sector ties implement more benchmarks based on their development stage and
rigorous selection processes and better organizational industry, among others.
practices, including performance tracking and Finding the right balance between ambitious and
peer learning. These advantages likely stem from achievable performance metrics was challenging,
investors’ keen interest in identifying and supporting recalls Gonzalo Villaran Elías, former director of
high-potential firms. program development at Proinnovate, Peru’s
Limited investor base and financial market government organization for entrepreneurship.
development in developing economies restrict However, the model shows promise: Accelerators
collaboration with accelerators. Most funding in have met over 70 percent of their performance
these markets comes from governments and aid goals while building stronger private-sector ties.
organizations, creating incentives that may dampen Most now collaborate with venture capital firms and
accelerators’ potential impact. In Africa, for instance, large corporations, identifying promising startups for
77 percent of entrepreneurs’ support organizations investment opportunities and connecting them with
do not include growth potential among their businesses seeking innovation solutions or supply
selection criteria.17 chain improvements.

The IFC Startup Catalyst18 reveals potential approaches These experiences and research show that accelerators
to tackle these challenges across development can unlock growth when incentives are aligned and
contexts. The program channels investments through adapted to local market conditions. Less developed
22 accelerators and seed funds, reaching 750 startups countries, with nascent financial markets, will benefit
across 65 developing countries, including 14 in low- from plugging into regional investment networks.
income and fragile countries. Portfolio data suggest For lower-middle-income countries, priorities must
that funds with accelerators, which combine funding shift to deepening local private-sector connections
with structured support, slightly outperform fund-only while nurturing angel investment networks and
seed fund managers. venture capital funds. Accelerators can focus on
specialization and scale in more developed emerging
Working across different development contexts has
markets—creating industry-specific programs, building
also shaped the program’s strategies. In emerging
cross-border networks for market expansion, and
markets, accelerators perform better when they invest
connecting local startups to global value chains.
directly in startups, as this creates stronger incentives
for success. In less developed markets, the program
partners with accelerators from more developed
neighboring countries to build regional business
networks and connect promising startups with larger
investor and private-sector networks.

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Emerging Market Insights | February 2025

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Cover Photo: NAR (Lebanon) is a
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