Accelerators are built on a delicate balance: they enlist the help of industry experts for free to help startups, who, in turn, share their deepest secrets and plans with them. Typically, as in the case of Y Combinator, there are no confidentiality agreements, no established rules for stealing a company’s idea or exploiting a mentoring relationship: instead, accelerators tend to operate with a combination of formal and informal mechanisms.
As legal scholar Brad Bernthal points out in a recent paper, accelerator member companies and mentors exchange economic value to a surprising extent, and all this in an environment of open information exchange. Legal scholars would argue that in the absence of written norms or sanctions, this should lead to opportunistic behavior – and yet, it typically does not.
Why is it then that companies feel safe to share proprietary information in this environment? According to Bernthal, there are three main explanations:
- Accelerators are built on the principal’s pre-existing networks and relationships, and so mentors act under the assumption that the same rules and norms apply as they are used to in a more regulated setting.
- Accelerators tend to aggressively shape startup culture through blogs, books, and other communication to enhance cooperation.
- Startup communities are such tightly knit networks that it is typically easy to mobilize members of the group in the event of a breach, and condemn a member who behaves opportunistically.
The above presumes that the economic intelligence that mentors may access as they work with a company is valuable enough to be stolen. One could also argue that there is no need to steal ideas because a mentor could invest in these companies without acting opportunistically, and turn a profit without having to execute the idea. On the other hand, that could still lead to a conflict of interest between a mentor and company: a mentor could still advise the founders to act in a certain way to benefit the mentor rather than the mentee.
If it is true that the informal organizational structure of accelerators prevents opportunism, it is good news for accelerators: this very structure allows them to attract a wider pool of mentors, who might shy away from more formalized types of engagement.
To access the full paper, please click here.
Contributed by Lili Torok.
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