How Start-ups Benefit from Providing Peer Advice in Accelerator Programs

11 Oct 2023
Entrepreneurs can bring more idea usefulness and novelty to accelerators as peer advisors and are more likely to learn from the advice-giving process. However, with idea novelty, the result is reduced when MBA-degree holders act as peer advisors, according to the research by Charles Eesley, Associate Professor of Management Science and Engineering at Stanford University, Jung Yun Han from National Taiwan University, and Fanny Li from Stanford University. The research goal was to assess the advantages of peer advising and mentorship on the individuals providing advice within accelerator programs. Accelerators are fixed-term, cohort-based programs, including mentorship and educational components, that culminate in a public pitch event or demo day. (Cohen and Hochbert, 2014). “We contribute this kind of competing mechanisms of peer advising that on one hand, you could be absorbing new ideas into your own venture, and on the other hand, you could be reinforcing your own knowledge,” said Dr. Eesley, who came to speak on the topic “Learning-by-Advising? How Start-ups Benefit from Providing Peer Advice in Accelerator Programs” at Sasin Research Seminar on August 25. Dr. Eesley ’s team conducted the research using three randomized experiments with 119 startups in an online accelerator program in Thailand. The study investigated the effects of providing advice on peer teams’ business plans by looking at two factors, idea usefulness and idea novelty. “Idea usefulness is to what extent the business idea proposes a feasible solution to develop a product at a reasonable price with technology. Idea novelty is to what extent the business idea has originality for the unmet need and non-stickiness to the existing solution,” Dr. Eesley explained. Three hypotheses were formed in the research: H1: Entrepreneurs will improve their idea usefulness in their venture pitches by giving advice on peers’ business ideas. H2: When advice-givers have prior work experiences, the entrepreneurs will be more likely to enhance idea usefulness in their venture pitches than those who do not have prior work experience and be more able to learn and benefit from the advice-giving process. H3: When advice-givers hold MBA degrees, the entrepreneur will be less likely to enhance idea novelty in their venture pitches than those who do not hold the degree. The research found that by advising on other startups’ pitch decks, advice givers can reflect on their pitch decks and make changes. “They reflect the advising practice on their own work by fixing the weak part or adding some missing components that were not acknowledged in their pitch decks,” said Dr. Eesley. Even though entrepreneurs without a degree can give better advice than MBA degree holders, it could also result in the case of “the blind leading the blind.” Dr. Eesley said that peer advising can lead to the advisors reinforcing their own perspective and viewpoint, thus there is less idea novelty. Instead, to bring idea novelty to your own company, it’s best to spend time looking at your own pitch deck, rather than giving others advice. Dr. Eesley added that another negative result of advice-giving is that it could result in the advisors being less open to adjusting their ideas to make them more novel in their ventures. Moreover, the research challenged the notion that diverse peer interactions always lead to greater creativity, revealing that working with similar peers is often more beneficial for start-ups in accelerator programs. In 2020, prior research conducted by McDonald and Eisenhardt corroborated the hypothesis that gaining knowledge from peers who share similarities, as opposed to those with differing backgrounds, during parallel interactions, led to enhanced idea novelty. Likewise, Dr. Eesley explained that, unlike established companies, start-ups put less emphasis on creating new innovations and more on practical details like idea usefulness and how to develop products cost-effectively. As a result, startups benefit more from interacting with similar peers in this context. In addition, while interacting with different peers may result in idea novelty, when it comes to younger firms, presenting idea novelty could cause uncertainty in terms of usefulness. Therefore, Dr. Eesley suggested that entrepreneurs should be more willing to test novel ideas out. Furthermore, the research found that when accelerators are part of a cohort composed of similar peers, their performance tends to improve. This improvement is particularly noticeable when the technologies used and the industry focus are more alike. However, if the similarities between the peers become too close, the potential for learning from the cohort diminishes. As the startup landscape continues to evolve, understanding these dynamics will be crucial for those embarking on the entrepreneurial journey within accelerator programs.  
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