A vast majority of accelerators, certainly the top performing 20 in the world, happened like this:
1. Founders decide to launch an accelerator
2. Founders raise a fund to fund the operations and funding of the startups**.
3. Part of the operations costs is paying employees. Sometimes the founders take a salary, oftentimes not because they don't have to. If you look at most accelerator founders they have already made sufficient wealth from previous ventures to float them for a while.
**This is why launching an accelerator, specifically ones that will compete with the current sea of competition, isn't a quick and easy thing to do for 99.99% of most people. Credibility, network, and often wealth are now table stakes. Almost always the first 5,6, or 7- figure check into the fund came from each of the founders. Almost always said founders were also active angel investors into 10+ companies on their own before they even started the accelerator.
Accelerator founders do NOT launch programs because they want a revenue stream / income for themselves or for the program. They do it for the upside, which is a long term investment which takes a lot of patience.
If you want to start an accelerator but would need to pay yourself $xx,xxx per year to be able to do it (and it's a full time, 70+ hrs per week, 150% commitment), then you by definition will have a lot of difficulty doing so.
Lastly, it is so difficult for an accelerator to "cash out" it's holdings in the startups that it funds that it should not be seen as realistic or any sort of strategy. So the notion of "replenishing the coffers" anytime in the next few years is not something a program should bank on or factor into it's initial financial projections. You can not count on Series A or B investors buying out the accelerator's stake. And you have no control over if or when any portfolio company gets to a Series C or beyond.
There is no traditional "exit" for an accelerator. Nobody will acquire you. It's unlikely you'll IPO. You are, in a sense, creating a mutual fund that has to keep performing or investors will quit putting money into it really quickly. A mutual fund that, should you get burned out, bored, or are failing at there is no open market on which you can sell it to some eager buyer. It's a very long term commitment, at least ten years.
Bottom line: Accelerators profit if and only if one or more graduate goes on to:
- Be acquired...
- at a price that returns a really good 7+ figure chunk of cash to the program...
- then maybe the founders of the accelerator will receive a Carried Interest158 (profit sharing) check from the fund giving them a personal profit.
- OR the on-paper IRR or cash-on-cash markup of the fund that cash flows the program is strong enough to raise a second fund to continue the program, allowing it to fight another day and fund another 10-30 startups.