Of the handful of accelerators vying for top entrepreneurial talent in Los Angeles, StartEngine has taken a contrarian approach in more ways than one. Rather than set up shop in the hip beachfront cities of Santa Monica or Venice, the program is located an upscale executive tower along the Wilshire corridor, just a stone’s throw from engineering powerhouse UCLA.

StartEngine is led by former Activision founder and CEO Howard Marks and LA Film School owner Paul Kessler. The pair’s dramatic goal is to invest in and mentor 500 startups in five years. With $15 million raised — the most of any accelerator in town — and their eye set on “galvanizing Los Angeles,” as opposed to simply earning a financial return, the question becomes, are they too ambitious?

“It’s going to be a tremendous amount of volume,” Marks said to Fortune’s Lori Kozlowski recently. “The reason we picked it is maybe because we wanted to do something the size of LA. LA is big, and it deserves a big accelerator with the size of this city’s ambition.”

StartEngine didn’t invent the “rapid accelerator” model. It most notable proponent is Dave McClure’s aptly named “500 Startups” Silicon Valley accelerator. Relative to the competition in the Valley, McClure’s early results haven’t turned too many heads. Y Combinator (YC), on the other hand, has grown into this type of velocity through a combination of demand from both entrepreneurs and investors, as well as a track record of phenomenal success.

StartEngine often invests earlier than other accelerators in LA and elsewhere. “We take startups much earlier (basically at their inception point),” says Marks. “Most of the startups we accept come to us with little to no customers or traction. All we are investing in is the idea and team.”

While YC is famous for betting on superstar teams that have yet to identify an idea, its track record brings the very best and make this model more justifiable. The prevailing trend in Southern California has, for good reason, been to invest in more established startups, typically with prototypes developed and often early traction demonstrated.

With each new class of startups there’s a hope of identifying the next Dropbox or Airbnb (both YC companies) to justify the model. But these fund-making companies are hard to find, even for the best accelerators and incubators. Then again, the potential return serves to shade the long odds. Assuming quality is equal in all cases — a large assumption — investing in 100 companies per year versus 30 obviously increases the odds of uncovering a big winner.

StartEngine isn’t quite on a pace for 500 investments in five years thus far, but it’s outdone all of its local counterparts with the size and velocity of its classes. The accelerator is currently introducing its third, 90 day class, with each subsequently growing in size from 10 companies in January, to 12 in April, and now 15 beginning in July. Most other programs in town are, by design, either beginning or mid-way through their second classes which have averaged 10 companies.

Again, it must be asked whether this prolific pace is something to be celebrated or questioned? The early results are a mixed bag.

There have been some interesting concepts to come out of the StartEngine oven, but follow-on fundraising has proven challenging for most of its companies. Of the 10 companies graduating in April from the inaugural class, only two have raised capital — a total of $800,000 between them. This is despite the accelerator hosting demo days in both LA and Silicon Valley, as well as many pitching at Silicon Beach Fest, LA Demo Day, and other LA community events.

Companies graduating from neighboring incubators LaunchpadLA, Amplify, and MuckerLab have had decidedly more notable results. Based on my own unscientific but well informed research, approximately 50 percent of each class has publicly announced their completed fundings with the average appearing to be in the $1 million to $1.5 million range with a good percentage of the rest raising successfully but electing to keep their financing out of the press.

So what accounts for the difference in results? Arguably, one element is the natural limit on viable startup ideas and teams available in the still growing LA tech scene. As many local advocates and I have argued in the past, LA doesn’t suffer from a lack of technical talent. But it does suffer from a lack of that talent demonstrating entrepreneurial ambition.

With three other prominent accelerators, each of them vying for 20 to 30 startups per year, it’s proving difficult for StartEngine to keep the quality up while on pace to fund 55-60 ventures itself this year (with a goal of 100). The gap between the most and least promising StartEngine companies is often wider than that that within other accelerator programs. I’m not privy to the logistics of the internal recruiting process, but it’s hard to imagine that Marks and his team can spend significant amounts of time building each subsequent class while mentoring and advising the current one. It follows then that recruiting, especially at the proposed volume, would prove a challenge.

Secondly, StartEngine’s standard investment “offer” is far and away the most entrepreneur-unfriendly in town — although it’s extremely difficult to compare apples to apples in this regard. This is something widely discussed in the community and about which I’ve talked to Marks, StartEngine’s mentors, and even several of its companies. It may be holding Marks and crew back from attracting the best companies.

While the three most successful Westside LA accelerators offer $20,000 to $50,000 for five to seven percent common equity in each company they accelerate (varying based on company stage), StartEngine’s starting offer is $20,000 for 10 percent preferred equity plus five percent warrant coverage. This means that Marks and his investors have the right to buy an additional five percent of the company at a future time at a price that’s fixed today (typically at a certain premium to the $200,000 pre-accelerator valuation).

As Marks pointed out by email, he’s often investing at an earlier and more risky stage than his cross-town counterparts (whether by design or not is impossible to say):

We get 10 percent of the equity when the other accelerators act as angel investors and make deals and take much less equity, which makes sense because later stage startups won’t agree on the published terms… It’s easy to raise money if you have been in business for one or two years versus just 90 days.

We tell startups on the first day of entering our program that it’s unrealistic for them to expect funding 90 days after just beginning to create their idea. To this point, we expect close to half of every class to get funded, just not within the first 90 days.

There’s nothing factually inaccurate about the Marks’ above statement, but it also provides an easy cover should StartEngine’s companies not impress outside investors. Regardless of stage upon entering, the vast majority of YC’s 100 plus companies in the last year have been receiving frothy $8 million pre-money valuations upon graduating.

The combination of hyper-ambitious class velocity, idea-stage investing, and filtration by aggressive investment terms go a long way toward explaining the mixed initial results with regard to follow-on funding.

Things remain very early in the StartEngine story, and it’s difficult to draw definitive conclusions at this point. The model, like the rest of the venture capital ecosystem, is largely based on a few successes driving a disproportionate share of the returns. Marks is betting that at least one member of the newest class, or one of the remaining 463 investments he hopes to make by 2016, will be the homerun needed to justify the model.

For more information on the StartEngine Q3 2012 class, click over to their website.

[Image Courtesy Kla4067]