Monday, July 27, 2015

1001 Accelerators – The Tale of the Right Choice

Accelerators. They often promise to make your company a billion-dollar business, to help you make your product a must-have or get you a follow-on investment that will secure a bright future for your company and allow you to have a good night sleep again. Since 2005, when the first accelerator Y combinator emerged, we have witnessed an expansion of entities, platforms, initiatives that call themselves accelerators and often claim to be saviors of early-stage startups. Europe is not an exception. There are more 70 accelerators active within the borders of European Union (some sources say even 100) and due to freedom of movement and small amount of seed capital that they provide, it is fairly easy for any startup to give it a shot in any member state. Given the amount of accelerators, how should you choose the one that can provide you with most value-add?

Well first of all, it is not so easy to be accepted for the acceleration program.  At least not for the successful one. The cohorts (classes of companies) are quite small (10-15 startups) and the acceptance rates span from 2% for the most popular programs to 10-15% for specialized and less known programs. Once you made it pass the first red tape it is a time to choose the program that will be a good fit for your company. Actually the research on ideal accelerator program should start before your application.  It is possible that the application process will require you to conduct several interviews, prepare additional documents or engage in further discussions. Frankly as a CEO of a startup you do not have time to engage in these activities unless you know that there may be a light at the end of the tunnel.

So how should you screen accelerator programs?

  1. Check the number of accelerated companies. It does not necessarily prove the quality of the program but at least you can make sure that the accelerator team has experience with acceleration and they had some time to fix the bugs by trial & error method.
  2. Check the number of companies that obtained follow-on investments or had a successful exit (acquisition or IPO). It is quite burdensome to do it manually but you can still do this background check through accessible databases such as Crunchbase. Be aware that these companies are still private and hence not all the follow-ons and exits have been made public.  In any case also partial data may make your decision better-informed.
  3. Check the pool of mentors and their backgrounds. Too many mentors listed (probably counting in extended network) or no mentor list at all? This should raise a red flag. If possible request this information additionally. The best programs include mentors from various backgrounds that can guide you on different aspects of business. It proved to be very efficient to involve angels or VCs into mentoring programs as well and thus allow them “get to know” these startups before they even become investment ready.
  4. Who are the partners? Almost every accelerator has number of partners that cooperate on the acceleration program. Although some partnerships may look fancy, be careful with your expectations. For instance some of the companies like Google or Amazon only provide items to Founder’s package and listing them as partners does not necessarily mean that you will be invited for the training to Google campus.
  5. General accelerator or specialized accelerator? It depends on the quality of the accelerator. Specialized accelerator may often provide more specialized mentoring and early introduction into the industry and its networks.  Do not however disregard other boxes on your checklist just because those guys are from your industry.
  6. Corporate accelerator or independent accelerator? Both have pros and cons. Corporate accelerator operates in line with the corporate strategy and has interest in startups which have an acquisition potential or which can become suppliers of the corporation.  It can provide the startup with unique opportunities, industry-specific skillset and developed network of contacts. On the other hand, in case you do not get follow-on funding from the corporation or do not become a corporate supplier it may be perceived as a negative signal by other players in the industry. 
  7. Independent testimony rather than staged success story. Many accelerators tend to parade their success stories on their websites and while these may be helpful, always try to find and consult an independent source. If you are close to making a choice, try to get in touch with a company which can provide you with first hand information about the program. In case that is not possible, at least try to verify the info with available public sources.
  8. Always do the interview. The “click” with the team that runs the program should also not be underestimated. You will spend a lot of time together next three months or so and the quality of your cooperation to large extent depends on the effectiveness of your communication.  If you do not like the general atmosphere that the accelerator team creates rather go with your gut feeling.
  9. The acceleration does not end with the program. Try to find out whether or to what extent the accelerator supports its startups once the acceleration program is over.  Remember that accelerator remains a minority shareholder in your startup and the follow-up guidance and networking (naturally not so intensive as during the program) may still bring a significant value to your startup.

All in all, it is a bit of an art to choose and also be chosen for the right acceleration program.  Even if your first acceleration program does not live up to your expectation you can always try another one. In fact many successful companies went through more than one acceleration program. On the other hand, even if you are not offered a spot in you “ideal” program, there is no reason for desperation. Many other successful companies were valued by their investors precisely for bootstrapping in the early stages of their existence.

Author: Tilburg University