Then and now. Accelerators 101

The accelerators’ ecosystem has changed fundamentally over the past few years. How did it all start and where is it headed? When is the right moment to join an accelerator, how should you choose the one that fits your needs and what’s in it for you? We found out the answers to these questions and many others last November at How to Web Conference 2015.

Max Kelly (Managing Director, Techstars London), Martyn Davies (Programme Director & Heads of Engagement, Ignite London), Rune Theill (Co-Founder, Rockstart Accelerator) and Todor Breshkov (Managing Partner, LAUNCHub) are the panelists that kindly accepted our invitation to take the stage and share their valuable insights & experience with the audience. This story presents the key take-aways of the discussion.

The accelerator ecosystem

The accelerator industry is changing and we are at a turning point today. With more and more programs emerging all around the world, the key differentiator is the network that startups have access to, as well as the programs’ focus, both ensuring the quality of support. We see more and more accelerators choosing to specialize on different niches / sectors where they can bring a more significant contribution with the available resources, while diversifying the services offered beyond acceleration or adapting the classical model to better fit the realities of the ecosystem.

If we take the example of Rockstart, it started 4 years ago as an accelerator willing to support early stage tech startups. Since then, they developed complementary offerings to the program: a co-working space, a community event they run across Europe, and they’re continuously looking to go to the next level. Besides their horizontal program, they moved into 2 verticals and they chose health and energy because these are the markets harder to penetrate, where startups have to work with established players and hence need introductions to make things happen.

Similarly, LAUNCHub started 3 years ago as a traditional accelerator program targeting early stage tech startups from the region (Central and Eastern Europe). However, after running their first batches they decided to change their model: they gave up the classical format of taking in companies in batches, and choose instead to offer seed investments and work with companies on a case by case basis, shaping their offering to better fit the individual needs and development strategies of their teams.

When is the right moment to join an accelerator?

“What an accelerator does is to test the people’s level of commitment to each other and to the idea / product. Sometimes teams get through it and get out stronger, sometimes one or more of the founders just go away or they give up completely”, Martyn Davies pointed out.

Most accelerators out there target early-stage tech startups. However, the definition of what early stage means is somehow vague, each accelerator having its own specific interpretation of the term. Generally, early stage startups range from the ones that just launched an MVP to the companies having 0.5 million EUR in turnover, that are active in one country and are figuring out how to scale their businesses globally.

“We’ve always worked with pre-seed stage startups, teams that only have an idea, and we helped them get to an MVP. What Ignite does is helping our teams to stop guessing by equipping them with the tools & skills to test their assumptions, giving them access to mentors and to our network, as well as supporting them shape their business strategy on the medium run”, Martyn Davies explained.

“We work with founders that have a product and a little bit of traction. If there is a market opportunity, I like to co-develop the product and the business model with the teams”, Rune Theill added.

This is not the case for Techstars or LAUNCHub, who work with more mature, revenue-generating teams, that have already built their MVP and reached (or are very close to reaching) product market fit.

“The average team size is 3 people. Half of our teams are pre-revenue, while the other half is already generating revenues from their clients”, Max Kelly explained.

What’s in it for you in an accelerator?

There are several ways an accelerator can help you speed up the development of your company:

  • Access to a network: an accelerator will help you grow faster by connecting you with people in their network (experienced professionals, investors, potential distribution partners, etc.);
  • Accelerated learning: this type of program accelerates what you already have / know as a team and helps you learn faster and iterate quickly;
  • Access to mentors: you’ll share the room with experienced mentors and some other talented startups, you’re assumptions will be constantly questioned and, at the end of the day, it’s going to be very clear what works for your company, as well as what doesn’t.

There are also limitations when it comes to this model and it’s important to be aware of the fact that an accelerator won’t solve the problems that you have in your team, won’t give you focus, nor commitment, and you still have to work hard to reach your objectives

When shouldn’t you go to an accelerator?

There are several instances where you’d be better off not joining an accelerator program. And here are some that have been identified by our panelists:

  • When you have an idea that is not mature enough to be tested. If you join an accelerator with only an idea, it will be very difficult for you to have a steep learning curve since you’ll only be available to test assumptions by discussing with mentors, instead of working with potential customers;
  • When you are missing a co-founder. If you’re team is not complete, it does not make sense to invest time in applying and, later on, attending an accelerator. This is not the way to actually build your company, so you’d better take all the required steps in advance;
  • When your company is too late stage for the program. Depending on the flavor of the accelerator, you have to be aware of the level you’re actually at. Being too developed in comparison with the other startups in your batch will turn you into the smartest in the room, but will not help you learn more, faster;
  • When you are not interested in raising funds. One of the major goals of most accelerators out there is to make your startup investment ready. There will be lots of pitching involved, and if you’re not interested there might be some other ways to make better use of your time;
  • When the network of the accelerator can’t help you. Hardware, for example, is quite difficult to accelerate: this is a sector where products are not delivered very quickly, and you need specific connections to help you out. If the accelerator you’re looking at cannot offer you these connections, it may not be wise to join it.

At the end of the day, it’s up to the team to choose which way to go. Joining an accelerator or raising money does not necessarily mean that your company is going to be successful, nor the other way around.

What should you look at when choosing an accelerator?

After weighing all the pros and cons, if you decide that an accelerator will help you out there’s still one important thing to be done: choosing the right program for you from the many available out there. And in doing so, there are a couple of things you should look at:

  • Who are the people running it

“When joining an accelerator, you get an investor on board. You have to know whether you like this investor and you’d be comfortable having him on your term sheet for the company’s life. Check out the background of the people running the program and make an educated decision”, Rune Theill advises.

  • Who are their alumni

Next, check out the teams they’ve worked with before and the results they had, go out there and speak with the alumni. If they say the program’s fantastic, than this is a great credential to help you make your decision. Otherwise, understand why they don’t say so and make some more research.

“If they ask me about my program, they have no reason to believe me: I am only going to tell them what they want to hear. I am directing the program, I believe it’s good, but if you’re going to join it you have to understand what’s in it for you and the startups that are part of the alumni network are the best ones to give you that information. They do the marketing part for us”, Martyn Davies pointed out.

  • What are the terms

Carefully looking at the terms is another thing you must do early on: each accelerator program has terms that most of the times are non-negotiable and impact the future development of your company. Understand the terms and what they mean for you: these are hard things that you can easily check with a lawyer.

“It surprises me that teams don’t put enough time in the due diligence process before actually applying to the program. Most of them only do so after being accepted, and they lose valuable time this way. They should do it before!”, Rune concludes.

If you like the people running the accelerator and you’d like them on board, have strong recommendations from the alumni, and the terms are convenient, then you’ve got the match you are looking for! Work on your application and get ready: you’ll need your full commitment and focus to make the most out of the accelerator program.

If you’re interested to find out more valuable insights on the accelerators ecosystem, check out the video of the panel “Then and Now. Accelerators 101”

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