The other day I was asked by the founder of a startup what acceleration program I would recommend, how he/she should talk to them and what their conditions are. We frequently receive such questions at Activize and there are no short answers, because it also depends a lot on the situation of the startup.
From my point of view, I recommend each founder to contact the various existing accelerators and discuss everything to form their own opinion. Based on previous experiences with various accelerators you will find down below a series of questions that the founders can ask both the accelerators and their staff to figure out what is best for their startup.
In the last 3 years the word accelerator has come to be used quite often and with different meanings. The model has evolved from traditional accelerators that offer pre-seed investment, to corporate ones with a focus on one or more areas, but also to those based on equity services.
Accelerators, both traditional and newer models, usually offer a mix of the following:
- an educational program with thematic workshops
- access to mentors, various experts,consultants who can help with pieces of advice and feedback
- business development services related to their product / startup
- market access and expertise (such as finance, health)
- support on administrative and legal issues
- providing a framework for communication with other startups in the accelerator and mutual support
- office space (although the pandemic has shifted many of the activities online)
- some also offer investment - usually between €20K and €100K for 5-10% equity in the startup
1. Going back to the startups area, first of all, the founders should know clearly what their situation is, for example:
- Is it the right time for an accelerator? - If your startup’s business model is already validated and the trajectory is clear, do you still need all the activities in that program?
- What do you need an accelerator for? It could be for several reasons, but it is important to form your expectations according to the needs of the startup:
- access to an extended network (mentors, company representatives, potential clients)
- clarifying the vision related to the business and the product
- the investment offered and the connections with the other investors
- finding a co-founder or recruiting new people to the team
- What investment are you looking for - What is your preferred amount and what minimum threshold do you need? What calculations do you rely on when proposing this amount? Make a budget with your monthly expenses and a cost forecast for the next year, you can also use a template like this one here.
- Do you need capital to finish the product faster, to validate the business model or to expand?
“I think that when you think of applying to an accelerator, you have to ask yourself questions about yourself as a founder. And one of them would be: [what do I need to do better and grow my business?] And I think that the question about oneself applies very well in Romania because most of the founders still come from the IT field, so they probably lack the know-how of business, finance and sales. Maybe that's how they realize that they either need to learn other skills or find a co-founder who has the necessary skills. ”
2. Some questions that need to be asked regarding the accelerator (some of them already have answers on the accelerator website, but others can be asked directly).
- What are the activities that will be included in the program? What is compulsory and what not?
- Who are the mentors and to whom will we have access? Are they coming to the accelerator or will we meet separately?
- Who will I work specifically within this accelerator? What expertise do the members of the organizing team have?
- How much time do I have to devote to accelerator activities? If there is something that is not useful to us, will we be able to not participate in that activity?
- Beyond the activities and access to mentors, what else do you offer us? Office space, product consulting, business development support (how many hours per week)?
- How will the communication between our team and your team take place? Do all the founders have to get involved in the program or one representative is enough?
- At what intervals will the meetings be held about how progress report and status check
- How much equity you take and what funding you offer (this is usually known in advance)
- Through which process do you invest in a startup? (ex: equity investment, convertible notes)
- What are the conditions for a subsequent investment on your part?
- How many funds are you in contact with that could provide us with follow-on investment?
- What are the expectations from our startup in exchange for participation?
There are also accelerators that look for startups on a certain vertical/domain - in this case a worthwhile analysis needs to be made on whether the network to which the accelerator has access includes companies and people in the industry in which your startup operates.
It is important to see the term-sheet you need to sign to participate in the accelerator. I do not recommend an accelerator that does not make public the conditions in the term-sheet.
In an interview with start-up.ro, Jon Bradford, nicknamed "the godfather of European accelerators'', mentions that:
"Before you agree to participate in such a program, do your homework. Talk to those who participated and receive feedback to see if the program is worthwhile and if it's ok to take action in your startup.”
Other founders who have gone through an accelerator are the best source of information about the quality of that accelerator. Usually the participating startups are listed on the accelerator website, so you can easily get the contact details of the founders to ask for an informed opinion. Write to 4-5 founders and you will for sure receive some answers. It takes 15 minutes to write to them. And don't just rely on one answer, it's good to hear more than one.
3. Additionally, we recommend that the participation in the accelerator to be conditioned by the setting of clear objectives, based on the needs of the startup, to be agreed by both the founders of the startup and the managers of the accelerator. For example in the Memorandum of Understanding you can have something like:
By the end of the acceleration period we will achieve the following:
- (product) the product will reach the level of MVP which includes ... and will be tested with 50 potential customers
- (business model) - we will validate / invalidate the three monetization models and we will draw a conclusion that is the most appropriate
- (sales) we will reach the first 20 paying customers, with a conversion rate of 10%
- (investment) we will attract a further round of investment of €100K in the next 2 months from the end of the acceleration period
- (marketing) we will clarify which are the three acquisition channels that have the greatest potential
- (team) we will hire another backend developer and a marketing person with experience on running campaigns
It does not mean that it is mandatory for these objectives to be achieved 100%, but the expectations of both sides are clarified and a common direction for the work is set, and those in the accelerator will be able to use their resources in those directions.
After two acceleration programs in which I participated and ten other incubation/acceleration programs in which I was involved as a mentor or coordinator, for me the most important decision factor is the attitude of the team in the accelerator and what kind of relationship you can establish with them.
It is important for the created relationship to be constructive, to have mutual respect. An accelerator can’t impose on a startup what to do next, it can only advise, consult, influence decisions, but in the end the founders are the ones who will make the business/product decision.
The accelerator should provide the right framework for founders to make as well-informed business decisions as possible. If an accelerator ends up forcing a startup into doing something, then I think it didn't know how to explain well enough the reasons why a startup should make a certain move or it did not have the right attitude.
In conclusion, I think that an accelerator should be used to the maximum by the startup. In the acceleration programs we worked on, I was the most impressed by those who actively requested access to our network (mentors, company managers, potential customers, investors, consultants) and who constantly asked us about various opportunities or with the ones with whom we talked a lot and in detail about the problems they had.
Although the employees of the accelerator will offer various things, the founders are the ones who should ask for as much as possible and be proactive in using the resources of the accelerator, sometimes to the irritation of those involved; only then you will know that you have asked for enough and if you have reached the threshold. Keep asking, of course with respect and consideration. Make use of everything you can, the accelerator’s employees will say no if they can't offer something (and it's very normal that they can't or don't have time for everything you ask for, but at least you asked and found out).
That being said, good luck accelerating! 😉