A few things to consider before applying to a startup accelerator.
Choosing an acceleration program can feel overwhelming. There are currently many options in the market, and the application process is quite demanding. Before embarking on that journey, it is essential to understand why to participate in a startup accelerator.
What is a startup accelerator?
A startup accelerator is a program that works with a selected cohort of companies to get them into optimising and growing their business and refine their pitch to investors and be closer to larger corporates to use them as a testbed for their beta products. The accelerators can be a generalist or focused on specific areas (technology, impact, environment, etc.) or verticals (consumer products, food, renewable energy, etc.). On average, startup accelerators last for 15 weeks. Some programs provide on-going support after the program. The most famous programs are Techstars and YCombinator, and they are both tech accelerators. Another successful example is 500 startups which is a more generalist business accelerator.
Many successful entrepreneurs built great companies without ever participating in a startup accelerator. But there are also many familiar brands that we use every day that did go through one. Here are a few examples: Uber, Airbnb, Dropbox, Reddit and Sendgrid to name only a few.
How does startup accelerator work?
Again, this will vary from one startup accelerator to another. But in all accelerators, the startups are expected to work very hard. If you are a startup considering applying to a startup accelerator, defer anything non-urgent to after the program to maximise your results. Also, make sure you have buy-in from your closest friends and family about these expectations too.
Most startup accelerators go through the following phases:
1. Application period
Startup accelerators are in very high demand. Additionally, they require a lot of dedication from founding teams. The application period is critical to assess if there is a fit for the applicant startups in the program. For this reason, the accelerator application form is very comprehensive focusing not only on the business but also on the founders’ profile. During this period, the most promising candidates are also interviewed by the acceleration staff to assess the traction of their business, team quality and availability to commit in the startup accelerator program.
2. Program kick-off
The first week of the program is very exciting, and mostly focuses on:
- Introducing accelerator staff, companies, and wider stakeholders;
- Orienting teams to environment, office, procedures, and tools;
- Baseline expectations on program structure, tracking progress and reporting;– Mentor matching;
- Partying and mingling. The startups will be spending a lot of time together and the first week is the time to find common ground.
3. During the program
Depending on the field, the working methodology of startup acceleration programs varies across accelerators. Some startup accelerators such as Maze X work closely with corporates so you will be expected to develop a corporate pilot testing project throughout the program. Others don’t.Weiting Liu, Founder & CEO of Codementor, is an alumnus of Ycombinator and Techstars. Both programs are highly successful but have very different approaches. According to her testimony, Ycombinator is very hands-off and focuses mostly on defining and monitoring self-imposed weekly milestones. This dynamic creates an environment of healthy competition as participants compare their progress to that of other participants. This approach allows startups to focus more on their goals, but it can also feel lonelier since they can have +80’ startups per cohort.Her experience of Techstars was very different, on the other hand. Techstars is very hands-on and runs a busy weekly schedule with activities such as:
- Working sessions with experts in crucial areas for startup growth as product, sales or recruitment;
- Mentor dating;
- Pitch training;
- Networking events among startups, corporates and investors (e: breakfast with CEOs).
While these activities create numerous opportunities for startups, a hands-on approach can make the week schedule heavier for the founders that are running a company at the same time.
At Maze X we lean more towards the YC approach on dealing with the startups blending it with Techstars mentor-driven approach. Our distinctive features are the focus on impact and the proximity with large corporates to test their products.
4. Demo Day
Most startup accelerators are investor ready programs. That is why most programs culminate in a Demo Day where all startups make their pitch to an audience of investors, partners and media. This is the moment to present your improved business model and pitch your solution to meet the investor or business partner that will secure your next round.
Why join a startup accelerator program?
Startups apply to accelerators for different reasons. However, it is always about gaining access to one of the following:
- A network of investors and mentors;
- Broader market segments through pilot-projects with corporates;
- Capital (in exchange or not for equity);
- Support from an experienced and critical team to help them question their business model;
- A community of startups that are going through or have been through the same challenges as you are facing now.
Startup accelerator vs startup incubator?
Both accelerators and incubators focus on helping startups succeed. However, their target and approach are different.
Startup accelerators are focused on building capacity of existing business with some traction. Traction means that startups have already clients, a minimum viable product and are on the road to product-market fit. The programmes are time-limited and only work with a finite number of startups per cohort. Startup accelerators can have a more or less hands-on approach, be more or less structured and rely strongly on connecting startups to a relevant network of mentors, corporates and investors.
Incubators, on the other hand, provide resources for entrepreneurs to translate their business ideas into minimum viable products. Most incubators are focused on creating a community of like-minded teams and have a shared co-working space run by a month-to-month lease system. Most times, they are not time-limited nor imply a thorough application form.
Besides accelerators and incubators, and according to Ian Hathaway, from Harvard Business Review, two additional enablers also support startups: angel investors and hybrid institutions. Here are the main differences.
How to find the right mentor?
All experienced entrepreneurs know that having the right mentorship is critical for their business success. Startup accelerators know this too, that is why they invest significantly in growing a vibrant network of mentors and in finding the right startup mentor to leverage this opportunity. Mentors are people who have extensive domain expertise and experience (technical, sales, marketing, legal, financial, investors, HR, and talent). Their role is to help you to think critically about your business and to give you access to business leads you would not access otherwise.
Mentors are also very successful and busy people. Instead of going after the mentors you already know such as Zuckerberg doppelgangers, reflect seriously on the challenges your business is facing beforehand and reach out to the mentors who own the expertise and network in those fields. Even if you don’t know them, you will be able to tap into richer insights, overcome your struggles and maybe land significant leads if you manage the mentor relationship successfully.
At MAZE-X, our mentors are experts on product management and have a strong focus on how sustainable and rapid-growth business models can deliver outstanding impact outcomes whether they are social or environmental.
What are the pros and cons of a startup accelerator?
A lot of successful entrepreneurs never participated in an acceleration program. But startup accelerators can make your business grow more in three months than in one or two years if you know how to benefit from all its opportunities. That said, please consider the following pros and cons before you apply:
- Time: it is very demanding both on a personal and business level. “you need to be in the accelerator focused on sprinting while managing the day to day of your business;
- Equity: most programs are seed accelerators, which means they give you money in exchange for equity. It is important to balance what you envisioned for your business and the new invested interest if you for a seed accelerator. You can also go for a no-equity stipend program, like Maze X;
- Costs: most programs still take place on a physical headquarters. Depending on how far you are, it might be costly to relocate into another city;
- A high-pressure environment that can feel overwhelming if you are facing pressure on other fronts.
- Funding. By participating in a startup accelerator program, you are generally granted some kind of funding. And you access a network of corporates and investors that might be willing to test your product in new markets or ensure your next funding round;
- Expert support. During the acceleration period you will be supported by a dedicated team of experts and staff that will help you accelerate your business faster than you ever did before;
- Mentors. Most programs are backed by a powerful mentor network that will open doors for your business that you would not access otherwise. Take some time to check the mentors’ profiles before you apply;
- Coworking space. Despite de costs of relocating to a new city, you will have a free working space. Sometimes these spaces belong to a larger community where you will be able to connect to hustlers like you that know your challenges first-hand;
- Alumni network. All the previous participants of the programme remain highly engaged with the startup accelerator community, and they are too a valuable network to scale your business;
- Pitch practice. After participating in a startup accelerator, you will be able to nail any elevator pitch. Practice makes perfect.
What is different about a startup accelerator and venture capital?
A startup accelerator is a program that works with a selected cohort of companies to get them into optimising and growing their business and refine their pitch to investors and be closer to larger corporates to use them as a testbed for their beta products. The seed accelerators offer a stipend with equity in return. On average, ticket sizes are smaller than venture capital funds. Nonetheless, some startup accelerators, like Maze X, offer a stipend with no equity which can be very helpful in case startups have to relocate. Regardless of the model, the focus is to accelerate the business, and the equity stake is used to align incentives.
A venture capital fund is a vehicle that mainly invests in early-stage tech-based businesses that have significant growth potential. The fund will typically take an equity stake and will partner with the entrepreneurs providing guidance and capital over a long-term time horizon. The fund will seek to generate appropriate liquidity events, whereby the equity stake is sold (to another investor or buyer) for more than the initial purchase price.
How different is a startup accelerator for social impact startups (tech, social, environment)?
A non-impact startup accelerator is focused exclusively on growth. The way to get there may vary: some programs focus on one business metric and test various ways to improve it during acceleration. Others push the founders to go out there and talk to customers to be able to develop a product that people want. Either profit, customer base or any other business metric, the goal of the accelerator will be to improve it and do it fast.
An impact startup accelerator also focuses on growth but with a triple-bottom approach. While the focus is also on financial results, the acceleration program also focuses on optimising the impact you have on people and the environment. Having impact embedded in the business solution is a mandatory requirement for participating in an impact startup accelerator. The startup needs to be solving a social and environmental challenge alongside having the potential for an attractive financial return. Impact-oriented organisations like MAZE believe these businesses will outperform non-impact orientated companies. As the presence of a social mission provides an ‘unfair’ advantage in attracting top talent, engaging with customers and receiving investment as millennials increasingly represent the key demographic in each of the stakeholder groups mentioned.
Cristina is Head of Communications at MAZE. An impact investing firm founded by the Calouste Gulbenkian in 2013. MAZE runs a pan-European impact startup accelerator based in Lisbon called Maze X. Applications are open until March 25th. Apply here.
Maze X Impact Unicorns in the Making.