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Summary:

All over the world, startup accelerator programs have exploded over the last few years – but that growth has been accompanied by diminishing returns for those taking part. How can this improve? Mikko Järvenpää, former staffer at Europe’s HackFwd program, has a few ideas.

mikkojarvenpaa

For the last year and a half, I’ve been working with one of Europe’s top accelerators, HackFwd, as their marketing geek. But now it’s time to make the entrepreneurial leap: I’m founding Vuact, a platform for finding and delivering interesting video to the right audiences. Suddenly being outside the accelerator world means I’m starting to look at what I’ve gained over the past 18 months — and having seen loads of startups, pitches and early-stage investments, I wanted to share what I’ve found out.

So what have I seen?

The fact is that accelerators and early-stage investment programs, particularly in Europe, are not really very differentiated yet. As the market matures we’ll see more vertically-focused programs. In fact, this is already starting. The U.K.’s Springboard, for example, just launched Springboard Mobile. There’s also GameFounders in Central and Eastern Europe, which focuses on the games industry.

But there’s still a long way to go

Where is the advertising technology accelerator, for example?

We’re going to see more and more of this, and it’s a good thing.

Why? Well, in having a tight vertical focus, an accelerator has clear positioning — which helps it immensely in marketing. It’s also likelier that the contacts and mentors on a vertical program have are directly relevant to the startups in the program. Same goes for potential business partners, VCs and acquirers. Finally, there’s a lot more potential for synergy in the portfolio. Take our adtech accelerator, for example: a startup creating an advertising network could benefit from the other startups on the program that are creating analytics, retargeting or creative management services.

And if the products don’t work out, there’s a higher chance of targeted talent acquisitions — potentially a good result for entrepreneurs, and a slight hedge to an investor’s risk.

Contrast this to a non-vertical program.

While getting in early-stage startups guarantees that they will run into a lot of similar problems, there is a lot of slack too.

Let’s assume that 10 startups meets 20 mentors from all over the industry: smart, experienced people who have great input for many ideas but don’t know everything. In most cases, a mentor who doesn’t know your business inside out will still give advice — but it will come from the perspective of an imaginary user, instead of from an industry expert, potential client or business partner.

That’s a real waste for everyone. Startups should be doing user testing and customer development all the time, not wasting precious mentorship time and relations for that.

And even if they really want to help, a mentor who doesn’t know anything about the games industry and doesn’t play games will get frustrated by talking to games startups. Equally, a B2B SaaS expert will mostly give input from their perspective, even if the startup in question is a social B2C product: I’ve seen more than one ‘white-labelled B2B version’ idea thrown around semi-reluctantly in meetings like this.

Having been to quite a few demo days and looked at various programs closely, sometimes it seems like the only common problem for the startups in an accelerator is getting follow-on funding. This, in turn, means that a lot of the participants are all-too clearly engineered for their demo day as an investment opportunity — a single make-or-break moment. But for investors looking for future stars, this can be frustrating as they need to cut through the pitch-clutter of different startups who are all aiming for the same end result.

Instead, a ‘lean accelerator’ should focus vertically to eliminate waste and shorten the iterations. Granted, from an investor’s perspective this decreases the diversity of a portfolio, but hey, you’re investing in early-stage startups: there are more important ways to manage risk than portfolio diversification.

For this reason, I’ve been watching the development of corporate accelerators — like Telefonica’s Wayra, Deutsche Telekom’s hub:raum, or even the BBC Worldwide Labs — with interest. While it seems in some regard that they’re just me-too programs, their deep vertical expertise and contact base can make them very appealing for startups that fit the profile.

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  1. What’s the name of you ad tech accelerator? love to know more? Ad networks are easy to set up. Do they really need an accelerator’s investment or guidance? No. And if it’s a “middle man” ad network you are building you are in real trouble, as the market has shifted toward automated buying.

    I would say the Euro ad tech space needs a funding eco-system (outside the likes of Thomas Falk et al) for ad tech, not another accelerator – and certainly not one with a verticalised ad tech focus. And what you mention in your piece are point solutions (anlytics, targeting, etc). What we need is a roll-up, not more FNACs.

    1. Thanks for the comment. Development of a funding ecosystem that you mention, especially in Europe, is of paramount importance. The ad tech accelerator was an example of the internal dynamics of an accelerator program. The portfolio product examples were neither entirely developed startup ideas, but rather areas of focus. To your point ‘ad networks are easy to set up’ – yes, so are social news sharing sites, but creating a winner takes more than just setting one up. Accelerators are in the business of picking and creating winners. The lower the barriers to entry for a product, the more other unfair advantages need to be bestowed upon a potential winner.

  2. Jason Della Rocca Monday, August 13, 2012

    Agree 100% on vertical integration. We’re putting the finishing touches on a game focused incubator+accelerator in Montreal. Some notes via my blog: http://www.realitypanic.com/archives/496

    The integration allows us to not only enable teams to bake the products, but also help them bring them directly to market. Would love to get your thoughts on the model.

    1. Jason, sounds very good, best of luck. I’ll reach out regarding a few more notes I have on the topic and a couple of questions based on what you’re doing!

  3. Byron M. G. Sanford, Esq. Wednesday, August 15, 2012

    Reblogged this on Briskin, Cross & Sanford, LLC and commented:
    This article definitely covers some interesting thoughts on the different models for a Business Accelerator program.

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