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Summary:

After leaving the accelerator world, Mikko Järvenpää decided to ask entrepreneurs what they really thought about their experiences inside the startup factories. After talking to more than 150 graduates he discovered that acceleration can work well, but programs don’t always provide the help startups really need.

mikkojarvenpaa

Accelerators are of great interest to many startups: the funding and mentoring they offered has huge appeal to both first-time founders and more seasoned entrepreneurs. But what exactly are the benefits they offer — and are there ways for startups to get some of them even without joining an accelerator?

As I moved from the acceleration side back to being an entrepreneur, I wanted to systematically list what I’d learned and work out what entrepreneurs could generally benefit from. I also ran a survey and a string of interviews to find the value that startups expect from accelerators — and ask why they actually got. My findings form the backbone of my book Speed Up Your Startup: What Entrepreneurs Should Learn From Accelerators To Succeed With Their Businesses. 

What I found was there are 10 primary ways accelerators add value to startups. Breaking them down, we’re able to see how that value is produced, and come up with ways to get the same advantage elsewhere. The goal is both to demystify and examine the workings of a successful accelerator, and produce recommendations that startups can act on.

Let’s take a look.

1. Generating and validating an idea and a business model. Accelerators help through expertise in the field, knowing what has worked and what hasn’t before, and what others are doing that is similar. 

2. Investing and finding more investors. There is more to startup support than money, but it helps a lot. As well as the validation offered by the previous point, investors also like the validation provided by other investors. A startup from an accelerator program has already passed a certain vetting process and is thus likelier to be interesting. This also works in the case of co-investing: many investors like co-investing with proven accelerators and VCs.

3. Providing contacts and opening doors. A good investor can open doors for you that you wouldn’t even get to knock on yourself. This also goes for customers, partners, potential hires and media contacts. Accelerators that have proven successful in the past — or ones that have successful individuals behind them —are more interesting and thus have the strongest contacts.

4. Providing mentors, advisors and guidance. This is a key component of many programs. The startup world runs by advising and mentorship. Other founders share their own experiences on their blogs, in the talks they give, and in the mentorship sessions at accelerator programs. These are both networking opportunities and learning opportunities for startups, but primarily they are geared toward telling the startups what they should do to multiply their chances of success.

5. Providing hands-on help or education. If the startup needs to do something that they can’t do themselves, accelerators may either help them, train them or help find someone to do it for them. It is common for an early-stage accelerator to help in company formation, for example. Some have experts-in-residence for instance in marketing and recruiting. 

6. Helping in product development and testing. An accelerator can help shape the product while it is being developed. This depends much on the length of the program and on the program’s focus. It’s also key whether this is done within the accelerator’s core team, by their immediate network or by securing test or pilot customers and users externally.

7. Helping with product marketing and user acquisition. Accelerators are very concerned with getting real users and customers for their startups, and some help with this by providing hands-on resources for marketing. Without large marketing budgets, the most efficient way to ensure this is building products that have marketing built into their logic.

8. Providing a peer group in a high-pressure environment. Founders get best along with other founders — not because of their amicable personalities, but because they share a passion for doing something special that outsiders often may not understand. While that’s at least a generalization and at worst a cliché, having a peer group who face similar challenges can be highly motivating. Time pressure may seem like a bug, not a feature, but it’s a success factor in a startup accelerator. Deadlines are tangible measures of discipline — and enforcements of it.

9. Providing a physical location and support resources. A place to work from can be a co-working space, an office or a series of temporary gatherings. Physical resources like printers, chairs and coffee makers also make a startup’s life easier.

10. Negotiating and providing discounts, freebies and perks. This is slightly related to points 3–5, but worth underlining separately due to their potential impact. For example, Amazon Web Services partners with leading startup accelerators and offers free credits to their services, making the infrastructure choice effortless to many.

The survey confirmed this breakdown, but also unearthed some interesting differences between what startups expect from accelerators and what they actually receive from them.

Mentorship and advice from the core team, for example, had both high expectations and were deemed valuable by startups taking the survey — but customer and partner contacts in the industry didn’t fare as well.

Forty nine percent of respondents who had not participated in an accelerator reported that customer contacts would be very desirable. However, only 22 percent of the participants reported that the industry contacts provided by the accelerator had been excellent. Forty six percent reported these to have been “neutral” or “poor”. More detailed answers support this, with many founders pointing out that an accelerator would add the most value by providing partner or customer contacts. “Industry fit” was also mentioned as an important criteria when selecting an accelerator program in the first place. 

The lack of auxiliary business services – such as company formation, accounting or payroll processing – provided by the accelerator programs was a big letdown. 67 percent of respondents reported these as “poor” or “neutral”. At the same time, in non-accelerated startups, 65 percent of respondents placed these services in the top two categories of interest.

The survey was taken by 151 startups and supplemented with 33 additional interviews. More about the survey and the book is at the Speed Up Your Startup site.

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  1. Great Read! Way to do it Mikko!

  2. Robert L. Greenberg Monday, October 22, 2012

    I’ve always found that 9 and 10 seem to be the most important. Being able to bounce ideas off of colleagues in the same (or similar) industry is immensely important when starting any new business.

  3. Words.
    Great article

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