It's possible there's too much startup icing and not enough cake.
The government’s move to push repayable funds the way of as many as four new tech- focused incubators got me thinking about interweb rumblings on whether there’s too much startup icing and not enough cake. Our new grants were about tech incubation, not accelerators specifically, but the lines are increasingly blurred.
The theory behind the grants was to fatten the Kiwi tech startup development pipeline and fill the much-publicised early-stage funding gap. In other words, if you get more starters in the venture race, more will cross the finish line even when an equally high proportion will be marked ‘did not finish’.
With Y Combinator acknowledged as the first accelerator in 2005 (and the best in the US last year), a Kauffman Fellow Programme study in 2011 said there were 200 accelerators across the US and Europe. The Seed-DB database in the US now tracks 134 accelerators in 33 countries, while a CrunchBase report tipped there’d be 170 accelerators on offer by the end of 2013.
In the typical model the founder team sacrifices a percentage of equity in exchange for short-term residence in a hotbed of mentoring and validation.
Accelerators now cater for startups of all types, including software companies, healthcare firms, emerging verticals such as wearable tech, programmes for makers and product designers, students and graduates, ‘mature’ startups and social entrepreneurs.
New Zealand shows signs of expansion alongside the proposed new incubators. The first tech accelerator, Lightning Lab, is into round two, and the Inspiring Stories Trust’s Living the Dream programme for social enterprises launched recently. Viclink and Creative HQ have announced the Futures Programme for students to help businesses solve problems through entrepreneurial thinking. A concentrated 14-week programme offering funding and mentoring, it shares some concepts with accelerators.
So could we end up with too many accelerators? Not if the programme meets a genuine need and gets results. I’ve heard Lightning Lab likened to completing an MBA in three months and the mentoring process like going several rounds in a heavyweight title fight.
The first effort’s results tell a success story. Four out of nine got funded to the collective tune of just over $2 million. Another made it into Startup Chile and got US$40,000.
We’re too small to get the range of specialist accelerators other nations have, but we don’t have to stay at home to accelerate, either.
An accelerator lays on networks, mentoring and the possibility of a pot of gold at the end of the rainbow, in the space of three months. Those things can take a long time to find using your own time and shoe leather. And jumping in the sandpit with other entrepreneurs can sharpen your thinking and overcome the significant downsides of entrepreneurial isolation – the worst being slow failure.
We can’t all come out accelerator stars, but we can ask ourselves how big we want to be and whether an accelerator is the best way to put our foot down. Sites like business-incubators.findthebest.com give you an idea of what matters: who the mentors are, how much equity you’ll give up, total funding dished out (and who got the most), number of graduated companies, specialisations and services and more.
Exits are a common measure of accelerator success, along with the odds on follow-up investment, but those are premature here.
You can get a good idea of value by asking teams that have been through an accelerator about what worked and what didn’t. Did they form partnerships that opened new markets, helped them get publicity or take their startup in a new direction? Did mentor overload muddy their founding vision or did some mentors make them confident it would work?
If you can afford three months away with your team instead of friends and family, an accelerator will offer value of some kind. It’s up to you to define your criteria for success.