October 28, 2019

Investors: Finding the right Accelerator

Investors: Finding the right Accelerator
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I get it, there are mixed views when it comes to Accelerators. If you’re someone that believes they’re all over-hyped pitch fests with little or no viable businesses emerging….this post is NOT for you (sorry, not sorry)

However, if you believe that in a mix of chaos and structured support interesting ideas emerge…continue on (This piece on Brian Eno’s concept of ‘Scenius’ is always a good read when it comes to collective, place based success)

In The Field 🌾

I’ve spent the last few years working with Investors, scouting for Investors and generally acting as bridge between different parts of the tech ecosystem. Many Accelerators speak of Investors but I rarely do I hear (if ever) any insights or advice for Investors interested in working with Accelerator programmes.

In this article I’ll use the term ‘Accelerator programme’ to describe any type of support programme which seeks to support entrepreneurs /founders bring business ideas to life.

Taking the concept of my previous article I now apply it to Investors. Here are 5 things Investors need to consider when working with Accelerator programmes.

1. Realism : Appetite for the Journey🍲

Let’s be up front. What’s your appetite here? I often encounter many investors who ultimately are looking for the next hidden ‘unicorn’ (whether explicitly stated or not)

I’d encourage perspective investors to avoid the trap question ‘what type of companies do I want to invest in’. Instead ask ‘what type of experiences am I seeking in working with founders’. The idea of working with founders is a spectrum and stretches between a financial transaction and actually getting hands on and supporting the business.

What is it that you want to experience?

  • Working closer with founders setting out on their first steps?
  • Mentoring / supporting companies who have real potential in reaching scale?
  • Dip your toe in the water and simply try a few things?

2. What Partnerships are in Place? 🤝

Not all Accelerator programmes are created equal, fact. Some of the best Accelerators are good programmes which expertly leverage strong external partnerships. It’s these partnerships which add credibility to the programme, but also act as a lightning road in attracting the most promising companies and entrepreneurs(for better or worse).

Questions to ask or investigate beforehand…

  • Are they partnered with a specific University (if so what department?)
  • Who provides the funding ? Motivations may be unclear (they often are)
  • What does this partnership actually translate into — access to senior members of staff, mentoring, coaching or general support?

A key question to consider is the organisation ‘wins’ in the context of the partnership. Once participating companies complete the programme what happens next? Does the partner benefit from referrals or better yet some sort of pilot using the companies technology?

3. How do they select participants? 🤾

I get it, everyone wants ‘traction’ which is roughly defined as some sort of tangible progress in the forms of patents secured, revenue or industry/sector recognition.

As an investor it will fall upon you to make a decision. What do you want the determining factor to be, what would it need to be for you? All Accelerators will ‘cut the pie’ in different ways. Entry to the programme may fall upon one or several of the below factors

  • Potential of the company to reach scale.
  • Talent of the founder / founding team.
  • University they attended (some programmes only accept applicants from the those associated with a particular institution)
  • Background of the applicant / founding team (it may be female /minority led)

More and more we’re seeing the emergence of those that bridge the gap between ‘traditional’ Venture Capital and Accelerator-like support in the form of company building. Examples of these type of organisations are listed below

4. What Stage?

I’ve lost count of the amount of times that I’ve heard investors say they want companies with ‘traction’. I mean…who doesn’t, right?

At the start I mentioned that’s its important to determine your appetite, what you’re willing to give beyond actual investment. Much like the selection process you’ll need to be clear on the stage at which the Accelerator works with entrepreneurs.

There are a few who overtly state who they’ll be working with, for example Tech Nation’s Upscale programmes (for companies who are already generating 1,000,000+ in revenue).

However, the overwhelming majority of Accelerators can be somewhat vague when concerning company maturity. In reality, most programmes say they’ll have a focus but will make exceptions for what they perceive as ‘exceptional potential’.

TIP : the more flexibility you have the greater experience you’re likely to have

5. Leverage Your Experience & Network 🌐

There is a great opportunity for Investors who are able to leverage their own network and proactively engage with Accelerator programmes. Most programmes do not, in most cases, have access to a ready made pool of investors. Instead of waiting for the right opportunity to present itself, consider the following below -

  • Approach promising Accelerators with offers for partnership. Whether that be on an individual basis or with a syndicate.
  • Negotiate guarantees on deal-flow and the possibility of referrals on an on-going basis
  • Offer to assist with selection. Those who support entrepreneurs are always looking for the ‘eye’ of those who are looking to deploy capital.

I’m often surprised at the gap between entrepreneurial support and those looking to deploy risk capital. In theory they’d be closely working together but in reality there’s often suspicion.

If there’s a key piece of insight I’ve gained it has to be….leverage. Many Investors often fail to recognise their leverage, let alone the value the they can provide Accelerators.

With so many programmes operational the reluctance is understandable. However, I do think there’s a huge opportunity often passed on by most Investors.

Is there anything else we should add to this list?

If you enjoyed this post, follow me on Twitter for more insight about Startup Discovery School and Life via @Gosbert 🚀

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