How do you measure the success of an accelerator?

Since joining and running the Microsoft Accelerator for the last 2 months, I thought I’d take some time to follow up on what I learned in my first month running an accelerator with a question to understand how to measure success.

There are, in our internal tracking list over 100 incubators and accelerators in India, over 75% of which are run by colleges and educational institutions. Of the 30+ for profit, private accelerators and seed fund / incubators, nearly 25 of them provide space, initial funding and mentorship.

Over the last few months I tried to get a sense for what constitutes success at an accelerator.

The prevailing wisdom seems to be that the only metric accelerators should be measured by is to create companies that are “fundable”. This implies that accelerators and seed fund / incubators should only look to fund teams and companies that have a good chance of getting follow-on funding.

That’s also the #1 metric even the entrepreneurs at our accelerator judge us by. A few weeks ago CNBC did a 11 min video interview of our current batch and the only thing that came from each and every entrepreneur was the amount of money they wanted to raise at the end of the batch.

Update: From a few email’s I got from some of the founders at our accelerator, who said that they were asked by CNBC to only focus on the funding part during their interview.

The problem with this measurement is that it focuses the selection process to be a lot more risk averse and less open to risky and unproven teams. Since many in the industry claim VC’s are becoming more risk averse, who then takes the risk to develop entrepreneurs who are young and inexperienced?

On the other hand, I do understand many accelerators have raised capital and have a fiduciary responsibility to return multiple-fold that money to their investors. Which is why we continue to see copy-cat models which have a standard $10K – $25K in investment and a 6-10% of the company in exchange. The model is based on a spray and pray approach to look for 1-2 “winners” in a batch of  10 companies.

Which leads me to conclude that only funding should not be the metric that you judge accelerators by, but if that’s not the only metric, what else is measurable?

Lets quickly look at what accelerators provide. Space, Mentors, a set of graduates from previous batches, a Demo day, and some amenities (food, etc.) and a demo day to meet investors.

Almost every accelerator has about 20-50 mentors who help the portfolio companies. From a quick glance of their websites, nearly 20 of the 200+ mentors appears on all websites. So none of the accelerators can really claim “we have the best mentors”. In fact most good mentors I know help more than one accelerator.

There is one difference though: Product mentors are rare in India and very few have a person (or set of people) to help you think through building something that’s needed by customers or users.

Space (desks, etc.) offered by most accelerators tends to be largely the same, and while there are some exceptional spaces, most entrepreneurs wont really judge the accelerator by the quality of the space.Same goes for amenities. Although we provide free food for all at the Microsoft accelerator, that’s largely a nice to have.

Previous batch founders and other companies funded before also help a lot, but they tend to be as good or as bad as the selection process setup initially. Furthermore, since many accelerators and seed funds were experimenting their models earlier, many of the previous batches were largely work-in-progress.

So then we are back to the demo day and investor connections.

Which is why we built an early adopter network and system to ensure that entrepreneurs have access to the first few marquee customers that they need (who will pay as well) to ensure they are building something someone needs and is willing to pay for.

Hands-on design, architecture, marketing, PR (making connections with reporters) and sales are other things we are providing to ensure traction before their seed round.

The question is how do you measure the value of these items and more importantly the impact of these on the startup’s future?

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10 thoughts on “How do you measure the success of an accelerator?

  1. Vijay Sharma (@vijaysw)

    Well, the only one I can look at that we can consider judging would be the Morpheus, because they have been around for so long.

    One thing great in their portfolio and I felt it at Practo and still see it many friends/customers from the Gang, was the unity they have to support each other.

    I know a lot of learning’s from Interviewstreet, Commonfloor, Practo is being passed on to the next batches, and in a way the metric for Morpheus to say are being good from the outside also seems to be – which got funding and Grew – (the above 3 come to mind), that being said, some shut down, some got acquired and others pivoted or joined other start-ups.

    To me – 3 things to measure for an accelerator and in due time:
    1. Growth of Start-ups : Customers, Hiring, Scale to next level (whatever it might be)
    2. Alumni give-back Mentorship from previous batches
    3. Tracking folks who shut-shop/close/don’t grow as well post 2 years and noticing where they fit in the eco-system.

    I always had an interesting discussion back at NEN, in wanting to track where these E-Leaders Go, do they join big companies, do they join Infy likes, do they join start-ups, do they build start-ups, do they join Masters Schools. If they joined or built start-ups I would put a +1 , else I felt the impact was not created and NEN was just a club for those folks.

    So in an accelerator’s case, hopefully the point 3. folks remain involved, participate in the eco-system in some format and contribute. Thoughts?

    Reply
  2. Sree Vijaykumar

    Mukund, we are in the current batch at 500 Startups.. A key metric should be company growth from start till end of the program and this could be measured in users, downloads, revenues, etc. Adding to your point about product mentors, that’s a key resource that entrepreneurs should be encouraged to use, rather than the ‘give me money and we’ll figure it out’ approach that many entrepreneurs take. Good product/subject matter mentors can make a huge difference if asked the right questions.. Another benefit from accelerators is the network that the mentors and partners bring. Smart entrepreneurs will take advantage of that to fix product/traction/customer acquisition issues.

    Reply
  3. Sridhar

    Mukund, it is a great strength of yours to be self critical and look at the large picture in the manner you have done. After reading your post two things come to my mind – firstly, are you focused too much on measurement? Secondly, I am reminded of kite flying, mostly from my own entrepreneurial journey about the core of a startup – what are you innovating or doing better at? Too much measurement can only lead, IMO, to analysis paralysis. To fly a kite, you have the whole blue sky, wind that is not too strong or too light, find an uncluttered area where the kite wont get tangled. You stand with your back to the wind and pull the string against the wind to make it rise, tug left or right to steer, and finally, give some line at greater heights to balance the tension between wind force and string tension. The startup journey is as exploratory, going with the wind, going against it. I like to believe these are equally important moments of a startup. As an accelerator, you perhaps are trying to hold the kite and throw it to the wind when the team flying it is ready to fly, on cue. Do talk about that. This stuff, I imagine are more of stories from your accelerator pod, rich in detail, contextual. Now, you are an amazing number cruncher as evident from your blogs! Take these stories and slice and dice to find new metrics – how many (micro) twists and turns the startups took to find direction, and so on. Once again, nice to be here.

    Reply
  4. Mukund Mohan Post author

    Thanks Sridhar. Great observation on my right brained tendency when it comes to everything. Maybe its too early to measure, but I am lost in what I should optimize to make life better for our startups.

    Reply
  5. Akshay Surve

    Hi Mukund,

    I do have a couple of follow-up thoughts:

    1. What’s the goal of the accelerator?

    I have been following-up on accelerators for sometime now as an entrepreneur and over time a clear pattern emerges in the kind of startups they incubate. Let me give a shot at putting this in words for some accelerators:

    a) Y-combinator: Get the smartest hustlers and/or hackers together; and that’s the secret to startup success

    b) 500startups: Spray and pray. Excuse me for adopting your terminology here, it just fits right!

    c) Morpheus: Prep-school for young startups. The startup ecosystem and it’s root is at a very naive stage in India and that’s where Morpheus fits in.

    (I could add many more here… but that’s the gist)

    2. What to measure can be directly derived from the goal. Example – for Ycombinator, they are looking for that 1 (few) big success. 500startups in general looks for moderate exits. Morpheus may probably look for follow-up funding; growth and sustenance as a business.

    Personal take on how / what to measure:

    I think accelerators are unique. I come from the background of being a social entrepreneur and I cannot stop myself from thinking of accelerators as a social enterprises with multiple bottom lines and far reaching impact on the ecosystem vs. a profit maximising business. In the same line of thought – I have seen a very interesting methodology emerge around measuring SROI (social return on investment) which track Inputs, Outputs, Outcomes and Impacts. Here is a 12 page primer – http://sroi.london.edu/Measuring-Social-Impact.pdf

    Reply
  6. Akshay Surve

    Hi Mukund,

    I do have a couple of follow-up thoughts:

    1. What’s the goal of the accelerator?

    I have been following-up on accelerators for sometime now as an entrepreneur and over time a clear pattern emerges in the kind of startups they incubate. Let me give a shot at putting this in words for some accelerators:

    a) Y-combinator: Get the smartest hustlers and/or hackers together; and that’s the secret to startup success

    b) 500startups: Spray and pray. Excuse me for adopting your terminology here, it just fits right!

    c) Morpheus: Prep-school for young startups. The startup ecosystem and it’s root is at a very naive stage in India and that’s where Morpheus fits in.

    (I could add many more here… but that’s the gist)

    2. What to measure can be directly derived from the goal. Example – for Ycombinator, they are looking for that 1 (few) big success. 500startups in general looks for moderate exits. Morpheus may probably look for follow-up funding; growth and sustenance as a business.

    Personal take on how / what to measure:

    I think accelerators are unique. I come from the background of being a social entrepreneur and I cannot stop myself from thinking of accelerators as a social enterprises with multiple bottom lines and far reaching impact on the ecosystem vs. a profit maximising business. In the same line of thought – I have seen a very interesting methodology emerge around measuring SROI (social return on investment) which track Inputs, Outputs, Outcomes and Impacts. Here is a 12 page primer – http://sroi.london.edu/Measuring-Social-Impact.pdf

    Reply
  7. Josh Maher

    I’m always surprised there is a lack of measurement around the startup themselves. If an accelerator is truly there to move the needle for a startup – wouldn’t the measurement of the accelerator be tied to moving the needle?

    For example if the goal of an accelerator is to move a startup team from whatever they are working on to a viable idea with a working MVP – shouldn’t the success metric be how many startups they are able to do this successfully with? For example 5 out of 10 startups that enter the accelerator exit the accelerator with a viable product/market fit and execution plan.

    On the other hand if the goal of the accelerator is to grow the revenue to a break-even point, the metric would be the number of startups that exit the accelerator with break-even books.

    Thinking about money – the metric should be how close was the funds raised to the LEAST amount of money required. The more money raised for any endeavor the less leverage exists and the returns for everyone are reduced. If 10k is all it takes to get to profitability and a growth trajectory than raising 25k is a negative thing for investors, accelerators, and the startup.

    Reply

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