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?