Is it easier to spot winners or to weed out middlers during the selection process for a startup accelerator?

The last 10 years have seen a rebirth of startup accelerators, which has resulted in many more startups getting funded by early stage companies who are startups themselves. Startups helping other startups is a very interesting phenomenon, but that is a topic for another post.

I would segment startups into the top 10, the next 25 and the remaining 965. The top 10 take between 1% and 3% of applicants. The next 25 take between 2 to 10% and the last 965 take what they can get. Of course many startups go from one accelerator to another, with some going to 4 accelerators before their seed funding.

Over the last 3 years I have seen our accelerators accept anywhere from 3% to about 8% of applicants depending on location.

Of the over 500 applicants in the most recent cohort at Seattle, we selected 2.6% into the program and interviewed about 8%.

So the question that comes up often is how easy or hard is the selection process.

We (like most others) will read 100% of the applicants, but give a more serious look to those that are recommended by our trusted partners. Getting a introduction from partners ensures that we will not only look at the application, but also shortlist for a second review.

Typically 2-3 folks review the applicants in the first pass and if most applicants get an average of 4 out of 5, then we will interview them.

There are many many criteria our reviewers look for including market, problem and founder’s background.

What I have found is that it is much easier to reject 80% of the applicants than to pick the ones to shortlist.

Looking back at the data to understand the ones we missed, which turned out to be great early successes, in the 8 cohorts I have reviewed, we have missed between 9 and 12.

What are the 3 most mistakes people make in the application process?

1. Estimating a very small or incorrect market. Most accelerator programs are looking to fund companies that will become large. Many entrepreneurs underestimate the market size, which puts them in the “interesting” but not “viable for the accelerator”.

2. Positioning the startup in the summary, especially for consumer startups. Usually we get between 5-10 companies in the same “market” in any given cohort. For example, travel planning was pretty “hot” in 2012, service marketplaces were frequent in 2013, etc. The difference between the startups was marginal in terms of the market, but most of the companies were positioning themselves as a social network first, which by default caused us to weed them out.

3. Not explaining the background and experience of the founders in the way that explains why they are best suited to execute the opportunity. I have seen many young founders look at building an enterprise SaaS product after they found it hard to get traction for their “consumer” app. That usually means a pivot after they got very little traction, so it raises red flags.