Connect with us

Archives

The Most Compelling Reason Why You Should Join an Accelerator

Published

on

Why You Should Join an Accelerator

Over the last 10 years there has been a dramatic growth in accelerators. While incubators such as ideaLab (Bill Gross, Los Angeles, 1990’s) had existed during the previous bubble, the absolute number of new age accelerators has gone from zero to over 300 in the US alone and from 0 to over 1000 worldwide. At the same time while, the number of early stage (less than $2 Million and company < 2 years old) deals have gone up significantly as well.

Growth in Seed Round Financing
Growth in Seed Round Financing

The chart above from Benedict Evans shows the growth in seed rounds, which indicates that the number of early rounds have increased relative to $3-6 Million rounds.

At the same time, the average amount of money invested in early stage rounds is going down. That makes sense since it is cheaper to build an early stage company and “try to find a product market fit”

Size of Early Stage Rounds
Size of Early Stage Rounds

There are 2 charts missing from this deck. First, how many of these early stage deals are going through accelerators and what is the size of the deal for companies going through accelerators versus those that are not.

Fortunately, thanks to folks like CB Insights and Mattermark, we do have access to that data. I will upload the charts in a few hours / tomorrow since I am running late to my meeting this morning.

1. Accelerator funded companies make up 13% of the total number of seed funded companies, and have been steadily rising. Obviously from zero in 2005 to 13% of total seed funded deals in 2015.

2. Accelerator funded companies raise 20% more in the seed round than non-accelerator companies.

Finally anecdotal data from Microsoft accelerator companies over the last few years alone, I can infer that accelerator companies have 25% better survival rate than those that did not go to an accelerator after the first 2 years.

How did we get this information?

We got over 250 applicants in the first cohort (Sep 2012), 450+ in the second (Mar 2013), over 600 in the third (Aug 2013) and over 1000 in the fourth (Feb 2014) in India alone. Of these, we picked 10 in the first, 12 in the second, 13 and 15 in the third and fourth cohorts.

We then tracked the remaining companies. Of them 5, 3, 11 and 13 got into other accelerator programs such as GSF, Tlabs and Kyron.

Of the remaining startups, 31%, 14%, 22% and 12% have shutdown. That compares to 20%, 10%, 22% and 0% so far.

So, if you are part of an accelerator program, you are likely to get more money, survive for longer and likely to get funding versus not.

Those are the biggest reasons to join an accelerator.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Archives

Creating Artificial Constraints as a Means to Innovation

Published

on

By

Artificial Constraints

Many of the entrepreneurs I know have created new innovative startups thanks to real constraints they had. For example, I was hearing AirBnB’s Brian Chesky, on the Corner Office podcast and he mentioned that when he and his cofounder were trying to get some money to get started and the only way to keep afloat was to “rent” their air bed they had in their room. That, then led to Air Bed and Breakfast, which is now AirBnB.

This was a real constraint they had – no money to “eat” so they had to make it happen somehow.

I have heard of many stories of innovation where in the protagonists had real constraints of either financial, technology, supply, demand, economic, social or any number of other characteristics.

The interesting story that I have also recently heard of how Facebook has “pivoted” from being a desktop offering to getting a significant part of their revenue from mobile is how they were given the arbitrary constraint of only accessing Facebook via the mobile phone.

So there are ways that you can create “artificial” constraints to force innovation to happen.

Most larger companies and some smaller ones as well, have to constantly find ways to create artificial constraints – to find a way to innovate and be more be a pioneer.

While some constraints are good – lack of funds at the early stage for example and lack of resources, there are entrepreneurs that are stymied by these constraints and those that will find  a way to seek a path to go forward.

I think this is a great way for you to think about innovating in a new space. If you have constraints, find a way to use it to your advantage.

Continue Reading

Archives

The Great Mobile App Migration of March 2020

Published

on

By

Mobile App Migration

Over the last few weeks as many in the world have been in lockdown, there has been a temporary “mobile app migration” happening. There are new apps downloaded and they replaced existing apps on the “home screen”.

While some of these apps are likely temporary use, for e.g. I have 6 “conferencing apps” – Zoom, Uber Conference, Webex, Google Hangouts, Blue Jeans and Goto Meeting. That is because of the many people I have conference calls with – each company seems to have chosen a different web conference solution.

Other apps seem like they will have staying power – Houseparty, for e.g. which has games, networking and video conferencing all built into one app to keep in touch with friends and relatives.

Houseparty

The apps that have moved away from my “home” screen, which I expect will come back once the crisis will be behind us include – Uber, Lyft and all the airline apps from Delta, Alaska and United.

Continue Reading

Archives

Perseverance with the Ability to Pivot on Data: 21 Traits We Look for in Entrepreneurs

Published

on

By

Perseverance with the Ability to Pivot

There are 5 key inflection points I have noticed which makes founders question their startup, to either make a call to continue working on their startup, pivot to a new problem or quit their startup altogether.

It is at these points that you really get to know the startup founder and their hunger and drive to be successful. I don’t think I can characterize those that choose to quit as “losers” or “quitters” because of many extraneous circumstances, but there is a lot of value that most investors see in entrepreneurs who face an uphill part of their journey to come out on the other side more confident and stronger.

These five inflection points are:

  1. When you have to get the first customers to use and pay for the product you have built after you have “shipped” an alpha / beta / first version. Entrepreneurs quit because they have not found the product-market-fit – because the customer don’t care about the product, there is no market need, or the product is really poorly built, or a host of other reasons.
  2. When you have to start to raise the first external round of financing from people you are not familiar with at all. Entrepreneurs quit because while it is hard to get customers and hire people, it is much more harder to get a smaller set of investors to part with their money, if you do not have “traction”, or “the right management team” or a “killer product”.
  3. When you have to push to break even (financially) and sustain the company to path of being self sufficient. Entrepreneurs quit at this stage because they have now the ability to do multiple things at the same time – grow revenues and manage costs, and many of them like to do one but realize it is hard to do that without affecting the other. So, rather than feel stuck they decide to quit.
  4. When you have to scale and grow faster that the competition – which might mean to hire faster, to get more customers, to drive more sales, or to completely rethink their problem statement and devise new ways to grow faster. Entrepreneurs quit at this point because they are consumed by the magnitude of the problem. They overassess the impact the competition will have on their company, give them too much credit or focus way too much on the competitors, thereby driving their company to the ground.
  5. At any point in the journey, when the founders lose the passion, vision or the drive to succeed. Entrepreneurs quit a these points because they have challenges with their co founder, they don’t agree with the direction they have to take, or encounter the “grass is greener on the other side” syndrome.

While I have observed many entrepreneurs at these stages at  discrete points in time, I have also had the opportunity to observe some entrepreneurs in the continuum, and I am going to give you my observations on 3 of the many folks I have known, who, have quit.

Perseverance separates great entrepreneurs from good ones
Perseverance separates great entrepreneurs from good ones

One went back to college to finish his MBA after getting a running business to a point of near breakeven, another found the business much harder than he originally thought he would and got a job at a larger company and the third was just unable to have the drive to go past 11 “no’s”‘ from angel investors.

Over the last 8 years, if I look at my deeper interactions with over 90 entrepreneurs, who I would have spent at least 100+ hours each, I would say that of the 24 people that are not longer in their startup, the one thing that stands out among the ones that persevere is that it is not “passion” or “vision” at all.

It is the inherent belief that they are solving a problem that they believe is their “calling”. They also don’t believe that there is any other problem that’s worth solving as much, even though there may be easier ways to make money.

So most of my questions of entrepreneurs to test whether they will pivot or quit are around why they want to solve this problem (which I am looking to see if they know enough about in the first place) versus any other one.

The answer to that question is the best indicator I have found to be the difference between the pivots, the leavers and the rest.

Continue Reading

Trending