I had a chance to participate and read the Global best practices survey by Unitus Seed Fund, where 78 co-working spaces, incubators, startup academies, accelerators and hyper-accelerators were surveyed and interviewed about their programs.
While, we tend to gloss (“at a high level, they are all accelerators”) over the details and differences, this report actually lays out a “maturity” curve for entrepreneurs. Most people might start out at a co-working space and a far fewer set of them end up graduating from a “hyper accelerator”.
For insiders, a hyper-accelerator is a 3-4 month pressure-cooker style program with a big focus on “pitch preparation” and “getting fund ready”.
While I have talked about needing a better way to measure “success” for these programs, in the absence of one, funding is one that we will all use.
Measuring funding within 6 months of graduating from the program is what they looked at more closely. Things look good or not-so-good depending on your point of view.
Hyper-accelerators get over 70% of their companies funded within 6 months (keep in mind all this information is self- reported), and “accelerators” – which I presume is a slower, more open program get only 30% of their startups funded within 6 months of graduating, unless you count getting into another “Accelerator” as success. I don’t think startup academies are really focusing on “funding” but they do miserably if they did.
The things I learned:
- Hyper-accelerators spend a lot of effort, money and time to “recruit” applicants. From the survey, they accept < 7% of applicants. It seems to me they are modeling their programs like the Ivy League college application programs, which gives credence to the theory that they are the new age MBA programs.
- Accelerators and Incubators are hosting startups for 6 to 12 months, which is a long time, even in places such as India and other locations where funding is rare and scarce. This is typical in University accelerators and for student entrepreneurs in particular, but even for-profit accelerators are running programs that are fairly long.
- The average number of investors that attended the “demo day” for the best quartile was 175 – which is large. Most ecosystems don’t have that many investors – active or passive, so I am not sure I believe this reported metric. I don’t doubt the survey, but I believe the self-reporting favors a looser definition of an “investor”.
Things that I found interesting for entrepreneurs to focus on:
- Entrepreneurs cite as peer-to-peer learning as the #1 significant benefit – which means the better the cohort, the better off you will be. The best question then for entrepreneurs to ask an accelerator before the “commit” to joining a program is – “Give me a profile of the other startups that are going to join the program”.
- Mentor engagement, which is often touted by the accelerators as their key benefit ranks only 2.5 out of 5 in terms of their satisfaction. Since more connected mentors has resulted in more funding, this is fairly important. Most (over 70%) of the programs allow startups to leverage 1 to 7 mentors during the program, so a key question for entrepreneurs to ask would be “How much time will entrepreneurs commit to help our startup”?
- Engaged alumni creates a better probability of success is what the survey also found. Programs that used their alumni in more ways than to just provide “an online chat room” or “a mailing list” scored better in terms of funding and progress. So another key question to ask is “How many of your alumni are still engaged with the program” and “How do the alumni get engaged to help and mentor the current cohort”?
It seems to me that the questions I’d get a lot – “the deal terms – what % of the company for how much in funding” and “how much time do we have to be in the office” – are largely incidental – so both accelerators and startups should just seek to find a happy median – maybe take the top program and the bottom programs and meet in the middle and put that aside.