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Managing Interviews and Pipeline

Now the fun really begins. You get to start meeting the companies in your pipeline. As we’ve mentioned, a healthy pipeline may have to conduct around 200 interviews. That can be a daunting task for any team, especially a small and potentially brand new accelerator team. So, how do you survive such a guantlant? Here’s my survival tips so don’t end up living on a video meetings for the foreseeable future.

To start, all these interviews need to be incredibly short and to the point. We’re talking 15 minutes. They need to be short and jam-packed with as many questions as possible. This is a challenge both for the founder and the interviewer. Let’s face it, in startup land both parties like to talk a lot and often have to explain things in great detail. Unfortunately, there’s just no time for that here and the 15-minute deadline helps to avoid either party ranting for too long.

If a founder asks to use a slide deck just tell them “No”. The reason for this is that there’s no time for long presentations, and founders often ramble when using slides. This means there will be little time at the end of the presentation for questions and answers, which is the real important part of an accelerator interview. In my experience, yes – you will get a lot of grumbling from founders over this. They use the slides as a crutch and as such can be too dependent on them. That’s also a bad signal. Great founders can speak naturally about their company and enjoy answering your direct questions without hesitation or frantically gasping for air.

For efficiency’s sake I recommend starting every interview saying this:

Thanks for joining us. Today we just have 15 minutes to talk and we have a lot of questions. So please try to keep all answers short so we can get through them. To get us started please give us your quick elevator pitch in under one minute.

This helps to set the proper expectations with the founder and remind everyone of our time limitations. A great accelerator interview has a lot of back and forth discussion. It shouldn’t be a recap of the startup’s entire history. It’s more important to know where they are today, what drives them and to find out if they are truly ready for acceleration.

I’ve included a set of sample interview questions below, but it’s a good idea to create your own list and iterate upon them as you get more experienced with interviews. I would also recommend saving the last 2 or 3 minutes to give them a chance to ask you questions. After conducting well over a thousand of these interviews I’ve also figured out this is a good signal about the founders’ intent and experience level.

Smart founders ask:

Tell me about your mentor network, do you have anyone who is a good match for us?

Do you offer any follow-on investment?

Can you share some examples of companies you’ve invested in, relevant to us?

Dumb founders ask:

Do you provide housing for us? (They haven’t even got in yet and if they are worried about where to stay, it’s a bad sign)

Are your investment terms negotiable? (Again, they are not in yet and think they can bargain? LOL)

No, I can’t think of any. (Smart founders ask questions.)

SURVIVAL PRO TIP   For conducting quick and efficient video interviews I recommend using Whereby (https://whereby.com). There’s no login and downloads for guests and it works in most major browsers. It really helps to avoid losing the first few minutes of any meeting when everyone is trying to login and fix their sound settings.

Sample Interview Questions

Tell us about the founders’ backgrounds?

How big is the opportunity you’re working on?

What do you know about this space that others don’t?

How do you market your product/service today?

How do you make money?

What’s your biggest challenge today?

What’s your current burn rate?

Why do you want to do this business for the next 5-10 years?

Any questions for us?

Selection Process

Now, it’s time to pick your companies. Hopefully, you’ve managed to build a large and diverse pipeline to choose from. A very healthy pipeline might have around 1000 companies but this might be significantly smaller for newer programs or programs that serve a very specific niche. Benchmark programs like 500 Startups received around 3000 applications each batch. Whereas Y Combinator can receive 7500 or more applications.

Regardless of the size of your pipeline, your next step is to determine the top 20% that will receive interviews. That means if your deal flow pipeline is around 1000 companies you might be doing some  200 interviews. That’s a lot of interviews, so you want to properly qualify them before scheduling the time.

In a startup accelerator pipeline I would start with the following deal stages:

  • Lead (Your outbound and scouted companies)
  • Applied (Anyone who came through your application form)

When it’s time to start screening the companies down to interviews I would then use deal stages like the following:

  • Not a match (To screen out companies you should not be spending any time on)
  • Weak Candidate (For companies that are relevant to your program but you’re just not super excited about the opportunity)
  • Too early (A good match for your program but they are too early stage. Putting them here makes it easy to follow up with them for later batches)
  • Strong Candidate (Super strong company you’re just not ready to interview yet. Use this stage to get a second opinion, and do more research on the company or industry they operate in)
  • To be interviewed (They are checking most of your boxes and in the top 20% of your application pool)
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Outreach and Scouting

For those early or inaugural programs, you’ll be needing to do a lot of outreach to build deal flow. Being the new kids on the block in a crowded area means you have to work a bit harder. Still, even mature programs do a fair amount of outbound to land great startups. This reminds me of an experience I’ve had in my own outbound sourcing.

We were doing a lot of outreach while setting up a new program in Europe. During this time, a theme emerged where many of the companies we sourced had already been in contact with another program. It kept happening over and over, even when we found under-the-radar startups, or companies in not so typical geographies. This other program was Angelpad in the States, and the outreach was conducted personally by none other than the program’s Managing Partner, Thomas Korte.[1]  Although Angelpad is perhaps a program that is not so well known,  they have managed to recruit some amazing startups such as Postmates (which has surpassed $2B in valuation). [2]  It seems a solid ability to outreach to undiscovered companies is one of the keys to such success.

Scouting Outreach Template

Here’s a sample template you can use as part of your outreach efforts. Make it unique to your program and even though it’s a template, the more tailored the better.

Hello!

I came across <STARTUP NAME> while researching <YOUR INDUSTRY OR REGIONAL FOCUS>. What you are working on is really interesting and I would love to learn more.

I’m <YOUR NAME> and right now I’m recruiting for the <YOUR ACCELERATOR> program taking place in <YOUR LOCATION> on <YOUR START DATE>. Our program is focused on startups working in the areas of <YOUR FOCUS>. Additionally, we have experts and partners (<PARTNER 1>, <PARTNER 2> and more) who can help you leverage technologies like AI and Blockchain to grow your business faster.

Companies in our program receive <YOUR INVESTMENT AMOUNT> in funding along with access to our large mentor network and investors.

Would this be of interest to you?

You can visit <YOUR WEBSITE> to learn more, or reply to this email with any questions you may have. Since I found your company you can ‘skip the line’ of applications and go right to an interview with our investment partners.

Please let me know soon if you would like to interview.

<YOUR NAME>
<YOUR TITLE>


why are you mentioning this guy?

Not sure if this belongs here, or if so I missed the point.

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DEAL FLOW

Sourcing and closing high-quality deal flow is key to long term success with your accelerator program. Today, thanks to an explosion of accelerators around the world, the landscape is more competitive than ever. So in addition to the proper management of your deal flow pipeline, you’ll need to work extra hard to attract the best companies.

For new accelerators launching their inaugural batch, this is going to be especially challenging. Without a track record to show and being an unknown brand, you’ll need to work double-time to fill the first batch. That means doing a lot of outbound outreach to get meetings with companies that match your profile.

As a catch-22, the best companies will think they do not need an accelerator program. That’s because they are already growing and typically overconfident about their prospects for raising additional funding. They will tell you things like, “Oh, we’re way past the accelerator stage” and “we plan to close big funding next month”. Neither of these things is usually true but we can’t fault the founders for their optimism. I have found the best way to convince companies like these is to show them a path where doing your program will allow them to raise more capital and at a higher valuation. But first, let’s learn how we make contact or get them to apply in the first place.

Getting Applications

This is actually one aspect of running an accelerator program that I personally really enjoy, which is probably due to my background as a marketing executive. I simply approach getting applications the same way a marketer would think about lead generation: It’s all about a large and well-qualified top-of-funnel.

Let’s look at a program with a batch size of 10 companies. To run a decent pipeline you could need as many as 1000 applications. The acceptance rates in these cases (as it is with leading programs like Y Combinator) is just 1%. For reference, the acceptance rate at Harvard is around 5%. For early and first batch programs you will probably not match these numbers and in fact have significantly fewer applications, but these are the benchmarks you should be aiming for. If you manage to get a few hundred applications your first time you are doing pretty good.

Getting Started and Application Marketing Channels

There are many channels in which you can find startups. Each program will typically need to market themselves in several different channels.[1]  This is especially true for your first few batches before you start to get some word of mouth marketing from previous attendees.

When it comes to capturing your inbound applications you’ll typically want this to take place on your own website. While there are many services and startup portals that will gather applications for you, I’ve found in the end this is something you want to control 100%. Additionally, some of these accelerator application portals require you to exclusively use them to accept all applications. I would avoid this as it limits your ability to use another platform and ultimately retain control of the valuable data you collect.

While I’m not able to give you an exhaustive breakdown of how to capture and manage your application data here, I’ll give you some friendly marketer advice. The dataset you’re building with your program gets more and more valuable over time. It’s also some of the only unique intellectual property (IP) you build with such programs. So treat your data well and start with a good Contact Relationship Management (CRM) software setup from the get-go. If everything you do with application data is in a big messy Excel sheet, you’re doing it wrong.

The Application

Most accelerators use a similar application format which includes some 20+ questions for the founder(s). These questions can in many cases feel a bit overwhelming. But here’s the kicker, this is by design. If accelerator application forms were too simple then programs would receive a lot of unqualified applications. By requiring so much information it serves to filter out some extent of the ‘wantrepreneurs’(although don’t worry, you’ll still get lots of applications from them!).

The bar for getting into accelerator programs has risen over the years, so if a startup can’t answer basic questions around their business they’re probably not a good candidate. This all being said it’s something to think about as you build your application form. The more information you request, the fewer applications you’ll likely receive. Be careful about putting too much friction in the process. For example, in my programs, I’ve never required the founders to record a video introduction of themselves. My concern is that there are likely some very brilliant founders who are far too shy to record themselves. I’d rather have a larger top-of-funnel and do my own filtering of the applications.

The Basics 
Basic Contact InfoEmail, Phone and so on
Company NameCompany name, and sometimes it helps to get the legal entity name as well for background research
WebsiteIf a company does not have a website, this is a good sign they are too early for this stage.
Company DomicileFind out where the company is incorporated to ensure it’s a match for investment mandate or focus.
Date of Company FoundingMost accelerators work with companies that are 1-3 years old. Although there are always some ‘late bloomers’.
Founder Name(s)Get the founder(s) names. It’s not important to know every team member but you should get an idea of how many founders are involved. Most programs look for 2 or more.
Founders LinkedInFor your due diligence, it’s nice to have direct links to LinkedIn for each founder. Browse these to look for the previous experience of the core team members.
The Pitch[2]  
Company elevator pitchTry to get them to give you a very quick pitch of what the startup does. When possible limit this field to less than 100 words. It’s actually a big challenge for startups to do this well!
What problem are you solving?Often for startups the problem they’re targeting is more important than the solution itself. Is the market big enough? Are they solving a real pain point?
How does your product work?Get some understanding of the solution itself and see if the founder can clearly articulate the value it provides.
Latest Investor DeckGetting a copy of the latest investor deck can quickly tell you the stage and level of sophistication of the team. Any team without one is probably at too early a stage for most programs.
Traction and Funding[3]  
What’s the current traction of your main KPI?Often this is revenue, but it can be other metrics as well. Look for how the founder articulates this number, is it a clear and meaningful way to measure traction?
Have you raised previous funding for this business?Yes/No answer to help you filter the stage of each company. Companies who have not raised funding are not always a bad match, but they may be too early for some programs.
How much funding have you raised?To understand previous capital into the company. Most companies that are an ideal match have raised some capital from angels.This can be a good external validator of the team and business model.
What was the valuation of the last investment round?To better understand what the market has previously valued the company at. Although the range in valuation can be extreme, ranging from $500K all the way to $5M+.

You can add further fields to your application form if your program requires more information to help guide the decision-making process. Other things to ask include:

  • How many team members are full time? To help to gauge the team’s commitment to the business. A company where most founders are not full time is a signal they may not be ready for acceleration.
  • What do you hope to get out of the program? To better understand the team’s motivations and ensure your program’s curriculum is a match.
  • How did you hear about the program? To see if they were referred by alumni or found it through another channel. This also helps to inform which marketing channels are working with regard to attracting applications.

Applications Marketing Channels

As you begin to accept applications, start to build up the acquisition channels you can use for each program. While most of the highest quality deal flow comes from your own network there are a few channels that can also support your top-of-funnel. Let’s take a look at a few of them:

Angellist (angel.co)

The de facto startup directory (at least when it comes to American startups) is a good place to list your program and scout for companies. They also offer an application tool that in some cases can bring in interesting leads.

F5S (f5s.com)

Another massive startup directory that is used globally. While most of the deal flow is very early stage here, there’s a lot to choose from. They also run an accelerator application tool, although to get much marketing support from them you need to make it the default and exclusive way to apply to your program.

Facebook Groups (facebook.com)

One of the most powerful channels for getting exposure to your program is Facebook groups. Specifically, early-stage startup groups focused on a certain region or type of technology. Simply search away and you’re bound to find several that match your profile. Post in these groups that you’re taking applications in the least spammy way possible.

Other accelerators

Because of the sheer number of programs running these days, there are likely to be programs similar to yours. Or perhaps even slightly earlier-stage, making your program a good next step. Look at their websites and alumni companies and do direct outreach to startups of interest. It’s also a good idea to build relationships with other accelerator managers. That way you can share deal flow when companies in your respective pipelines are better matches for each other’s programs.

Remarketing/Retargeting (adroll.com)

For any program, it’s a good idea to run retargeting advertising to all visitors who visit your site. In many cases, startups will take some convincing to fill in your application form. Or they’ll just plain forget. Using these ads is an easy way to bring them back to complete the application. There are many ways to do retargeting but I personally recommend the service AdRoll.

So for early programs, you’ll be doing a majority of outbound outreach to find your companies.

Over time and after completing successful batches you’ll find that your inbound starts to gradually improve. In this business, word of mouth is everything. So don’t underestimate how important it is to have a happy founder graduating  your programs.

SURVIVAL PRO TIP   Founders are notorious procrastinators. They will often wait until the last minute, just as applications are closing, before submitting theirs. Don’t be nervous if your applications are off to a slow start and save most of the promotion for your final week. It can help to include language like “Apply Today! We review applications as we receive them.” on your application form.  

I get your point, but this sentence is all over the place.

This is good, and I would reccomend dropping a note above in the intro that the pitch is an important part of the application.

Same here, an Intro to the importance of this in the application gets you a long way.

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Sponsors and Corporate Partners

In general, startup accelerator programs have extremely tight operating budgets. After all, a program’s goal is typically not to make money from running the program itself, but from the increased value of the participating companies. When you start tossing in costs like accelerator staff, event space to run your program, and travel, things can quickly add up. While it is certainly possible to run programs on a shoestring budget, a little extra operating cash can have a big impact. This is where sponsors and corporate partners come into play.

Speaking candidly, this is a bit of an oil and water scenario. You’re trying to build and support small early-stage companies. Yet you have to do some pandering to these big slow-moving corporations who might consider sponsoring your program. But here’s the thing! They also need you! They need you both for marketing themselves to the startup community and in some cases selling their services directly to startups. It’s a mostly symbiotic relationship and something you’ll have to manage as a program director.

First, it’s good to know that almost no-one is going to want to sponsor your very first program. That’s because there are many accelerators programs out there, with new ones popping up all the time. So the parties most likely to sponsor a program are probably already involved with one, or several programs. Additionally, as a new program, you don’t have much track record to show. Sponsors often like to see operations running for a few batches, and the beginning of an alumni network. When starting out it’s recommended to go for quick wins with smaller corporations, saving the really big fish for when you’re more established. That might also mean much smaller sponsorships but it’s a starting point and a chance to build a larger relationship. In terms of the price range, many of my newly established programs had sponsors only offering $2500-$5000. We took the money, and it allowed us to get to know the corporations and prove our value. Landing a really big corporate partner for your program can be a multi-year effort. But don’t get discouraged, if you build a solid program and manage to run several cohorts, partners will start knocking on your door. Many established accelerator programs now command large sponsor levels as high as $500K annually and more.

When it comes down to the different types of partners there’s really only two. Let’s take a look at each of them:

Industry Partner

If your accelerator program is hyper-specific to a certain industry or technology, this will likely be your main sponsor. They are often a long-established leader in their respective industry. For example, if you’re building a program focused on maritime and ocean startups you would be targeting every large shipping company out there. If you were doing a FinTech accelerator you would be in discussions with banks and financial players. Your best bet with this type is to engage with industry powerhouses who are not already involved in another program. An effective pitch here is to show them a path to learning a lot more about new technology, trends in their industry, and getting access to talented founders they may want to hire or acquire at a later time.

Service Providers

Here’s a rather large category of potential sponsors for a program. This includes the likes of Amazon, Price Waterhouse Cooper, law firms, and so on. For them, their main goal in sponsoring a program is to sell their own services to the startups, at least the ones that get funding and can afford them. They may also do the sponsorship for some branding into the startup ecosystem as well.

In terms of how you structure the sponsorship, most programs offer some type of ‘Gold, Silver, Bronze’ approach, or other multi-level offerings. How you structure these levels is really up to you. The industry focus and the tenure of your program will also be a factor in determining what you can ask of your sponsors. I would, however, recommend trying to land one large or a marquee sponsor, and getting them to sign up for an annual commitment with you. This may take some time and much effort, but in the end it’ll be much easier for you to focus on keeping one large sponsor happy, instead of many, many smaller ones.

Sample Sponsor – Levels and Offerings

Gold

  • Logo featured first and most prominently on the website
  • Sponsor’s name featured in the accelerator program brand name (Powered by Your Corporate Name)
  • Host (1) sponsored session/workshop during the program
  • (5) Social media shoutouts during the program (Tweets and Facebook posts thanking you for your support)
  • (10) Tickets to Demo Day
  • A booth at Demo Day to showcase your brand or product(s)
  • Your logo featured at Demo Day (large) with rollups

Silver

  • Logo featured on the website
  • (2) Social media shoutouts during the program (Tweets and Facebook posts thanking you for your support)
  • Your staff can attend (2) accelerator program workshops or sessions of interest
  • (5) Tickets to Demo Day
  • Your logo featured at Demo Day (small)

Bronze

  • Logo featured on the website
  • (1) Social media shoutouts during the program (Tweets and Facebook posts thanking you for your support)
  • (2) Tickets to Demo Day

There’s also another type of startup accelerator sponsorship in the form of in-kind services. In the business, we sometimes call these perks. While these don’t usually put money in your operating budget, they do generate a lot of value for the startups in your programs. More specifically these are free credits and services from companies that startups typically need. An example of this is Amazon Web Services (AWS) cloud computing credits. They can also include other things such as lawyer hours, free software, or access to premium paid products at a discounted rate. Companies are smart to offer these cheap/free credits as a way to create lock-in with the startups in your program. They know once a startup has built on its services or platform it’s hard for them to move even if/when they scale up. It’s a sneaky but effective approach and as a program director, you’ll want to forge relationships with many of these providers.

With the in-kind sponsors, there is one industry that is perhaps the most active with accelerator programs. That would be the cloud computing platforms. More specifically, the ones from Amazon Web Services, Microsoft Azure and Google Cloud. It makes sense – almost all startups need these cloud services and all these tech giants are eager to gain more market dominance. For the time being Amazon is the leader and one of the most active sponsors of accelerator programs. You can find them offering $50,000 or more in free cloud credits to programs throughout the world. From experience, I can tell you they are a great partner. Also from experience, I can tell you, much like Amazon as a whole, they are extremely data-driven. To keep them as a happy and active sponsor it’s important to show them that a large portion of your startups both activate and use the free credits offered.

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Mentor Networks

As smart as you might be, you probably don’t have all the answers between yourself and the accelerator staff. Enter mentors. These are experts in their various fields on the founder, investor, or corporate side of things. Almost every accelerator program has some form of a mentor network. Those that do typically enjoy overselling just how amazing that network truly is. The truth is that mentor networks are supplemental to your own staff and experience because at the end of the day, the more experience you have in-house and make available for your founder daily, the better.

Mentor networks can, however, be a powerful deal flow recruiting tool. Founders like to look at your web page and see lots of smiling faces from authorities in their respective spaces. That’s because early-stage startups are eager to expand their networks but that can take a long time to develop. So they view accelerators and investors as shortcuts in this area. Just be honest with founders and yourself about their involvement in the program. I’ve found that it’s better to have a bespoke approach with each startup you work with when it comes to mentors, their expertise, their involvement, dedicated time, etc. Match them up with a few of the right mentors instead of a large list of people that may or may not be relevant to their company. The stronger the match, the more valuable the interactions will be. In some cases, I also ask the founders to make a wish list of people they want to meet. That might be a specific person or just anyone in their industry.

As an accelerator manager, your main job is to deal with people. Mentors are the external rockstars you bring in to help the companies understand the lay of the land and prep them for when they graduate from your program. I’ve worked with a lot of them, and at the risk of generalizing, let’s take a closer look at each type.

The All-Star:

Let’s start with the best mentor you can possibly get on board: The all-star successful and well-known founder or business leader. They have proven they can build a big business and successfully exit it. In true ‘pay it forward’ style they now dedicate a fair amount of time to helping the next generation of founders. Due to their success, they are often cash-rich but time-poor, so you’re typically lucky to get them to come into your program just once. They’ll do a talk, usually in fireside chat format, and perhaps meet a few companies. Be respectful of their time and make sure they have a smooth experience so you can get them to come back again.

The Mentor Prostitute:

Let’s swing the pendulum all the way now and talk about one of the worst mentors you can get: The mentor prostitute. They are mentors in no less than 20 other programs and proudly display that fact on their LinkedIn, website, resume and occasionally shout it from street corners. They have more advice to give than they have the experience to match, but that doesn’t stop them from sharing it. They email you constantly, trying to become a mentor in your program. This is typically a red flag. The best mentors you’ll have to recruit in, not the other way around.

The Investor Mentor:

Smart investors will actually be very open to mentoring in your program. They need a way to expand deal flow and you can really get to know a company by watching them for 3 months in an accelerator program. There is a very, very small chance they’ll invest. But either way, it’s a net positive for both parties. Given their experience, and as high-frequency meeting people, they are also the best candidate for setting up office hours sessions with batch companies. For even more value, ask your investor mentors if they’ll do mock investor pitch sessions with your companies to better prepare them for the real-world investor meetings.

The Growth Hacker:

Since most startups in an accelerator program are looking to learn how to grow faster, these are great people and you need to have them in your mentor network. Ideally, you’ll have growth mentors who are focused on online marketing (paid ads, searches, social media), and others who are more focused on the sales team and process development. Since this type of person typically also has a full-time job or works for an agency you can sometimes recruit them by allowing them to sell their services to companies in the batch.

The Intangible Mentor:
Building a startup is not just about the things you can touch like investment or growth hacks. It’s also about the softer things such as people management, building confidence, and perhaps most important not burning out as a founder. To address these areas you also need mentors who are perhaps far removed from the world of startups. One example might include an expert on improv comedy to help founders speak more naturally. Or an expert of sleep health and nutrition for example to help founders live better lives and run at peak performance.

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Investment Structure

Many accelerator programs offer investment alongside the program they run. The dirty secret of the accelerator business is that running programs is actually not very profitable. Quite the opposite actually! Most programs are run at a loss with the returns being wholly dependent on the investments in startups themselves. If you’re launching an accelerator program to build a big profitable business you’re not likely to find it.

Whether your program includes investment is up to you and depends on your own situation and business goals. There are many programs out there, especially corporate ones, that for example don’t invest for equity in the companies they work with. One reason for this is that it’s actually rather challenging to manage the sheer volume of investments an accelerator can make during its lifetime. Not to mention the longer-term legal maintenance needs. If your program does not have a venture fund attached to it, or if your backing is corporate it might not make sense to make investments with each program. Additionally, some programs are run as a public service (government-backed) or for corporate branding and marketing. They are not returns-driven and there ain’t nothing wrong with that.

That being said, the quality of startups you can attract will dramatically increase when an investment is available. It is, of course, a big decision for a startup to spend several months with you, so for the startups, the investment helps to cover costs incurred and time lost working on other things. The general thinking is that you’ll also work harder for them in trying to increase their company’s value. As we say in our industry, it’s all about having skin in the game.

There are many great books written on the subject of startup funding. If this is all new to you I would recommend ‘Venture Deals’ by Brad Feld and ‘Angel’ by Jason Calacanis to get started. In this book, ‘The Accelerator Startup Guide’ we won’t be going into such depth of investment structure and terms. However, I’ll share a few things I’ve learned over the years with programs that included a financial investment made into the companies.

What are the terms?

As you interview startups and build your pipeline this question will come up again and again. Startups who are talking to accelerators are particularly sensitive about this topic, specifically with what valuation a program invests at. Of course, if a startup was killing it and growing rapidly they would be getting lots of great offers from venture funds. However, if they’re talking to you this is likely not the case. Still, they are programmed to try to get as much money for as little equity as possible. Herein lies the problem.

Startup accelerators don’t invest at typical startup terms and there’s a reason for that. An angel investor may write a check but they are usually not very active in the company. An accelerator program, on the other hand, will spend weeks and months hands-on with a company, in addition to longer-term alumni support. An accelerator’s contribution is different from an angel’s, and in some cases, their contribution is even more hands-on than a venture fund. Accelerators are also typically investing very early. This means that they are accepting much higher risk and therefore warrant a lower valuation. Much to the dismay of the young founders, this is sometimes hard for them to understand.

 Sample Program Investment Terms

ProgramInvestment AmountEquity
Y Combinator$150K7%
500 Startups$150K6%
Techstars$120K6%

As we can see in the table above, most of the well-known programs are investing at a roughly $2M valuation. For the markets in which YC, 500 and Techstars operate (like Silicon Valley), this is actually considered a really good deal for a good startup with traction. For comparison, a seed round for a similar company in Silicon Valley might value the startup at more like $4M-$5M, so the accelerator is getting a significant discount here. As every startup ecosystem and region is different in terms of valuation, you can use as a general rule that an accelerator program should be entering a company at about 50% of the valuation a local venture fund would invest at. Your ability to convince a startup you’re worth such a deal will be critical to closing the best companies for your program.

As part of that convincing, you’re going to run into a few roadblocks. First, for the founders, you want to show them that doing your program is a path to a *more* successful fundraise. Along with that, you’ll help them attract better investors and get them the valuation they believe they are worth. It also helps if you can get them to understand that fundraising is a difficult and nebulous process with no guarantees. However, with your program, you can take something very murky and misunderstood and provide some clear direction. I’ve used the below image in welcome materials for several programs and feel it encapsulates this all very well.

Another challenge you might face with regard to investment terms is getting buy-in from the startup’s previous investors, board members, and advisors. I have in several cases been able to convince the founder to accept a program’s terms, only to have a board member try to completely shut it down. Your best bet in this scenario is to talk directly to the concerned party and continue to sell the value offered by your program, explaining how the company will have a greater chance for success by attending your program. Sometimes this works but other times these parties are an unmovable object and unwilling to consider it. In that case, I go back to the founder and simply ask them, “Do you run your company or does someone else?”, hoping to inspire some boldness in them to push the deal through. From my qualitative experience, early startups that have already ceded control to their boards are doomed to fail anyway, so perhaps you’re saving yourself some trouble by having them opt-out.

Program Fees

There’s one part of accelerator investment terms that’s a bit controversial and that is charging startups a program fee for attending. Y Combinator does not do it, and they go as far as to publicly call it “bad behavior”. 500 Startups, on the other hand, have always charged a program fee and defended its use. Often the fee is deducted at the time of wiring the money. Effectively allowing the program to buy more equity for less. Here’s how 500 Startups explains it in their FAQ:

Yes – We charge $37,500 per company to participate, but these fees can be deducted from our investment amount so you don’t have to pay out of pocket. As mentioned above, our gross investment is $150,000. Once program fees are deducted, you would receive $112,500. These program fees help to cover basic costs of running the Seed Program, paying outside speakers and should be viewed like tuition.

I’ve worked in programs that do both and I don’t have any strong convictions against charging a fee. In fact, I think for new programs where your operation budget might be limited it’s your best way to get a financial boost. I’ve worked on several programs that just would not be able to operate without the program fee. Just be mindful that some founders will push back on this or decline a deal due to the program fee. I recommend a ratio of roughly 3:1 in terms of investment size to the program fee. Anything more and you’re perhaps being a bit too greedy and may scare away good startups.

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Building a team

Just like building a startup itself, the team is everything when it comes to running a successful startup accelerator. There’s a lot of moving pieces to these programs so you’re going to need a few extra hands to manage them. Unfortunately, there is not a super deep talent pool when it comes to people with accelerator management experience. It’s still a somewhat new industry and only lately have we seen exponential growth in the number of programs taking place around the world. So that means you might have to get started with some junior or less experienced team members. Sounds not too dissimilar from a startup, doesn’t it? While this book is primarily geared towards accelerator managers, feel free to share it with any member of your staff.

As you build your team there are a few core roles that every program should have in order to support the needs of all the moving parts of a successful program. Oh and not to mention to avoid burning out in the process.  Let’s take a look at each of them:

Managing Director/Investment Partner

At the highest level, the CEO or Managing Partner is typically the most experienced team member. They have both prior investment and operational experience and are able to handle any challenge that comes up. Former venture capitalists and even former founders can make great candidates for this role. If they can lead sessions that’s also great, although from my experience they are more often behind the scenes, ensuring the program has the capital and other resources needed to function properly.

The Teacher

They are the most comfortable in front of a group or on stage. They are a generalist who can speak on a wide variety of topics such as marketing, sales, fundraising, and pitch prep. They are ‘the professor’ on staff leading the bulk of the educational content. In most cases, they are a former founder and have often gone through accelerator programs themselves. If you have run several batches already, it’s helpful to look at your alumni and see if anyone stands out as a potential candidate for this role.

Program Manager/Director

The program manager is the glue of any good program. They manage the program and also manage the daily calendar before, during, and after the program. This puts them in charge of communicating activities, in addition to making all activities run smoothly. In many cases, they will also be the ones responsible for managing the mentor network, guest lecturers, and myriad other things. Regardless of their gender, they are often considered to be the ‘mother’ of the program. They have all the answers as the role relates to program logistics. They also typically manage the operations folk and interns as well.

Operations Manager

With attention to detail and the ability to manage both people and spaces, the operations manager ensures everything runs smoothly. This includes the operations of the accelerator program office space and also event management. They may also be in charge of coordination between mentors, partners, and speakers. They work hand in hand with the Program Manager/Director on just about everything program-related. They are the right-hand man/woman to that role and support them very closely.

Investment/Legal Associate

With each accelerator program, there is much to manage with regard to investment documents and legal paper wrangling, so it’s best to have a junior to mid-level associate solely focused on this. Their primary responsibility is to complete the investments in every company and manage the longer-term legal requests that come up. They can also support the due diligence process of screening the companies in a program. Completing startup investments is a complicated and grueling process, especially when dealing with large batch sizes of 10 or more companies. This role helps to drive that process so the other team members can focus on program execution.

Entrepreneur in Residence (EIR)

These former founders can be thought of like super mentors. The best profile is a founder who has recently sold or left their startup. They are in between startups or recently had a successful exit. So at the moment, they are discovering what they’ll be working on next. A great outlet for them is often an accelerator as it allows them to work with many ideas and business models at a time. In other words, they need inspiration and you (hopefully) have gathered several inspiring ideas into a single venue for them. As a bonus, you get really experienced founders working closely with your batch. When possible it’s helpful to have several EIRs involved in each program. This is often a part-time role and may or may not be compensated.

The Interns

Similar to the benefits an EIR might receive working in your program same goes for people at the beginning of their startup journey. Although they may have more energy than experience, startup newbies can still be very helpful in the form of program interns. They can help with odds and ends and even directly support your batch companies. You can usually find the best intern candidates from the entrepreneurial programs at your local college. If you pitch it to them as an opportunity to turbocharge their startup experience, and maybe even to get a job with one of the companies, you’ll have no shortage of signups. It’s also recommended to compensate them for their time. From my experience, I’ve found that interns who are not compensated are less engaged and in many cases disappear altogether. If you value their time and allow them to continue you may also find that today’s intern can become tomorrow’s program manager if given the chance.

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Introduction

Welcome to The Startup Accelerator Survival Guide.

Before we get started, let’s talk a little about what exactly a startup accelerator is. Popularized in Silicon Valley, but replicated throughout the world, these are short-term programs focused on, you guessed it, accelerating a startup. This can mean different things but typically these programs pay some attention to helping a company scale its business metrics and secure funding after completing the program. This is not to be confused with an incubator, which is typically a longer-term program and an initiative with different goals. For example, a university will often have an incubator to develop student ideas or build technology that needs a lot more time and funding.

Although these two concepts are often interchanged I like to think about startup accelerators as educational, content-heavy, and hands-on programs occurring over 1-3 months, whereas incubators are much longer-term (sometimes taking place over years) and less hands-on. Let’s also not forget about startup labs, startup studios, corporate innovation programs, venture builders and so on. What can I say? We like to make up a lot of names in the tech industry. There’s nothing wrong with these other company builder models, but for the purpose of this book, we’ll be sticking primarily to the ‘traditional’ startup accelerator way of doing things.

Many of the ways startup accelerators work today can be traced back to the most well-known program, Y Combinator. To use techie developer speak, they are the ‘master branch’ and the rest of us are just a ‘fork’ of that branch. The humble origins of Y Combinator also reveal much about how accelerators took their current form, mimicking a summer school-like educational style format. The first batch was even named the Summer Founders Program and targeted students directly by offering the program (and investment) as a much better alternative to a boring summer job.

“Some friends and I have started Y Combinator, a new venture firm that specializes in funding very early stage startups. Our first project is the Summer Founders Program, an experimental replacement for the conventional summer job.

The SFP is like a summer job, except that instead of salary we give you seed funding to start your own company with your friends. If that sounds more exciting than spending the summer working in a cube farm, I encourage you to apply.”

  • Paul Graham, Y Combinator Co-Founder March 2005

And with that announcement, Y Combinator was born. Paul Graham would later admit that they didn’t expect their first batch of companies to do very well. It was more for them to learn how to become good investors. Although there was one company in that first batch that has done fairly well. That company being Reddit, which has become one of the most visited websites in the world. However, through the course of that first batch, the Y Combinator founders learned something perhaps more important than how to become a good investor. They began to see the benefits of investing and working with multiple companies simultaneously, something that had never really been done before.

“Initially we didn’t have what turned out to be the most important idea: funding startups synchronously, instead of asynchronously as it had always been done before. Or rather we had the idea, but we didn’t realize its significance.”

  • Paul Graham Y Combinator Co-Founder March 2012

Sometimes called a batch, or a cohort, this is the real essence of a startup accelerator program: A shared learning environment and the sense of community that it creates. It’s actually a very special feeling and perhaps the most important key to the success of your own program. If you can capture just an ounce of the excitement, pressure, and hard work found in programs like Y Combinator, then you’re probably running a decent program already.

That all being said, don’t feel you need to emulate Y Combinator or other leading programs to be successful. Learn from their experience but make sure to make your program your own. Don’t try to create ‘the Y Combinator of xyz’, instead create your own vision, investment thesis, and unique approach. This book will hopefully help guide you.