A former 500 Startups accelerator batchmate gives the scoop on the advantages of picking the correct accelerator at the right time for your business
The author is the Founder and CEO of Slidebean, a simplified, cloud-based presentation tool. Slidebean was part of Startup Chile, one of the most important accelerators in Latin America and then selected for Batch 11 of 500 Startups.
A startup accelerator might be the boost that your startup needs to get to the next level. ‘Get to the next level’ has different meanings for different companies, and since accelerators have become somewhat popular in the past few years, it’s important that you consider if your startup can really leverage the resources they provide, to make it worth your time and that chunk of your company.
I’ve been through three different accelerators with my companies: Startup Chile, in South America; DreamIt Ventures in New York and 500 Startups in good old Silicon Valley. These three accelerators happen to be suited for three different stages in the growth of a startup.
There’s only so much you can do before you get some investment in your hands (don’t quit your day job yet!). Still, there are plenty of (almost) free experiments that you can run to validate the potential of your idea, and to give you a head start against other applicants.
- Create a LaunchRock page to collect leads, and show you have hundreds of interested users. Start reaching out to them on a weekly basis with quality content.
- Make a Demo Video (don’t pay over US$500 for one, your product will change significantly and it will render it useless).
- Create a Squarespace website with a fake Sign Up button (we did this).
- Create a Facebook Fan Page and a Blog and get people to start following you.
- Hustle some revenue! Try to get users by selling your platform as a working tool, even if you need to do everything manually under the hood (This means $$, and it will be freaking awesome to prove you can actually make money).
In both of the companies that I’ve founded we’ve been able to hustle some money our way before even looking for any investments. At my first startup, we did a Kickstarter Campaign and on Slidebean we supported the team by doing development and marketing consulting, this paid our bills (we are not 20 anymore and we have families to feed) and gave us about 40 per cent free-time to work on Slidebean.
The rise of Latin American incubators
Startup Chile is an example of an idea-stage accelerator/incubator, with a similar model to Wayra, Startup Brazil, NXTP Labs in Argentina and Startup Mexico. As you can see, most of these programmes are Latin America-based and many of them are also hosted by the government. The advantage: equity-free investments.
Latin American governments are trying to forge startup ecosystems, so they need talent and ideas from abroad. They often invest US$25,000 to US$40,000 equity free!
While their investments are conditioned to bureaucratic bookkeeping and carefully monitored expenses, they can provide you with the capital that you need to get things moving (and hey, it won’t cost you a chunk of your company). Furthermore, the experience of living abroad is great, and it will connect you with a lot of people similar to you.
The programmes themselves are not that ‘accelerated’, they feel more like college rather than a business accelerator. Mentors are limited and only a few of them will have real startup experience, and while the programmes will connect you to some local investors, most of them only put money on companies that will remain in those countries.
The application process for these programmes is pretty much a huge questionnaire that will take a couple days to fill out, in many cases this is the only filter that they’ll have (no calls or interviews).
Secret tip: since so many people apply, applications are filtered by screeners from companies like YouNoodle, so it’s utterly important that you make your business extremely easy to understand because the first filter will be made by someone that is not tech-savvy.
The team information will probably be even more relevant than your business info. Remember, they are looking to bring awesome teams to spread the startup culture, so make sure that you highlight your team as much as your product (which is likely not developed at this point).
Post-launch programmes in the US and Europe
This is the category where accelerators like DreamIt Ventures, ERA and Startup Wise Guys fit in. With exceptions, they usually accept companies with a launched product or MVP and looking to acquire their first customers. Since they are funded by private capital, they will take between five per cent and 10 per cent of your company in exchange for the acceleration period and about US$20,000 cash.
You want to be careful about which accelerator you choose. Some of them don’t really have a good mentor network and don’t provide enough value to be worth your stock. Make sure you check their portfolios to find at least a few big success stories. You will also find that US$20,000 will only give you runway for the months you’ll be in the programme; so make sure you plan ahead. Many companies are forced to shut down post-accelerator because they run out of money. I’ve been there.
I can speak very well about the added value that DreamIt provides. It’s a great startup experience if you’re a first-time founder, it has access to literally hundreds of investors in the East Coast and will provide close mentoring on improving your MVP and acquiring your first customers. (Growth stage companies might not get that much value with programmes like these, because what you need is growth hacking, which will not be made available to you here).
Getting a spot on these programmes is harder because the cash investment decision is made by the managers themselves. Recommendations go a long way, and it’s a great place to start if you can get one.
On the applications you’ll be competing with other companies with launched products; so again, showing good signs of revenue will make you stand out. A few months ago we hosted a webinar where Andrew Ackerman, the Managing Partner of DreamIt Ventures, goes into how to talk to investors and answers a lot of questions.
The team continues to be a relevant variable, so make sure that your team culture is visible on your application. The most important variable, however, is proof of concept – users, sign-ups, a crowdfunding campaign and even Techcrunch-like press will definitely help.
Growth-stage accelerators, top of the pyramid
This category is reserved for programmes like YCombinator, Techstars and our very own 500 Startups. With Slidebean, we made it to the interview round at Techstars (but were still too early) and got accepted to batch 11 of the Silicon Valley 500 Startups class.
Getting into one of these is hard, you’ll be competing with startups that have US$500,000 revenue run rates, some angel or at least F&F (friends and family) funding and that very likely went through another earlier stage accelerator before they applied.
This application will be about metrics. How fast are you growing? How are you acquiring customers? What is your CPA (cost per action) and LTV (loan to value ratio)? What is the size of the market and how to you plan to reach it? Unless you have Reddit-type virality, you will need to have revenue numbers to get through the first screen.
For Slidebean, we had about US$2,000 MRR (monthly recurring revenue) by the time we filled the 500 Startups application, which actually was irrelevant compared to some of our batch mates. Nevertheless, we had a warm intro from a startup on the previous batch and that absolutely made a difference.
A recommendation by previous alumni will almost certainly get you an interview and this is a huge head start, since about 50 per cent of interviewed companies actually get a spot.
For programmes like these, make sure you make the trip to have a face to face interview. Skype interview is an option but the accelerator certainly pay less attention to those teams. If you don’t make the trip it could mean that a) you don’t really care or b) your company doesn’t have US$500 to pay for your trip. Either way, it sends a bad signal.
Interviews are usually 15 minutes long, so demos are required and hopefully some decent slides on growth. We can help with that 😉 >
They do care about your passion and your team, but revenue and traction will be much more relevant. Make sure that you understand your growth tactics and do not bullshit them, they know more than you and can tell.
Getting to know the Managing Partners prior to applying is also very useful. If you stalk them enough you might come across some startup events that they will attend. Make sure you introduce yourself and stay in touch about once a month. They are actively looking for companies for their batches and it’s your first chance to make an impression. (Absolutely do not target Dave McClure or anyone in that level. It’s really hard to get a hold of him, he gets pitched all day every day and will likely forget you).
Also, don’t waste your shot with an accelerator by applying too early. If you’re not there yet, better wait and find a programme that better matches your stage. Repeat applicants don’t get as much attention unless they show a pivot or stupid amounts of growth.
This post has been republished from the Slidebean Startup Insights blog.
The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at writers[at]e27[dot]co
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