With intense competition among accelerators today as startup ecosystems emerge globally, it has become increasingly difficult for accelerators to find ways to lure top founders and talent to their programs. However, the best ones can shine within a sea of competition using our 10 ways accelerators can help startups be investible.
- Help them develop a comprehensive go-to-market strategy
- Teach them how to speak the investor’s language
- A launched MVP and provable customer acquisition strategy allow your founders to negotiate deals with VCs from a position of strength
- Data talks and BS walks
- Expand your founders’ thinking beyond the tech and pitch deck
- Motivate local capital (investors of all classes) to invest in the local startup ecosystem
- Provide access to successful founder mentors
- Provide structure, accountability, and feedback at regular intervals
- Introduce them to the startup ecosystem in different ways
- Start with investable founders
For a startup accelerator, its programs, access to networks, and connections all add to its allure, but there is one resume bullet point that matters most to founders: funding success rates. No matter what stage a company is in, founders want to know that the ecosystem they entrust with their new company will give it the best chances of success (and, ultimately, funding).
This may seem like a version of the “chicken or the egg” principle to accelerator partners: you need founders who find successful funding to bring new high-potential founders to your program, but you need high-potential founders to bring funding success.
The formula for what types of startups are investable from all levels of investors has changed greatly over the decades. A cool story, great pitch, and hoodie-wearing savants from Stanford or Harvard may have been enough to lure top-tier venture capital when Silicon Valley hit its stride with Facebook, Uber, Airbnb, and others. Still, today’s investors are looking for more – they want clear business insights, early growth, and a pathway to results.
The tips included can help accelerators across the US prepare their founders to better align with what investors want to see in their investments. By better preparing your founders, your accelerator will help its prospects, pipeline, and brand equity–which is a winning formula for everyone.
1. Help them develop a comprehensive go-to-market strategy
We all know that founders are pre-conditioned to put the largest, most liberal interpretation of their Total Addressable Market (TAM) and forecasted penetration rate into their decks and pitches. It’s just common sense to want to sell the best versions of themselves when seeking access to accelerators or investors.
While lots of zeroes used to raise eyebrows and caused investors to consider that they may be listening to the founders of the next unicorn startup, reality has set in after a substantial amount of startups with unicorn potential (as they were sold) have flopped based on a lack of finding actual customers who were willing to part with their attention or money.
Along with a potential growth trajectory that would be enough even to garner an investor’s attention in the first place, many investors are placing their focus and requirements on a comprehensive go-to-market strategy. They don’t want to know that a startup has the potential to gain 350M customers in a 350M person country – they want to know exactly how the founders plan on bringing their startup to those potential customers.
Many accelerators focus on driving the MVP or product development forward but don’t focus enough on helping the founders develop how that product will find its early and follow-on customers. Set your founders up for success by helping them understand that people won’t come to their product based on a good pitch deck.
2. Teach them how to speak the investor’s language
High-potential founders often enter the startup ecosystem with some sort of expertise that provides them with the experience and knowledge which formed the idea for their startup in the first place. They likely wouldn’t be looking for an accelerator if that experience and knowledge had been in the venture capital or startup investing world. They’d already have the Rolodex required to staff and fund their startup.
Shrewd investors – especially local capital and investors unfamiliar with the Silicon Valley manner of investing – will likely have plenty of questions far outside of a founder’s knowledge base or set of experiences. They will want to know how your founder knows there will be a good product-market fit, that their startup will gain traction with the target customer base, and that a real revenue opportunity exists outside the founder’s dreams.
Often, investors are interested in the exit strategy – when and how will investors get their money back to find another potential unicorn to invest in?
Passion, drive, and a cool demo may be enough to convince friends and family (who are already supportive in the first place), but it’s not likely to tip the scales for a savvy investor. Teach your founders what investors are interested in so they aren’t thrown to the wolves unprepared.
Depending on the business model, investors may have questions that the founders have never considered. Instead of force-feeding them metrics to memorize, teach them to think from the investor’s point of view, so they can not only prepare for questions but also quickly comprehend on-the-fly questions that may come during the Q&A.
3. A launched MVP and provable customer acquisition strategy allow your founders to negotiate deals with VCs from a position of strength
As economic conditions tighten, startup investors will likely tighten their purse strings as well. Whether that means putting less into their investments, investing in fewer startups, or demanding more equity from those they invest in, it would benefit startup founders to bring the strongest case they can to potential investors.
One way to ensure your founders are negotiating from a position of strength is for them to come to the table with an MVP, actual customers, and a provable customer acquisition strategy. A letter of intent (LOI) for B2B startups, a waiting list of customers who’ve signaled their interest to buy once the product hits the market, and/or a strong number of early adopters with usage stats and data showing they’re using the product or platform signals early promise.
It’s not easy, as an MVP costs money to build, and your founders may have already strained their resources by bootstrapping a development team to build the demo. In a time when investors’ dollars become tighter, however, the greater the proof of concept and potential customers that your founders can show, the higher their likelihood of funding round success.
4. Data talks and BS walks
Investors want to know that founders have a comprehensive understanding of their business and that a company is nothing without its customers. Founders can spend all day waxing and waning about what they think their future customers will likely do, but real data on actual customers will paint a far stronger picture.
Suppose a founder truly understands their business and has used data to back up their beliefs. In that case, they know where potential future revenue streams lie, where problems may emerge, and where they can drive further efficiencies within the business.
By acquiring actual customers and collecting all of their interviews, metrics, and data on those customers, founders can prove to investors that they understand how their product is used and where future customers may be found.
Investors want to know they won’t invest in a company that will quickly grow stagnant. The best way to allay those fears is to prove that founders are already invested in growing their businesses.
5. Expand your founders’ thinking beyond the tech and pitch deck
It is extremely easy for founders to get tunnel vision during the startup phase and put all of their focus on what is in front of them. Between hiccups, dev team staffing issues, the search for funding, and other challenges, it’s easy to see why founders get sucked into the emergencies of the moment rather than the potential of the future.
A good accelerator program should teach its founders to think of potential issues from a root cause analysis standpoint, constantly expand their vision, and think beyond the horizon.
Empower your startup founders with the skills to accurately identify their TAM, early adopters, potential bottlenecks and issues, ways to acquire customers, and early revenue to scale their success.
6. Motivate local capital (investors of all classes) to invest in the local startup ecosystem
As startup ecosystems begin and grow outside of Silicon Valley, it becomes integral for those ecosystems to thrive so that local investors come off the sidelines rather than having the ecosystem depend on the well-known venture capital firms from Silicon Valley or other startup hubs.
Innovation hubs and startup ecosystems in Dallas and Atlanta have taken this need to heart. Dallas brought $3.65B in startup funding in 2021 and just over $2B in 2022, while Atlanta startups raised $4B in 2021 and $2.5B in 2022 (there was a national drop in startup funding due to economic uncertainty in 2022).
To build a proper startup ecosystem in any area, investors of all stripes should be brought into the fold and educated about the opportunities of investing within the ecosystem. Along with the potential for profits, the ability to grow jobs in their backyard and add allure (and potentially vastly increased property values, as seen in Silicon Valley) can aid in the sales pitch from startup ecosystem evangelists and accelerators.
Without the capital to fund new startups, an ecosystem may not have the potential to thrive. Traditional banks are extremely unlikely to invest in startups (aside from community banks in small amounts), so an ecosystem would be wise to court everyone– from traditional wealth investors, retired entrepreneurs or CEOs, and even local companies who stand to benefit from the talent and innovation that a startup ecosystem could provide for their firms.
Education on both fronts is key for this to work, however. Traditional investors and companies need to understand the differences and opportunities within the startup investing ecosystem, and the ecosystem partners (including founders) need to understand how to speak the language of these investors. A cool pitch deck isn’t likely to cut it for high-net-value investors who are used to seeing prospectuses and disclosures during their typical due diligence.
But the opportunity to bring these investors into the startup ecosystem exists and can be a winning formula for everyone involved if done correctly.
7. Provide access to successful founder mentors
Mentors help us see the world from a different perspective, and it is best when that perspective is at least a similar experience. Mentors who are retired CEOs from Fortune 100 firms surely have a wealth of knowledge regarding mature business practices and large budgets. Still, unless they started the companies themselves, they may not quite understand the unique needs of a startup founder.
Founders have a significant (understandable) fallback position to write off any advice they don’t like as simply being from someone who “just doesn’t understand my vision.” However, when constructive criticism comes from another former founder who has walked in those bootstrapped shoes, it becomes far more difficult to discount.
Mentors with experience in marketing, management, or technology are a great addition to any accelerator program. However, mentors with experience bringing startups from the idea stage through funding rounds and successful customer acquisition (and potentially exit) are worth their weight in gold.
Bonus points if those successful founders graduated from your program or at least the under the tutelage of someone on your team.
High-potential founders are often beset by “the good idea fairy,” constantly barraged by people who love to share their own (uninformed) visions of how they think the startup should be run to find success. When those ideas come from a fellow traveler who knows the pains of the founder’s path, they are far more likely to stick – and come from a place of useful knowledge.
8. Provide structure, accountability, and feedback at regular intervals
Building an entirely new thing is never easy, and any honest founder is fraught with frequent periods of self-doubt. No matter what sector or industry the startup seeks to disrupt or add to, the journey is often a long one full of deliverables, needs, and timelines. As the old saying goes, the best way to eat an elephant is one bite at a time, and a well-organized structure can help set the timelines to keep everything on track.
By helping your founders set a rigorous structure, you can aid them by ensuring they stay on track and schedule. You build a winning formula by supporting that structure with frequent accountability checks and feedback.
High-potential founders will accrue “hangers on” along the way, especially from those who see that their idea and talents have a significant probability of success. These folks need to be kept as far away from them as possible because the ability to accept constructive criticism needs to be a skill that becomes well-honed and hopefully engrained during the startup period.
They need and deserve praise when it is warranted – just being willing to put it on all the line to bring their idea to the world is a feat in and of itself and shows a resolve that most people don’t have. But when appropriate, they also need to be given the hard truth that perhaps the path they are moving toward or their decisions are incorrect.
Regular accountability and feedback can help stop a potentially harmful trajectory before it reaches the point of no return. Accelerators are often on fixed schedules, during which the startups and founders should be ready for fundraising and pitches upon graduation. If you don’t make the time to nip bad or potentially funding-killing ideas in the bud quickly, their paths may be too far traveled to be fixed in time.
Suppose you and the partners in your accelerator don’t provide that honest accountability and feedback when needed. In that case, you can be certain that the investors certainly will when they recognize any issues in the product, business plan, or strategy.
9. Introduce them to the startup ecosystem in different ways
Good accelerators add a lot of fanfare to their demo days, pulling out all of the stops and inviting others from the startup ecosystem, like media and investors, to partake and witness the fruits of their founders’ work. While this is an excellent process and a great way to close the loop on all the hard work and progress put into the cohort’s work, it shouldn’t be the first time the founders are introduced to the ecosystem.
Networking mixers, arranged media interviews, mentors, TED talk-like symposiums, and opportunities to interface with successful local companies who may benefit from the startup’s success are all excellent ways to introduce your founders into the startup ecosystem before demo day comes. It’s human nature to be more invested in the success of something we feel we have a part in building, even if our role is minimal.
Allowing local partners and supporters of a startup ecosystem to get time with founders and insight into their process and vision long before demo day allows them to feel like an insider. This drives their innate human urge to do whatever they can to ensure success.
Most founders fear that anyone discovering their ideas will steal them. It’s only after they’ve gone through the entire process that they learn how hard it is to start and bring a company to fruition, which is why that fear is largely unwarranted.
Helping founders overcome that fear early and learn to build a local community of cheerleaders can help drive their success further down the road. And their success, after all, will also help your accelerator’s success.
10. Start with investable founders
This is not the last point because it is the least important. Rather, it is one that we hope you are most likely to retain because if followed, it will lead to your success. You get back what you put into a system, so you always want to start with the most high-quality ingredients in any recipe, system, or data set.
Some accelerators may succumb to the urge to grow their cohorts as quickly as possible. To satisfy that urge, they may bring founders into their system whose ideas may not have as much potential, drive, or vision as they would like, which can do far more harm to the accelerator than good.
If a concrete formula guaranteed success for a startup or founder, every venture capital firm would have a far higher success rate with their investments. That formula would quickly spread like fire among the entire startup culture. There would, of course, be founders who would attempt to emulate whatever characteristics were inherent in said formula. Still, thankfully, the most powerful success metrics we know of cannot be faked – they are either something you have or don’t.
The movie Moneyball is based on the story of Oakland A’s Manager, Billy Beane, the first person credited with using statistics to build a professional baseball team roster rather than scouts and anecdotal evidence.
While ERAs and strikeouts may not apply to determining whether a startup founder will be successful or not, there certainly are characteristics in the leadership team, vision for the startup, business utility, and experience that can be used to determine the likelihood that a founder will have what it takes to be investible.
The partners in an accelerator should take the time to sit down and identify the characteristics that they are looking for in founding teams and startups. Once those characteristics are identified (and scored), they should be used to inform all future decisions on whether to bring a founder into their program or not.
By ensuring that your accelerator is only adding the best ingredients to its recipe for success, you are deciding to focus your finite resources (time, money, effort, social capital) on investments that are most likely to generate positive returns.
Closing
Much of the startup world is governed by external events we cannot control. There is the economic risk that conditions will deteriorate and the availability of startup capital will be reduced.
There is the regulatory risk that state or federal regulations will hamper investments, a new startup’s business model, or even the startup ecosystem. And, of course, there’s the risk a startup will begin by focusing on something with a massive Total Addressable Market. Still, societal changes will suddenly make that interest dwindle or disappear.
We cannot control many of these external risks, but an accelerator can do plenty of things to manage what it has control over. Building a strong startup ecosystem within your local area and building bridges to those within the ecosystem can both help and benefit successful startups that graduate. And introducing your founders into the startup and investment ecosystem helps forge strong networks. These are things you can control.
The successful founders that come out of your accelerator are its best assets, so great care should be taken to ensure you are doing whatever you can to help nurture and grow as many of them as possible. Building a pipeline and ecosystem in and around your accelerator that makes it widely recognized as the pathway to success will help you find high-potential founders beating a path to your door.
Suppose your accelerator does build a repeatable process that leads to success. In that case, other accelerators will do their best to reverse engineer your best practices and emulate what you put so much work into the building.
As they say, “Imitation is the sincerest form of flattery that mediocrity can pay to greatness.” That’s only true if you build something worth imitating, and the true high-potential founders will know who the imitators are versus who they are imitating.
Make sure that your accelerator is the latter.
