Startup Accelerator Stages: Team Selection

Original author: John Ramey
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The most successful accelerators in the world carry out six basic functions, such as: Attraction, "Hunting", Selection, Training, Support, Investing. It looks simple, but many may misunderstand this statement. All your work as an accelerator is to ultimately get you a stake in successful companies.

State institutes, educational and other institutions have the same goal - to "grow" as many large successful enterprises as possible, making everyone richer, which, in turn, is the basis of business reproduction. You [as an accelerator] simply view the same goal from a different perspective.

Outside of San Francisco, this statement means that you must develop a community to attract new talented teams without ceasing to work with those already found. Teach them to be better, and then help them become successful.

What about vertically oriented accelerators specializing in hardware or medicine? Honestly, it's hard for me to advise anything specific. Due to other current problems of accelerators, it was difficult for me to formulate the difficulties characteristic of this particular niche.

You [as an accelerator] will definitely need specialist mentors in your field, you must immediately identify unrealizable or simply fantastic projects (for example, a cream against cancer or something like that) and maintain a team spirit among the founders. But on the other hand, the principles of entrepreneurship in startups from different areas are approximately the same (whether it be applications, Internet projects, b2b, etc.).

So it’s absolutely normal to form accelerators around highly specialized vertically oriented industries like medicine or space exploration, but it’s absolutely ridiculous to concentrate only on mobile applications or web projects.

Commentary by Dmitry Kalayev, Director of Educational and Acceleration Programs of the IIDF:

The accelerator is very dependent on the expertise of its team, mentors and partners. It is impossible to effectively select, train and help in development in abstract areas. In fact, an accelerator can only be successful if it knows how to do something better than others. It is impossible to be better than others in all directions, so you really have to focus.

For example, we focus on stages and spheres. Despite the fact that in the general sense IIDF supports any Internet projects and mobile applications, we have a strong expertise in growing a certain type of company: these are companies with a turnover of more than 100 thousand rubles. up to 1 million rubles per month in the areas of b2c, b2b, marketplaces.

This is also quite wide. Therefore, we also have industry areas: medicine, information security ... we still formulate and revise some of the areas, as the market is changing. At the same time, we clearly define for ourselves what type of projects we do not take: games, including gambling, purely media projects and typical e-commerce. The picture may change, but focusing is an important part of the success of the accelerator.




Attraction


Do your best to bring people together. Train the community to work more efficiently (everyone, rich and poor, will benefit from the economic recovery). Teach others to love entrepreneurship.

I like events (or web materials) in which experienced entrepreneurs share true stories of creating their own business, talk about tactics in the legal field or the topic of SEO optimization. I also like events where startup pitches take place. Or just meeting educated people in places with lots of alcohol. Get some cool thing, for example, a helmet of virtual reality (Oculus), and let people turn it in their hands (I saw how they rejoiced in third world countries where techies knew about this helmet, but could not get at least one )

Hackathonsgreat help in creating a product and in training and practice approaches to conducting entrepreneurial activity. However, at the Asian Startup Weekend, where I was a mentor, almost every team spent the lion's share of the time making a great presentation. At the same time, they [teams] had no idea how to confirm the value of their business ideas. This approach to the event makes it completely useless and even harmful.

It will be better to attract entrepreneurs for free or at the cost of the event. Never take money for the opportunity to make a presentation. Attract sponsors. Consider hackathon your way to promote the topic of entrepreneurship and encourage the community. Invest, but do not wait for the instant return of the invested.



Obviously, branding plays a large role in the operation of the accelerator. Can people find you? Is your site optimized for relevant search queries? You need to earn recognition so that educated people, thinking about entrepreneurship, come to you.

Some of the tasks performed by the accelerator work for the benefit of the whole society, so why should the accelerator pay all the costs if the company also benefits from its work? Engage a government resource in your work and get public support: money, tax benefits, counter funding, free or cheap venues for events, the ability to quickly get visas, support services that help you quickly understand bureaucratic issues, free Internet access, free airfare, etc.

For example, the French and Dutch governments own part of Air France KLM. Thanks to this, they provide accelerators with free tickets to attract foreign mentors to their events! And Turkish Airlines shows short videos about startups on screens built into the seatbacks.

The most important thing is to establish transparency in relations with the government, but at the same time not to allow it to control your work. Otherwise, it will ruin your business. Document the fact that your business takes a long time to get on its feet. I saw politicians who, after just a couple of years of working together, stop supporting accelerators because they don’t understand that even Silicon Valley took 150 years to develop.



Hunting


One of the most problematic places in the work of accelerators. Even the professional New York Yankees baseball club sends their people in search of promising kids and minor league teams. Special trainers and psychologists then work on developing the abilities of budding players. You must do the same.

Look for people with advanced degrees who haven’t “found themselves” in university work. Find a successful offline company that is worth developing on the Web (I saw a similar situation in Russia - the girl tried to bring her offline travel agency to the Internet market - now her project fell into the California 500 Startups program). Find a successful startup at the seeding stage or a project that has not yet become a business in full, and explain to them (I hope, real) value in working with you. Find a foreign company and give it the opportunity to move to you. Find an introvert who likes to write code for various third-party projects, but who does not like to attend noisy events and look for potential business partners and employers there.

Yes, it is difficult and requires more effort. Search for projects and people or leave this business. If I had to choose between active and passive involvement of projects, I would definitely choose the first option. But usually, 99% of their time, accelerators attract startups passively.

Commentary by Dmitry Kalayev:

“Hunting” or as we call it in our accelerator “scouting” is a very important part of the work. Truly strong entrepreneurs are confident in themselves, and they have almost no idea to ask for help from the accelerator. Therefore, the most promising teams appear precisely through active search and consultation. Only by finding a weak spot in terms of a strong start-up, showing your expertise and proposing a working solution for a particular business, you can create the need for such teams in partnership with the accelerator.

Personally, I have more than 50 flights a year around the country, some of the IIDF employees practically live on planes, helping teams in the regions of Russia and getting to know interesting business growth through personal connections and recommendations of many entrepreneurs.

Indeed, this is a very laborious and lengthy process. In addition to finding companies at a late stage, we begin to work with entrepreneurs from the “I have an idea” stage - until the moment we are ready to invest in them, it may take a year or two, and all this time we stay in touch and help with various formats and expertise .

To understand the scale: more than 20 thousand people go through formats organized by the IIDF per year, one or two events take place daily in Russian cities, in which the IIDF acts as an organizer or co-organizer.

Selection


I don’t care what you told your investors or the government that you would finance 10 startups per quarter. If you find only four promising teams, then finance only them. If you have a problem with this, review strategies for attracting and actively seeking teams and / or better control your investors.

Commentary by Dmitry Kalayev:

In this case, the accelerator is like any startup. There should be a plan, but nothing will go according to plan. At the start, we planned to invest 400 presowing teams in 4 years. To do this, we had to take an average of 40 startups to each accelerator.

Indeed, reality makes its own adjustments. We had 40 startups only once in the fourth accelerator. In the rest, the number of teams ranges from 25 to 35.

This is precisely because it is harmful to invest in a team while it is still at an early stage - the investments will “burn out” and the team itself will not be able to go to the next stage of development, and the credit of investor confidence and the limit of one’s faith will already be chosen.

We regularly review the strategy both in terms of priority areas and requirements for the start-up stage, and in terms of quantitative indicators. For example, now we have plans to invest even more than 400 startups, but the average number of teams in the accelerator is expected to be about 30. Moreover, if there are no mature companies on the market in such numbers, then we do not do artificial selection to get a round figure.

Usually I am against decisions being made “collectively” in accelerators. For professional venture firms, this is necessary, because before investing in the project $ 10 million, the consent of all partners is required. But in the early stages of the project, it seems to me, it is absolutely normal to express different opinions about its [project] perspectives.

Get rid of “shamanistic practices” at the stage of selection. And from hiring employees "at random." Define the criteria you need to evaluate projects, and clearly explain them to all decision makers. Establishing assessment criteria is very difficult. Do you invest only in a business that is ready to [potentially] enter global markets? Or just software that cuts down on project clients? Or only in a company with obvious prospects for monetization? Are you ready to take the founding team without technical skills?

Recognize that people are imperfect (even if the founder should be a “superman”) and optimize the selection in accordance with the most important conditions in your opinion.

If you intend to invite outside experts (for example, local businessmen) to help you evaluate startups, then they must keep up with the times. An entrepreneur who built a textile factory 20 years ago should not evaluate an Instagram-level startup without your explicit guidance and knowledge of the evaluation criteria.

Be flexible regarding your financial offers. Do not try, for example, to offer everyone, without exception, 50 thousand dollars in exchange for a share in the company of 8%. Y Combinator can afford it, and you can not. You need to be more flexible, especially if you are going to entice companies that are already on their feet with experienced founders. Founders complain that their project, according to experts, costs less than a start-up of competitors? Tough, but this is the business.



Commentary by Dmitry Kalayev, Director of Educational and Acceleration Programs of the IIDF:

Today, most of the deals in the accelerator, we are at the stage when the bargaining by the founders is a matter of ambition, rather than objective reality. And companies with 50 thousand monthly turnover and companies with 200 thousand monthly turnover we will give our standard offer of 7% for 1.4 million rubles. If the company has stepped over 500 thousand monthly turnover, and such companies at the entrance to the accelerator we began to appear 1-2 in each set, then we are ready to further discuss the financing conditions - such a business almost came close to the next round of investment.

In fact, the main thing here is not even a question of amount and not a question of company valuation, but a question of what support we can provide in business growth now and how we will influence as a partner in the future. And in this context, our 7% acceleration offer for older companies is even more useful than for startups taking the first steps.

When investing in companies on a seed round with an investment volume of up to 15 million rubles, the price of the company is determined both by the results of the obtained economic parameters and by negotiation.

It is worth noting that the issue of bargaining depends on the position of the accelerator. Accelerator FRII in the Russian market, the position is quite similar to YCombinator in the US market. For accelerators without that weight, gaining 3-5 teams every six months to a year, bargaining with the founders is a prerequisite for survival.



Announcement:

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Come and chat with the IIDF team, trackers, experts, as well as with Accelerator alumni.





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