How to improve startup accelerators
Note: we decided to publish this, of course, an interesting look at the current state and development of startup communities around the world with expert comments - Dmitry Kalayev, director of educational and acceleration programs of the IIDF, became him. He gave his assessment of the conclusions reached by the author of the article and spoke about the Russian realities of the work of acceleration programs.
Most of the options for helping start-up communities (such as incubators, accelerators, educational institutions, government initiatives, hackathons, conferences and so on) do not work well. It is assumed that all of them should bring value, but in reality they only receive money. Some of them do more harm than good.
In almost every country, leaders are trying to nurture innovative entrepreneurship. But due to the lack of development programs or specialists to turn to for help, many initiatives cannot be implemented for elementary reasons, which can be completely avoided.
Here are some very simple ways to help improve the situation. They simply need to be used, because entrepreneurship is important for improving our world just as the development of agriculture or writing was once important.
After the company that I founded in Silicon Valley was acquired (and I realized that I urgently needed to recover physically and spiritually), I sold all my property and went traveling light.
During the journey, I acted as a mentor for more than 1,000 founders in more than 25 countries and collaborated with governments, accelerators, universities, investors and non-governmental organizations to help them better understand their mission: to look for successful entrepreneurs who are creating more and more useful things around the world.
I am grateful that I saw with my own eyes the spirit of entrepreneurship in every corner of the globe (and even in North Korea!). This post describes how, through the advice and efforts of local community leaders, significant changes are being made. I hope this helps you in your endeavors, wherever you are.
“Accelerator” - I will use this very word to refer to all such initiatives [listed above]. Because they are all somehow trying to speed up the work of the entrepreneur. It’s stupid to find fault with the name (be it an accelerator, an incubator or something else).
There are no two identical situations, however, the basic tips that many similar organizations need to hear are very similar. Below I will describe the ideal accelerator, tell you why we should ignore the “signal” problems, and how to improve mentoring.
- How do I create my own Silicon Valley?
- Do A, B, C, X, Y, Z ...
- No, I mean, without doing ANYTHING of it?
1. Do not try to copy Silicon Valley. You can not. Or, even worse: after watching movies and reading blogs, do not try to copy what you think is happening in San Francisco. Even if everything looks really clear, believe me, basically it's all for the show.
But the real information is not at all on the surface, and it is difficult to express through tweets. Learn from the example of San Francisco correctly. In addition, you do not need to want to imitate the Valley, because San Francisco is one of those specialized ecosystems that can cope with some situations and is really bad with others .
Create something of your own. For example, I really liked that The Family in Parisunderstand this perfectly and create a community focused on the French mentality, because otherwise they will not develop. Don't give your communities and organizations silly names like “Silicon ___.”
Commentary by Dmitry Kalayev, Director of Educational and Acceleration Programs of the IIDF:
Indeed, [in Russia] the imitation trend is quite strong. And I think that this is normal, you just need to understand the reality of the Russian mentality and the conformity of business infrastructure. For example, in the spring edition of 500Startups, the largest investment was made by the team with the service “tourist dating for sexual minorities” - such a mix of AirBnB and Mamba for people with a different orientation.
For the Russian market, I would not do this either because of the difference in mentality, or because of the high risks of a conflict with Russian law. If we talk about the IIDF Accelerator: indeed, outwardly we look like a copy of 500 Startups or YCombinator, but in fact, “under the hood” because of the realities of the Russian market, mentality and business culture, we work in a very different way.
2. Recognize that there is a huge difference between unicorn venture companies and other forms of entrepreneurship. Most communities share all businesses into those that are similar to Instagram (high risk, technological advantage, universal recognition, the “style” of Silicon Valley), and those that work on the principle of a local Chinese restaurant. That is, only white or black is distinguished.
But there are shades of gray between them - for example, I like the way they work at Indie.vc : they invest in companies that can succeed, but not necessarily global success. If you do not consider such businesses as potential participants in your program, you blindly make catastrophically stupid mistakes.
Commentary by Dmitry Kalayev:
About 90% of our portfolio projects now work only on the Russian and CIS markets - we perceive this normally. In general, the FRII’s view on what the potential of the business: global, local or niche is based on whether the company has the ability to reach a turnover of 300 million rubles a year after occupying 10% -30% of the market after 4 years. In other words, any niche with a size of more than a billion rubles can be interesting to us.
3. Accelerators are modern universities. Traditional model: “We are an accelerator! Apply, we will choose the 10 most promising, and after 90 days you will start your business and get financing! ” does not work. The true goal of the accelerator is to teach entrepreneurship methods so that on the day of graduation, the founders have knowledge, own tools and continue to develop. Funding, launching, weekly growth, and so on - these are all bonuses. Governments must support communities as they compensate for the lack of public education programs.
4. What is at the input, then at the output: do not try to get attached to a predetermined number of free places in the accelerator by selecting projects (do not take “extra” projects). If your program really allows you to create a unicorn company , and you invest in companies that are not suitable (according to paragraph 2) or are already the three hundredth option a la Tinder, then success does not wait for you, no matter what you do. If you find only 7 good teams in one set, then take only 7.
Comment by Dmitry Kalayev:
Yes, this is the right approach. If you decided to take 30 teams in the set, but only 15 worthy, then you do not need to get another 15 “because you promised”. If you notice, then the number of teams in each set of the IIDF Accelerator is different. Exactly because of this reason.
If the team is not ready or is at the wrong stage of business development, then it makes no sense to "drag by the ears." It will definitely be a failure for the founders and a loss of investment.
At each start of the IIDF Accelerator, I say: "You are the best team on the Russian market today." And this is true, because we take only those in whose potential we believe.
5. The processes of community formation, attraction and active search for projects are very important. It is especially important to hold events, work on branding, and organize parties in ecosystems outside of San Francisco - this way you can put the process of “withdrawing” potential entrepreneurs out of the shadows. You must become a magnet for potential founders. Just as startups are looking for investors, you must “hunt” for talent.
6. Qualitatively improve the mentoring support of the founders.Mentors must be qualified specialists in their field (“we have already stepped on this rake”), appear in the startup life cycle in time (do not introduce the founders of the company in the third week of their stay in the accelerator). Try to lead the team to the right decision, do not tell them what to do. Explain to mentors what exactly you want from them, let them feel responsible for their work.
7. Avoid unnecessary events, meetings, noise and conditions when the mentoring support is “exhausting itself”.Most accelerators force founders to attend too many events, business meetings, and mentor meetings. And work in coworking is noisy, which can also be distracting. Give the founders time and work space where they can calmly think and work. And give companies the opportunity to create their own corporate culture, as the team develops after the founders.
Commentary by Dmitry Kalayev:
Indeed, there is only 24 hours in a day and for a period of three months there is constantly not enough time for business development. Our answer is focus! Do not take the accelerator as a training. Investments and results are obtained not depending on the attendance of all trainings and meetings with all experts.
If, specifically, now in business, the main task is to raise repeat sales - all efforts and all meetings with experts are just about that. No need to communicate with everyone in a row "for the future." If one of our graduates missed a module or an expert that later became important to him during the acceleration, we are always ready to arrange a separate meeting between the team and the expert during the next accelerator program.
8. Ignore the “ signaling problem ”: love everyone, but invest in winners. Investing more money in promising companies is not only possible, but also necessary in order to get financial benefits for your accelerator. I think that in the field of business acceleration, systems of "ranking" projects or similar meritocratic systems are still needed. And the founders should know what they value. The phrase “ Everybody won ” is not applicable here.
9. One of the most significant and rarely mentioned values of accelerators is the effective work with talents.I heard the founders of YC said it was their greatest value. You must masterfully be able to select people with different talents as a team. A startup with a good team is developing poorly? Support the founders - help them join the more successful team.
10. The task of Government No. 1 is to provide meaningful changes or to eliminate problems in the functioning of the venture ecosystem. The best thing the government can do is simplify everything for entrepreneurs: easy visas, preferential taxation, the ability to easily hire / fire employees, access to free office space, deferred payment of loans for training, and the removal of control over projects using drones or stem cells, investment in STEM education (and retentiongraduates in this country!), etc.
“Exceptions for startups” must be made to the law, otherwise it only interferes with their development. Give future founders the opportunity to relocate, create communities, etc. Create more attractive conditions for investors who invest in startups in the early stages. Create attractive conditions for exiting the project, because without people making money, the startup life cycle can end, and all your efforts will be in vain. Investors will fly anywhere in the world if there is an opportunity to earn venture capital.
11. Traditional universities: entrepreneurship is studied in practice, not by studying outdated business plans. If the student is in business, helphim, remove the obstacles, do not bother.
Once I was studying at one of the “top” universities on the topic of entrepreneurship in the USA. And although I created my company in the first year of college, I was still required to spend time on courses like Entrepreneurship 101, where I needed to write essays on the topic “What is Entrepreneurship?” (Fortunately, I and a few other people helped update the program, and thereby created the best university entrepreneurship course in the country: “Spine Sweat”, which is taught at Indiana University).
That's why Y Combinator just created a fund to invest in startups, and TechStarsacquired UP Global (Startup Weekend, Startup Digest, Next, and others). There is nothing strange in the fact that the best accelerators in the world are developing according to this scheme. They need to improve their work in attracting capable people to the business and get more profit by supporting startup winners.
TechStars has gone far ahead compared to YC (in terms of globalization), expanding into markets such as Berlin . It is very important to create in the community such a mechanism that would identify and attract potential founders and startups. To work passively, to meet only with those who have applied for themselves - this will not be enough.
Imagine you are a football coach. If you train a famous team in a place where children already want to play football, and the most capable ones really achieve success, then yes, you can relax and choose peacefully. But if you are promoting football to a new or unexplored market, you will have to spend a lot of time organizing and promoting the football community, identifying talents and developing them, just to try and create a good team.
Startup Weekend and other UP Global programs are just some of the examples. I worked as an organizer, sponsor, speaker, judge, mentor, and was even just a visitor to several Startup Weekend events in different parts of the world: I recorded the highlights from the presentation at the largest SW in ShenZhen in China and explained what “startup” means to the villagers of the Philippines . In 48 hours, it is very easy to identify people who have potential, while simultaneously forming a startup community and, as a result, achieving long-term indirect benefits for the environment as a whole.
The undisputed leader among the world's accelerators, YC, has created many unicorn companies. But if more money had been raised at YC in order to gradually gradually double the share only in successful graduating companies, the amounts received from them would have broken all records. That is why they created the fund. However, according to the press, YC still does not invest in startups at stages A and B due to “signaling” problems.
The “signal” problem: when an investor investing in the early stages (like an accelerator) doubles the investment not in all, but only in some teams. This suggests to other investors that the teams left without financing are not the most promising. That is, figuratively speaking, investors thereby hammer one more nail into the coffin of projects left without investments.
Ignore the alarm problem
There is such a thing in entrepreneurship: I call it "lemonade stand syndrome." When an authoritative person ("adult") wants to cheer up the entrepreneurial spirit of the "child", he encourages him to try to work at the lemonade counter. But adults are afraid to give a real assessment of this entrepreneurial endeavor.
So they just say: “Mmm, your lemonade is so delicious! Catch a dime, "instead of the bitter truth:" Your lemonade is disgusting. I’d better buy from a smart neighbor boy who promotes his project on social networks and uses gluten-free lemon powder from independent producers. ” (The relations between “adults” and “children” in Silicon Valley look something like this, but this is a topic for another post).
As a more universal example, university startup competitions can be found where there is sure to be someone who will pitch a project for the sale of T-shirts and at the same time want venture capital investments. But no one tells him the truth, thereby doing more harm than good from the unwillingness to return him from heaven to earth.
Due to lemonade stand syndrome, signaling problems and other things, many accelerators are afraid to honestly give a real assessment of the merits of their wards. Or take actions that would publicly show that the accelerator has a different attitude towards its teams.
But who cares? Everyone knows how few startups succeed. Speaking literally, those who come to Demo Day are people who evaluate the results of your startups. Why should you hide the truth from your founders? Everything: the market, the press, customers, employees and investors are ruthless capitalists. Competition is life. For those who are aiming for venture capital investments, the second place is already a failure.
“Sorry, Susie, but Timmy understood how to work, and you didn't. We will do our best to help you make delicious lemonade, because we like you. But know that in the end, only those who pass the test will receive our money. ”
All universities graduate students. An average Harvard student is damn smart. But when he enters into competition for a job at McKinsey, what matters is where he takes the harms of his peers. Competition perfectly motivates graduates - this is not enough for many founders who first hit the accelerator.
If I have 10 companies at the seeding stage, and I think that 3 of them will succeed, then, naturally, it seems to me that the remaining 7 will not succeed. No one can predict how things will turn out: maybe some of these 7 companies will be able to “shoot”. But the reward for supporting three potentially successful teams outweighs the risk of underestimating one of the seven "losers."
The trade-off is to develop some clear standard of communication with your companies and, possibly, the outside world. These can be quantitative assessment standards, for example, “confirmed market size” or “raising external capital in the amount of more than $ X”. Or you can use qualitative parameters, for example: “Once a week we will evaluate how well you implement the Lean methodology in your work. If in the end you get a rating of 8 out of 10 and above, then we will invest in you. "
Commentary by Dmitry Kalayev:
In the IIDF Accelerator, everything is quite simple. To get the investment of the next round, you need to show the dynamics in your business. If you were able to grow a business from 100 thousand rubles of monthly turnover to 1 million per month, then you yourself know that it’s cool enough and investors will also appreciate it.
And vice versa, if a tough team with a plague experience and a promising market for three months could not move - there were three clients and the same three clients remained, it doesn’t matter for what circumstances, but this is clearly not a “fast-growing company”.
Please note: the “border” between winners and losers in acceleration programs is much stricter than it should be. She divides the teams into black and white, and this is due to other problems described later in this post.
Evaluating startups is a special skill. Many give wrong estimates.
As official judges, or as individuals who decide to finance a company or support it [in another way], I too often meet experts who try to evaluate a startup according to personal preferences. For example, a team wins a hackathon with an application for children thanks to the highly rated expert whose children liked this application. Meanwhile, the team, which managed to increase the efficiency of solar panels by 20%, is morally suppressed, because the expert is not interested, and he did not vote for them.
Evaluation of startups before their ideas enter the market should be based on how they cope with doing business. Do they follow Lean principles? Do they learn fast? Is their training cheap? Do they ask the right questions? Do they know what they really need? Do they know what their team should be? Is there anything special and outstanding about them?
Commentary by Dmitry Kalayev :
Of course, there’s nowhere to go from prejudice and, sometimes, we miss interesting startups. To avoid this, we focus on the development of a startup in time. For example, we have a two-month correspondence accelerator program [approx. - You can approach the correspondence program based on the results of work in the Pre-Accelerator of the IIDF ], where we do not give investments but help our expertise and methodology to quickly check the presence of demand in the market.
According to the results of these two months, the teams attract the first customers and earn the first money. In this case, the possibility of a mistake by experts is practically eliminated, since if a team shows dynamics in money on the account and by active users, then it is a “winner” and it makes sense to invest in it. Thus, our main approach is to help a startup get dynamics in measurable results, and the results already speak for themselves.