What startups want (from their accelerators): support, support and support - and maybe a bit of cash

Analysis: How do 'graduated' startup founders look back on their experiences participating in an accelerator program; what were the main benefits and drawbacks - and would they do it again?
What startups want (from their accelerators): support, support and support - and maybe a bit of cash

Last week, the European Commission' Startup Europe initiative organized the first Accelerator Assembly Conference in partnership with startup accelerators such as Seedcamp and Techstars, and organizations like Startup Weekend, Nesta and How To Web.

In our ongoing quest to research how seed funds and startup accelerators are starting to reshape the European tech industry from the bottom up, we attended the conference and learned a lot.

In one of the on-stage presentations, Jed Christiansen discussed some interesting findings of research carried out in relation to his work on Seed-DB, a global database of accelerators and their portfolio companies.

Christiansen, who has a day job at Google in London, also shared a document with said findings with all of the attendees, and was kind enough to let me publish the highlights here on tech.eu.

(This is part 2 of the most interesting findings of Seed-DB's research; part 1 can be found here).

Re: Research

This particular research combined multiple sources of data for analysis. Some quantitative data was taken from Seed-DB, much like the other research report published yesterday.

In an effort to study what startups had to say about their accelerator experience, an extensive survey was also sent to 'graduated' companies worldwide. All in all, 51 startup founders replied, a sample size large enough to draw some interesting conclusions.

In particular, shining a light on the benefits and drawbacks of participating in an acceleration programme turned up some interesting results.


Question: “What were the most important benefits you gained from your accelerator experience?”

One of the most consistently-cited benefit of an accelerator program for startups was the mentorship, i.e. the business-specific coaching and feedback they received during the cycle.

It's not much of a surprise, but more than 80 percent of respondents said receiving mentorship and advice were the biggest benefits of temporarily joining an accelerator - it's no wonder so-called "mentorship-driven" accelerator programs have so far proven to be the most successful and most copied model across the globe.

It also highlights, again, that an accelerator's network of mentors and advisers makes all the difference in terms of value for participants (seed financing, office space, legal support etc. are relatively easy to come by, and by now clear-cut commodities in the accelerator space).

Specific comments from founders included the following statements:

- “We were regularly challenged on what we were doing and why we were doing it”

- “Defining the business more via mentorship”

- “Trustworthy, insightful advice from experienced entrepreneurs and businesspeople”

Another oft-cited perk of accelerators is the combination of the network built during the program, the available alumni connections available and the improved future networking opportunities because of the accelerator's 'prestige'.

Christiansen's conclusion:

"In addition to the regular 1:1 training, accelerators are extremely valuable to startups in the network they gain access to, both in the program itself as well as an alumni network."

Investment and other financial benefits

The exact financial investment of the accelerator is strong enough to be cited somewhat regularly (>30% of respondents), but is clearly not the primary reason for participating in an accelerator program. Not that it's not important, but critical it ain't either, apparently.

This aligns well with earlier Seed-DB research, where the impact of direct investment was rated significantly lower than the impact of product development support and impact of accelerator brand and network (4.14 compared to 7.13 and 7.83 on a 10-point scale).

Connections to investors

When Seed-DB previously carried out research on why startups joined an accelerator, one of the top reasons was that they could connect them to follow-on investors.

This aspect of the accelerator program was rated 8.51 on a the 10-point scale mentioned directly above. However, that research was conducted in the summer of 2009, and the respondents were largely alumni of US-based accelerators.

For this study, only slightly more than 30 percent of respondents cited it as an important reason for joining an accelerator.

How much value accelerators really add, according to startup founders

In an effort to determine the value-add of an accelerator, based on Y Combinator graduate Songkick's founder Ian Hogarth method of weighing the same for venture capitalist firms, the following question was asked:

“If the accelerator provided no funding to your company at all, how much equity would you give them just to go through the program?”

The most popular answer? Zero, by more than a fifth of respondents.

An additional 55% of startups would allocate some equity, between 1 and 6 percent, to their accelerator even without funding, which implies the accelerators are adding value above and beyond what startups get from the direct investment. Typically, accelerators in Europe take between 6 and 10 percent in equity.

Some startups (17.2%) were willing to provide the accelerator with the exact same equity they would have even without funding. A lone respondent was even willing to provide more equity to the accelerator than they had allocated, even in exchange for no funding whatsoever.

The remainder of respondents declined to answer.

The drawbacks of accelerators

In addition to the benefits of accelerators, startups were surveyed about the disadvantage of participating in these programs.

Roughly 41 percent of respondents said there were no drawbacks to their participation. Those who did put (the lack of efficient and game-changing) mentorship and advice on top of the list of drawbacks, which is surprising given how much value founders get out of that aspect (see above).

According to Seed-DB, startup founders often described mentorship sessions as “overwhelming” and said that mentors weren’t as blunt with the entrepreneurs as they should have been. In some cases, the mentors simply didn’t have the domain-specific expertise or experience with certain markets or business models.

Other startups wrote that their mentors focused on technical solutions instead of looking at a bigger picture, and getting customer feedback. Finally, some programs apparently have such a wide network of mentors that founders spend a lot of time simply figuring out who they can and should listen to and engage with further, and that the wide variety of opinions are considered a "distraction".

When startups were asked about what they would do differently if they went through an accelerator again, changes to mentorship was an even stronger theme. Many startups cited that they would have wanted stronger mentors, different mentors, or a lead mentor.

All in all, over 30 percent of founders cited drawbacks in the mentorship process at their program, which implies that there are many elements about mentoring in accelerators that can be improved.

Another point of contention was the infamous accelerator 'demo day', which some founders described as a "distraction" and a "waste of time". In this case, Seed-DB didn't cite specific percentages of respondents.

Then there are a number of logistical hurdles that were brought up by founders, including difficulties and hassle moving to where the accelerator was located, and trying to balance going through an accelerator while also having a family. One founder expressed his unhappiness with the exact details of the legal funding structure (e.g. too many individuals on the cap table).

A final assessment

At the end of the survey, startups were asked:

"If you had to go through the process again, would you still participate in an accelerator program?"

Every single founder responded that they would choose to go through an accelerator again, although some of them tempered this somewhat by saying it was a clear “yes” if they’d never started a business or been through an accelerator before.

In other words: if they were starting a second company, their decision wouldn’t be as clear-cut.

Also read:

A spotlight on the EU startup accelerator ecosystem: quantitative and qualitative analysis

It’s getting crowded: with roughly 100 startup accelerators across Europe, how many are enough?

Corporate-run startup accelerators: the good, the bad and the plain ugly

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