“Listen, if you’re going to perform inception you need imagination.”— Eames, Inception
It’s a tough world out there for an entrepreneur, no matter how steadfast and determined one may be. Incubators and accelerators are rising to become key players in the ecosystem that help entrepreneurs develop strong, fundable startups, but even incubators and accelerators need some support. In August, we invited our Speed2Seed partners to a workshop focused on investment preparation and facilitation. One of our sessions was focused solely on how investors think––specifically what they look for in startups and how they approach analyzing promising startups that come knocking on a VC’s door. We found that this perspective of “thinking like an investor” provided a different approach to analyzing startups, and we’ve decided to take it a step further and help the entrepreneurs working with our partner incubators/accelerators begin to think like investors too.
During our Speed2Seed workshop, one of our incubators/accelerators partners made the wise observation that the groups in the room are all startups at their core as well. They’re still figuring things out. This leads to a sort of “startup inception” scenario––there are startups (incubator/accelerator cohort startups) within startups (our incubator/accelerator partners) within a startup (our Speed2Seed program). We’re all just a bunch of entrepreneurs, so let’s start thinking like a startup––better yet, let’s start thinking like a startup thinking like an investor!
Thinking like an investor means for everyone that they need to know their consumers, know their pain points, develop a program that addresses fundamental issues, then tweak and adapt according to feedback. After all of that, they also need to express and market themselves really well to their customers and stakeholder.
The Successful Startup Mentality
Entrepreneurs are some of the world’s best problem solvers, across the board, which makes working in the startup ecosystem so exciting. They have a knack for hacking, inventing and ultimately making our lives better, or at least far more interesting than before.
The Lean Startup by Eric Ries is quite possibly one of the most widely read books in startup world. Since we’re now “incubators/accelerators thinking like startups thinking like investors”, let’s start there. While some entrepreneurs may be struck with a magical idea in the shower, implement it, find hundreds of millions of customers clamoring for their product/service and then end up rolling in millions of dollars by the end of it all, it’s likely that this isn’t the case for a strong majority of startups. There is often a method to effectively dealing with starting an effective startup, and it can be simplified to the following:
- Understand who your customer is and take the time to TRULY understand them. Don’t assume.
- Understand their pain points in a very specific way.
- Be a problem solver. Create that product/service that directly addresses and alleviates those pain points in order to generate substantial value.
- Test, validate, adapt according to feedback.
This very same thought-process needs to be applied to incubators and accelerators. Understand who your customers are, understand their pain points, target your incubation/acceleration program towards solving those pain points, then make sure that you develop feedback loops that help you adapt and refine your incubator/accelerator accordingly.
Ben Yoskovitz, author of Lean Analytics (highly recommended read to entrepreneurs and incubator/accelerator managers), emphasizes this underlying notion on his blog:
“The variance in quality between accelerators is probably going to widen as well, although the people running accelerators are always trying to improve. At least the best people running accelerators. I’ve spoken with many directions / managers / founders of accelerators, and they’re working hard to try and provide a great experience and create tons of value for founders…Accelerators are startups themselves, which means they need to keep trying things, measuring the results, and iterating. In the next 5-10 years, I’d expect the model to have changed significantly. That’s almost a given.”
While this seems like a great idea, it is important to note that experimenting with different models and program tweaks in acceleration can be time intensive and expensive at times. Abhishek Gupta of TLabs notes that while they experiment with their program, measuring the outcome becomes difficult when processes can last 7-8 months or longer before you can see some sort of results materialize. Further, even though the data might point to a successful experiment, Gupta emphasizes that if his gut says otherwise, he will go with his gut.
Still, the fundamentals of understanding your customer, pain points, developing a product or service that addresses these problems, and testing and gathering feedback are still very relevant to incubators/accelerator trying to innovate.
Know Your Customer
We recently posed a question to our Speed2Seed partners: as an incubator/accelerator, who is your customer? Does an incubator/accelerator have one or more customers? Of course the first response is that the customer is the startups in an entity’s cohort, but there were some alternative opinions. The runner-up response was investors, but even that response was controversial. In some cases, especially those who are funded by governmental organizations, partners said that the government is a customer. There are a lot of circumstances that play into an incubator/accelerator’s answer––there’s a responsibility to the startup ecosystem, there’s the expectations set with the startups in their cohort, and there is the entity’s business model. Regardless of an incubator/accelerator’s answer, it is crucially important to not only understand who the customer is, but to dig deeper and really grasp the complexity of the customer you are targeting.
If we look at the startup as the customer, first it’s important to understand not only what they need––such as investment, mentors, a strong curriculum––but also understand why they need these things. These different factors reflect significant pain points of entrepreneurs such as lack of access to financial resources, lack of experience r guidance, limited understanding of customer validation and development strategies, etc. Let’s go into startup mode––is the incubator/accelerator developing a product (i.e. a program) that solves these startups’ pain points? Can this be tested?
While we don’t believe that investors are the customer of an incubator/accelerator, we know for a fact that they can be a real pain––pain point, that is. In order to properly address funding as a pain point for startups in an incubator/accelerator, it is incredibly important to go through the same process of hypothesis testing of pain points when it comes to investors. Do incubators/accelerators truly understand investors? Do they understand the pain points of investors? Are incubators/accelerators able to prepare their cohort to reduce these pain points? Can this be tested?
Using Feedback Loops to Tweak Programs
There are lots of assumptions floating around in the ecosystem that haven’t been tested. Relying on assumptions without testing and validating them leaves a lot of room for uncertainty and ambiguity.
A fundamental first step in reducing this ambiguity is by proving or disproving assumptions through developing feedback loops between an incubator/accelerator’s key stakeholders and customers. In this sense, whether an incubator/accelerator looks at startups or investors as customers or some conglomeration of the two, the next step is to actually go out at validate pain points and provide a product that solves problems.
The Speed2Seed program has adopted this methodology as well. The product (the Speed2Seed program) that we envisioned a year ago has gone through several revisions primarily based on feedback from our Speed2Seed partners (who are our customers). We run an experiment, we gather data based on what our partners thought was effective or ineffective, then we analyze and tweak our next steps accordingly. Essentially, Speed2Seed is also operating like a startup. What we’re left with is startup inception––startups within startups within a startup. It was a good movie, and a good way to think about our future.