“Anything that just costs money is cheap”––John Steinbeck
In the last Speed2Seed blog, we explored the importance of an incubator/accelerator’s community. Of course, one of the biggest incentives of top accelerator programs is the ability to access a network swarming with investors, mentors, and sector-knowledge. But the only way that an incubator/accelerator can maintain a strong network and community is by ensuring that there is a significant value-add by the program. We’ll reiterate that quite often, it’s not what you know; it’s who you know and how well you know them; but what you know still matters. As an incubator/accelerator, they fundamental question to be asked every day is whether the program that you put together is adding value to a startup, versus alternative ways they could be spending their precious time?
Simply put, people are attracted to and inspired by success. This especially holds true for people involved in the startup ecosystem. In a world where 90% of startups fail, graduating from a top program is often seen as a stamp of approval to provide people like investors (yes, investors are people too) a little bit of comfort in such an uncertain world. It turns into a chicken-or-the-egg issue, though. Where there is significant value-add, there will be strong output, which in turn helps to foster a strong community as well as attract even stronger applicants in the future. So how do programs create compelling value-add?
In this post, we’ll explore survey results in three key areas:
- Use of deep sector knowledge
- Creating structure around maturity
- Relevant use of mentors
Ultimately, our survey data tell us that the vast majority of the most successful programs are those that shape their programs around deep sector-specific knowledge and networks, while creating a structured program based on the startup’s maturity level.
70% of Top Quartile Bring in Deep Sector-Knowledge
Dealing with startup chaos can lead to madness, no matter if you’re an entrepreneur, an investor, a mentor, or an incubator/accelerator manager who happens to be involved in dealing with all of the above. Who can better help a startup conquer the chaos than people who know exactly what the startup is going through because they’ve been there themselves?
You don’t go to a general practitioner when you have issues with your heart. You go to a cardiologist. But the only way that specialist is going to help you is when you know that you’re having heart trouble. Though every startup is wrestling with their own chaos, there are fundamental issues that each entrepreneur is likely going to deal with, like market validation, customer validation, pitch preparation, understanding valuations, etc. But there comes a time when only deep sector-knowledge can help entrepreneurs overcome barriers to their startup’s growth. We find that 70% of those in the top quartile of success have a deep sector focus; the second and third quartile both have 50% who have a sector focus and only 10% of those in the lowest quartile of success have a sector focus.
Bringing in people, networks, curriculum and investors with extensive experience helps startups access the knowledge and resources necessary to develop a successful business. Village Capital, an impact-focused accelerator, has a unique approach to developing their sector focus––each cohort they bring in is focused on a specific sector, which helps them target the mentors, resources, and networks necessary to help startups operating in that sector-space during the acceleration program. If a program doesn’t have a specific sector focus, then they better have a wealth of specialists at their fingertips to support their entrepreneurs.
Creating Structure around Startup Maturity
As an incubator/accelerator, once you embrace each startup’s madness, things become absurdly complicated for you; developing efficient, structured ways to work with startups becomes all the more important. One of the biggest issues we’ve come across while working with our Speed2Seed partners is how to deal with startups that are in the same program, but are in different stages of startup maturity. There’s a sense of responsibility to the overall entrepreneurial ecosystem, where a lot of organizations feel the need to reach as many entrepreneurs as possible, resulting in a scattered distribution of ability and maturity. When this happens, an unstructured program over-taxes an organization’s mentors, staff and resources due to dramatically different needs of their startups. There are three key factors that contribute to a well-structured program: fixed start times, consistency and efficient duration. These three factors can help incubators/accelerators shape a program around specific outcomes of their program.
We’ve found that efficiency becomes a challenge among those organizations that have more of an open-door policy when it comes to bringing in new startups. Our data show that 100% of the first quartile has fixed start dates to their program launch, and this metric descends to 70% by the fourth quartile. Our data also suggests that programs in the first and second quartiles of success have their cohorts gather twice as often as those in the last quartile. While this wouldn’t be a statistically significant determinant of success, we believe consistency helps to facilitate peer-to-peer learning––a difficult factor to quantify, but an important source of knowledge for a startup nonetheless. Further, 80% of those incubators/accelerators in the first quartile of success keep their program duration between 3-5 months; 90% are 6 months or less. Of the last quartile, 50% of those programs last longer than 6 months, with 30% lasting over a year. While this is by no means conclusive, it suggests to us that it may be easier to work with startups going through a more structured program.
By creating a more structured program, complemented by a program curriculum based on key universal goals to achieve during a startup’s incubation/acceleration time, it frees up resources and time that can be put towards a more building ever-more-sophisticated support systems for startups.
Incubators Use Training, Accelerators Use Mentors
As a startup becomes more mature, they rely more heavily on the experiences of those who are deeply engaged in their specific sector. Survey results show that incubators are 3x more likely to utilize a training guide and structured curriculum as compared to hyper accelerators, who place far more weight on their mentors. This helps to explain the depth of engagement of alumni and mentors in hyper accelerators and accelerators versus incubators, as mentioned in the past blog. Ultimately, as a startup becomes more mature structured curriculum won’t be as relevant to their more nuanced circumstances. This is where the association between the increasing prevalence on sector focus and our archetypes comes into play.
Three Points to Take Away
Summarizing the learning from the survey in the areas above:
- The majority of the most successful incubator/accelerators bring in deep sector knowledge.
- These successful incubator/accelerators are able create structured programs that help them allocate time and resources more efficiently.
- As a startup matures, they rely more on that sector knowledge of mentors versus an actual curriculum.
Ultimately, the most successful startups are those that are solving big problems and alleviating pain points in unique ways. Just like the startups that incubator/accelerators seek to make successful, these incubator/accelerators need to be exceptional problem solvers, too. As all good problem solvers know, specificity matters. The goal of a strong incubator/accelerator is to find startups dealing with similar problems (even if they are operating in very different domains or different locations), set goals for the participants to achieve through a structured program that addresses key issues, and find those people who are best suited to help guide startups through these problems in a specific manner.