NexThought Monday: Don’t Brag That You’re More Selective than Harvard and Other Lessons in Startup Acceleration
“The second best time to plant a tree is now.” – Chinese proverb
In the past decade, since Y-Combinator pioneered the concept of an “accelerator,” hundreds of accelerators and seed funds have deployed millions of dollars into programming and investment with the admirable goal of supporting entrepreneurs. There are over 500 accelerators and seed funds worldwide, but there has also been very little research to answer the millions-of-dollars question: Is all this effort working?
The hardest part about understanding “what works” in supporting entrepreneurs is how long it takes to see true results. Investors, foundations and governments all want to use their funding dollars most efficiently, but it takes time and sustained effort to gather useful data.
Village Capital recently released a new report with Social Enterprise @ Goizueta that begins to shed light on an answer. Part of the Global Accelerator Learning Initiative (GALI), the study is the most ambitious effort to date to track what’s working in accelerators. GALI’s first-ever report evaluates 15 Village Capital programs since 2009 and questions which elements of our programs were most closely related to improved outcomes for companies. Specifically, those outcomes included (1) increased revenue growth; (2) increased job creation; and (3) increased funds raised.
The report seeks to answer the fundamental questions: What’s working, and where should we double down? And perhaps more importantly: Are there things that we (and likely dozens of other venture development organizations) spend lots of time and money on that aren’t related to better outcomes?
Village Capital will be using these results to improve our programs and target our resources. Other venture development organizations can learn valuable lessons as well. While the best time to plant this tree, according to our Chinese proverb, was 20 years ago, there is no better time than the present to make sure entrepreneurs are getting the most out of startup acceleration.
Please check out the full report; we’ve outlined highlights below.
Identify and focus on the stage where you can add the most value to companies. Our acceleration programs worked best for companies that (a) had a product in the market with revenue and (b) had not yet raised outside funding. When it came to our particular curriculum, pre-revenue companies were too half-baked to benefit from limited engagement, and companies that had already raised funding had limited ability to pivot and react to market feedback.
Some accelerator programs are better for the earliest-stage companies, and some are better for growth-stage companies, but being very specific about the stage at which you add value will deliver better results.
Be smart about selecting program partners who will roll up their sleeves. Program partners have a high degree of correlation with successful outcomes – but not in the way you’d think. Partners who are perceived as “adding brand value” because of their famous names do not figure strongly into positive program outcomes. On the other hand, partners who contribute to curriculum and play a meaningful role in programming tend to yield better outcomes – even if they are not as well known. If your accelerator is going to partner with a corporate or a large institution, it’s a good idea to educate these partners on how to add tangible value to companies.
Focus more on building quality entrepreneurial networks, and less on delivering business skills content. Many promising entrepreneurs don’t have access to resources because they don’t have the right networks. They didn’t go to the right schools, or don’t speak the same language as investors (in emerging markets, quite literally). We found that very little of the program time spent on business skills actually made a difference – but the program time spent on communication and networking made a significant difference. Because many of our best entrepreneurs don’t come from well-connected backgrounds, networking sessions are leveling the playing field.
Don’t build your program around guest speakers or formal classroom activities. Less is more when it comes to program content. When entrepreneurs spend a lot of their time in the classroom – listening to guest speakers or to us teaching – those programs tend to have inferior outcomes. The more remote work we allow, the better. Accelerators would do well to design content as something that entrepreneurs do remotely as they work on their businesses, and save on-site time for building valuable relationships.
Don’t brag about being more selective than Harvard! Many programs – us included – use quantity of applications as a proxy for program value. “We had 300 applications and picked just 15 – we are more selective than the Ivy Leagues!” We found, though, that programs with fewer applicants actually outperformed those with more applicants. We think the more focused programs (e.g. our program helping scale hardware companies in East Africa) attract fewer applicants, but yield better outcomes, than the broader ones (e.g. “tech for Africa”). We’re re-thinking the time (and bragging) we spend trying to drive those application numbers upward.
As Village Capital’s companies continue to mature and grow, we’ll stop doing certain things (delivering content in classroom, focusing on application volumes) and start doing others (fewer but higher-quality mentors, increasing help with communication skills). We’d love to hear from our peers about what’s working. After all, the conversation about “what works” is just beginning.
Top image: A startup manager during a recent Village Capital accelerator program. (Image courtesy of Village Capital)
Ross Baird is the executive director of Village Capital.