How to improve startup accelerators
Note: we decided to publish this, of course, an interesting look at the current state and development of start-up communities around the world with expert comments - it was Dmitry Kalaev, director of educational and acceleration programs of the IIDF. 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 options for helping start-up communities (such as: incubators, accelerators, educational institutions, government initiatives, hackathons, conferences, etc.) do not work efficiently enough. It is assumed that all of them should bring value, but in reality they only get money. Some of them do more harm than good.
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In almost every country, leaders are trying to grow innovative entrepreneurship. But due to the lack of development programs or specialists to whom you can turn for help, many initiatives cannot be implemented for elementary reasons that can be avoided.
Here are some very simple ways to help improve the situation. They simply need to be used because entrepreneurship is important for the improvement of our world just as the development of agriculture or writing was important.
After I acquired the company I founded in Silicon Valley (and I realized that I urgently need to recover physically and spiritually), I sold all my belongings and went traveling light.
During the trip, I acted as a mentor for more than 1000 founders in more than 25 countries and collaborated with governments, accelerators, universities, investors and non-governmental organizations to help them better understand their mission: looking for successful entrepreneurs who create 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 significant changes are made to the world through the advice and efforts of local community leaders. I hope this helps you in your endeavors, wherever you are.
"Accelerator" - I will use this word to designate all such initiatives [listed above]. Because they all somehow try to speed up the work of an entrepreneur. It is foolish to find fault with the name (be it an accelerator, an incubator, or something else).
There are no two identical situations, but 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.
Marc Andressen:
- How can I create my own Silicon Valley?
- Make A, B, C, X, Y, Z ...
- No, I mean, without making ANYTHING of it?
General tips
1. Do not attempt 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, trust 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 it via tweets. Learn from the example of San Francisco right. In addition, one should not want to imitate the Valley, because San Francisco is one of those specialized ecosystems that do an excellent job with some situations, and really badly with others .
Create something of your own. For example, I really liked that The Family in Paris understands this very well and creates a community oriented towards the French mentality, because otherwise they will not develop. Do not give your communities and organizations silly names like "Silicon ___".
The comment of Dmitry Kalaev, director of educational and acceleration programs of the IIDF:
Indeed, [in Russia] the trend of imitation is quite strong. And I think that this is normal, you just need to understand the reality of the Russian mentality and the compliance of the business infrastructure. For example, at the spring release of 500Startups, the most investment was collected by the team with the “tourist dating for sexual minorities” service - such a mix of AirBnB and Mamba for people with unconventional orientation.
For the Russian market, I would not do this because of the difference of mentality, and because of the high risks of conflict with Russian legislation. If we talk about the Accelerator of FRIA: indeed, we look like a copy of 500 Startups or YCombinator, but actually under the hood because of the realities of the Russian market, mentality and business culture, we work very differently.
2. Recognize that there is a huge difference between unicorn venture companies and other forms of entrepreneurship. Most communities divide all businesses into those that resemble Instagram (high risk, technological advantage, universal acceptance, "style" of Silicon Valley), and those that operate on the principle of a local Chinese restaurant. That is, distinguish only white or black.
But there are shades of gray between them - for example, I like the way they work in Indie.vc : they invest in companies that can succeed, but not necessarily on a global scale. If you do not consider such businesses as potential participants in your program, you blindly commit catastrophically stupid mistakes.
Dmitry Kalaev's comment:
Approximately 90% of our portfolio projects now work only on the market of Russia and the CIS - we perceive it normally. In general, the FRIA’s view on the potential of a business: global, local or niche - is based on whether the company has the opportunity to enter the turnover of 300 million rubles a year while occupying 10% -30% of the market in 4 years. In other words, any niche with a size of more than a billion rubles may be interesting for us.
3. Accelerators are modern universities. The traditional model: “We are an accelerator! Apply, we will choose the 10 most promising, and in 90 days you will start your business and receive financing! ”Does not work. The real goal of the accelerator is to teach entrepreneurship methods so that on the day of graduation the founders have the knowledge, own the tools and continue to develop. Financing, launching, weekly growth, and so on are all bonuses. Governments should support communities, as they compensate for the lack of public educational programs.
4. What is at the entrance, then at the exit: do not try to become attached to a predetermined number of empty seats in the accelerator, making a selection of projects (do not take "extra" projects) . If your program really allows you to create a unicorn company , and you invest in companies that do not fit (under point 2) or are already the three hundredth option a la Tinder, then success does not expect you, no matter what you do. If you found only 7 good teams in one set, then take only 7.
Dmitry Kalaev's comment:
Yes, this is the right approach. If you decide to take 30 teams in the set, but only 15 are worthy, you do not need to get another 15 "because you promised." If you notice, the number of commands in each set of the Accelerator of IIDF is different. Exactly because of this reason.
If the team is not ready or is at the wrong stage of business development, then it is meaningless to "drag it by the ears." It will be exactly the failure of the founders, and the loss of investment.
At each start of the Accelerator of IIDF, I say: “You are the best teams in the Russian market today”. And this is true because we take only those 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, organize parties in ecosystems outside of San Francisco - so you can put the process of "withdrawing" potential entrepreneurs from the shadows on stream. You must become a magnet for potential founders. Just as startups are looking for investors, you must “hunt” for talents.
6. Qualitatively improve the mentoring support of the founders. Mentors must be qualified specialists in their field ("we have already attacked this rake"), appear in time in the startup life cycle (do not introduce venture capitalists to the founders of the company during the third week in the accelerator). Try to lead the team to the right decision, do not tell them what to do. Explain to the mentors what exactly you want from them, let them feel responsible for their work.
7. Avoid unnecessary events, meetings, noise, and states when mentoring support “runs out of itself.” Most accelerators force the founders to attend too many events, business meetings and meetings with mentors. 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 form their own corporate culture, as the team develops after the founders.
Dmitry Kalaev's comment:
Indeed, there are only 24 hours in a day and for a period of three months there is not enough time for business development. Our answer is focus! Do not take the accelerator as learning. Investments and results are not dependent on the attendance of all trainings and meetings with all experts.
If specifically now in the business the main task is to raise repeat sales - all efforts and all meetings with experts are only about that. No need to communicate with everyone in a row "for the future." If one of our graduates missed some module or expert that later became important to him during acceleration, then we are always ready to organize a separate team meeting with an expert during the next accelerator program.
8. Ignore the " signal 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 gain for your accelerator. I think that in the field of business acceleration, we still need project “ranking” systems or similar meritocratic systems. And the founders should know that they are appreciated. The phrase " defeated all " is not applicable here.
9. One of the most significant and rarely mentioned accelerator values ​​is to work effectively with talents. I heard the founders of YC said that this is their greatest value. You should be able to skillfully pick up people with different talents in the team. Is a startup with a good team developing badly? Support the founders - help them join a more successful team.
10. Government's No. 1 task is to provide meaningful changes or eliminate problems in the work of the venture capital ecosystem. Best of all, the government can do is simplify everything for entrepreneurs: easy visas, preferential taxation, the ability to hire / fire employees without any problems, access to free office space, deferred payment of student loans, cancellation of control over projects using drones or stem cells, investing in STEM education (and retaining graduates in this country!), etc.
“Exceptions for startups” should be made to the legislation, otherwise it only hinders their development. Give future founders the opportunity to move, create communities, etc. Create more attractive conditions for investors who invest in startups in the early stages. Create attractive conditions for withdrawing from the project, because without people who earn money, the life cycle of a startup may stop, and all your efforts will be in vain. Investors will fly to anywhere in the world if there is an opportunity to earn venture capital.
11. Traditional universities: entrepreneurship is studied in practice, and not the study of outdated business plans. If a student is engaged in business, help him, remove obstacles, do not interfere.
Once I studied in one of the “top” universities on the topic of entrepreneurship in the USA. And although I created my company in my first year of study at the university, they still demanded that I spend time on courses like “Entrepreneurship 101”, where you need to write an essay on the topic “What is entrepreneurship?” (Fortunately, I several people helped to update the program, and thus created the best university course on entrepreneurship in the country: “Spine Sweat”, which is taught at Indiana University).
That's why Y Combinator just created a fund for investing in startups, and TechStars acquired 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 start-ups-winners.
TechStars has gone far ahead of YC (in terms of globalization), expanding at the expense of entering markets such as Berlin . It is very important to create a mechanism in the community that would identify and attract potential founders and startups. To work passively, to meet only with those who submitted an application themselves - this will not be enough.
Imagine that you are a football coach. If you are training a well-known team in a place where children already want to play football, and the most capable really achieve success, then yes, you can relax and calmly choose. But if you are promoting football to a new or unexplored market, you have to spend a lot of time organizing and promoting the football community, identifying and developing talents, 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 even was just a visitor to several Startup Weekend events around the world: I recorded highlights from a presentation at the largest SW in Shenzhen in China and explained what the “startup” means to the Philippines villagers . In 48 hours, it is very easy to identify people who have the potential, at the same time forming a start-up 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 YC had earned more money in order to gradually double the share only in successful graduating companies, the amounts received from them would have broken all records. That is why they created a foundation. However, according to the press, YC is still not investing in startups at stages A and B due to “signal” problems.
“Signal” problem: when an investor who invests in the early stages (as an accelerator) doubles investment not in all, but only in some teams. For other investors, this suggests that teams without funding are not the most promising. That is, figuratively speaking, thus investors hammer one more nail into the coffin of the projects left without investment.
Ignore the signal problem
There is such a thing in business: 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 on a lemonade stand. But adults are afraid to give a real assessment of this entrepreneurial endeavor.
So it just says: “Mmm, your lemonade is so delicious! Catch a penny ”, instead of the bitter truth:“ Your lemonade is disgusting. I’d rather buy from a smart neighbor boy who promotes his project on social networks and uses gluten-free lemon powder from independent producers. ” (This is how the relations of “adults” and “children” in Silicon Valley look like, but this is a topic for another post).
As a more universal example, university start-up competitions can be given, where you can find someone who will pitch a T-shirt project and at the same time want venture capital investments. But no one tells him the truth, thereby causing more harm than the benefit of not wanting to return him from heaven to earth.
Due to the lemonade syndrome, the signal problem and other things, many accelerators are afraid to honestly give a real assessment of the merits of their wards. Or take such actions that would publicly show that the accelerator treats its commands differently.
But who cares? Everyone knows how few startups succeed. Literally speaking, those who come to Demo Day are people who evaluate the results of your start-ups. 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 targeting venture capital investment, second place is already a failure.
“Sorry, Susie, but Timmy understood how to work, and you didn’t. We will by all means help you to make delicious lemonade, because we like you. But know that in the end, only the one who passes the test will receive our money. ”
All universities graduate students. The average Harvard student is pretty damn smart. But when he enters the competition for a job at McKinsey, it’s important what place he occupies hurts his peers. Competition perfectly motivates graduates - this is not enough for many founders who first got into the accelerator.
If I have 10 companies at the planting stage, and I think that 3 of them will succeed, then, naturally, it seems to me that the remaining 7 will not achieve it. No one can predict how things will turn: 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 kind of clear standard of communication with your companies and, possibly, the outside world. These could be quantitative valuation standards, for example, “confirmed market size” or “raising outside capital of more than $ X”. Or you can use qualitative parameters, for example: “Once a week we will evaluate how well you implement 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. "
Dmitry Kalaev's comment:
In the Accelerator FRIA, everything is quite simple. To get the investment of the next round you need to show the dynamics in your business. If you could grow a business from 100 thousand rubles a month's turnover to 1 million a month, then you know yourself that it’s cool enough and investors will appreciate it too.
Conversely, if a steep team with distemper experience and a promising market could not budge in three months - there were three clients and these same three clients remained, then it doesn't matter what the circumstances, but this is clearly not a “fast-growing company”.
Pay attention: the “border” between winners and losers in acceleration programs is much stricter than it should be. She divides the team into “black and white”, and this is associated with other problems described below in this post.
Evaluating startups is a special skill. Many give incorrect estimates.
As official judges, or those who decide to finance a company or support it [in some other way], I too often have experts who try to rate a startup according to personal preferences. For example, a team wins a hackathon with an app for children thanks to the appreciation of an expert whose children liked this app. Meanwhile, the team, which managed to increase the efficiency of solar cells 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 well they cope with doing business. Do they follow the principles of the Lean methodology? 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? Do they have something special and outstanding?
Dmitry Kalaev's comment :
Of course, there is no escaping bias and, sometimes, we are missing out on interesting startups. To avoid this, we focus on the development of a startup in time. For example, we have a two-month absentee accelerator program [approx. - the correspondence program can also be approached based on the results of work in the IIDI Preaccelerator ], where we do not give investments but help our expertise and methodology to quickly check whether there is 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 error by experts is practically excluded, since if a team shows dynamics in the account money and active users, then it is a “winner” and it makes sense to invest in it. Thus, our main approach is to help a startup to gain momentum in measurable results, and the results already speak for themselves.
Source: https://habr.com/ru/post/294450/
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