Beggars can (and should) be choosers…
Over the last few years, numerous 3 Day Startup alumni and their companies have been accepted to prestigious accelerator and incubator programs, including Y Combinator, TechStars, and 500 Startups. Having worked with a couple dozen startups that have applied to accelerator programs now, the 3 Day Startup crew and I have some advice for budding entrepreneurs about the next stage in your journey: entering an accelerator.
First, let me point out that startups are flooding accelerator programs, and the result is that numerous accelerator programs are popping up. The Wall Street Journal gave some great coverage to this topic in an article that relays the fact that many accelerators will fail to produce substantial successful startup companies. By the way, many incubators also fail (for more discussion than you need on the topic read this). This can be very sobering news if you’re currently excited about getting money or mentorship from an accelerator program, so below, we give advice in hopes that you can beat the odds.
For those that have applied to colleges before, I’d argue that your accelerator applications need to show even more skill and depth than your college applications and essays. For those that have not applied to college in the past, listen up:
How much effort should I put into my accelerator application(s)?
Our short answer is at least 50 hours (on top of all the time you’ve doubtless dedicated to prior diligence and prototyping for your startup):
Let’s do a simple cost-benefit analysis, where we estimate the risk/reward break-even point (this process, by the way, is an important business principle if you don’t already use it).
First, what do you get out of the accelerator? Your first answer might be “money”, but think again. The money that you get will probably be in exchange for some equity in your company and it will affect your initial valuation. In other words, this money goes to your startup, which will be used to support you, so forget about the Benjamins! In reality, an accelerator is giving you “free” time to work exclusively on your startup. The amount of time you’re getting is usually about 3 months, or since I know you’re hardcore, about 1700 hours per team member.
To calculate your break-even point in terms of time spent writing your application, you also need to know the probability of getting into an accelerator. The best accelerators, like YCombinator and TechStars, have acceptance rates in the 1-4% range. For these accelerators, you should spend at least 50 hours drafting your application (1700 hrs. * 3%). If you think you have a better than average chance of getting into an accelerator, the math says you should spend even more time on your application.
We suggest the following breakdown of these 50+ hours:
- Research (8 hours): Spend a couple focused evenings just going through the application instructions for a bunch of accelerators. Start by briefing yourself on Aziz Gilani’s (DFJ Mercury’s) list of the top accelerators here. Make notes about what you need to apply to each, and get organized.
- References (8 hours): If you need recommendation letters for any of your applications, take a week to schedule meetings with people from whom you want references. In your meeting with them, try to make sure that the content of their letters will support important parts of your application, such as your relevant knowledge, diligence, and startup enthusiasm.
- Writing (34 hours): Start writing… a lot. You’ve probably researched and thought a lot about your startup already, and this is the time to put this all down on paper and organize it. You’re not writing a business plan, so this shouldn’t be a laundry list, and eventually you’re going to have to cut content to meet the submission length restrictions. However, having more content will make it easier for you to prioritize which content you should include in the application…
When writing, remember that your application needs to scream the following things:
- First and foremost: You are the right team to build this startup. You’ll need to demonstrate that you’ve had a breadth or depth of prior experience that will give you the edge over all other teams with similar ideas – and trust us, there WILL be other applicants with similar ideas when you apply. Most accelerators, incubators and investment firms will choose a stellar team with a good idea over a good team with a stellar idea.
- Your depth of knowledge regarding your startup’s market and customers (and users if that’s relevant). Have strong evidence that people will not only want to use your product or service, but that they will also be willing to pay (a lot) for it.
- Make sure that your application answers tell a story about your startup concept. Good applications answer the questions directly, while great applications tie all parts together conceptually.
Now that I’ve stated my case about why I should get into the accelerator, what things should I be looking for when selecting a startup accelerator?
If you’ve already been accepted into a few accelerators: Congratulations! This is a major accomplishment, which you should celebrate for a bit. Then, get back to cranking: there’s a lot to consider in selecting which accelerator to enter…
The biggest advice we can give is to prioritize what you want to get out of an accelerator experience. A few things that may be important to your startup are:
- Mentors: This is probably the biggest, often the only, important aspect: many entrepreneurs at this early stage just don’t know what they need to be doing right away, so they need access to wisdom. You should insist that the accelerators you’re looking at give you a list of the mentors you will have access to. Make sure that these mentors have experience in your startups industry AND that some will be able to help you with more general purpose startup topics (e.g. marketing/branding, legal, etc.)
- Investment: If your startup has potential to grow very quickly, your top priority might be buying gas to fuel your growth engine. Consider prioritizing accelerators that have big potential to get you to your next stage of funding. As an example, TechStars does an excellent job of communicating their results, including total funding raised by their startups. You might need to call up directors of your other accelerator options and ask them about their results. Compare the results of a bunch of accelerators to get an understanding of which accelerators are doing it right.
- Traction: Some accelerators aim to build companies with massive user acquisition needs and often accept startups that have potentially strong business models focused around viral marketing. Other accelerators are on the opposite end of the spectrum, aiming to support startups that have very few, high-impact or high-dollar clients. In this case, your startup might be a business-to-business play, and you should find mentors with B2B experience.
- Customer development and product definition: If you already have a product or technology, but you’re looking to make a pivot into a fiscally viable market, you need to be around experts in customer development, or mentors with connections to the likes of Steve Blank, Eric Ries, or other lean-startup gurus.
- Being in a particular location: For some, it’s good to get out of your current city for any number of reasons. For others, your startup may need to be located in a particular region to improve your likelihood of success. For example, if your startup is in the travel space, you should probably be near a source of travelers and mentors that know about travel. In this case, you might consider cities such as New York City or London.
- Disruption: A very small portion of startup ideas are potentially disruptive in the markets they target. Having access to mentors with experience with disruption or technology adoption is important. Next best would be having potential connections to the likes of Clayton Christensen, Geoffrey Moore, or other technology adoption gurus.
In practice, your startup is going to fit into a handful of these categories. Take an educated guess about which of these are most important to you. Then, make sure that the accelerator’s mix of mentorship covers the areas that are important to you: Many accelerators list their mentors on their website, which you can browse through to get a sense for their areas of expertise and prior experience.
How much effort should I put in while at the accelerator?
Short answer: As much as you possibly can. In fact, some of your effort will be invested in figuring out the best ways to invest the rest of your effort and avoid burn-out. In the end, you’ll get out of an accelerator what you put into it.
Tal Raviv of Ecquire has a great blog post on this subject here. It’s a good read to get into the right mindset before your journey into this startup adventure.
Work hard. Play hard. And keep on rockin’.
For graduate students out there, you might also be interested in checking out a presentation by Katie Coons and me about raising funds to support your graduate research: Begging for Money: Panhandler’s Guide to Landing a Fellowship.