Startups and Mentors
Overview: Startups and mentors are perhaps the most important parts of an accelerator program. Top accelerators thrive at the intersection of promising startups and thoughtful mentors. These two groups act as the fuel to create invaluable networks and interactions that lead to a successful and enduring accelerator.
But how do you find the right talent? The first step is to understand why startups join accelerators in the first place.
Entrepreneurs participate in accelerators for a variety of reasons, but funding and connections are at the top of the list. In Jed D. Christiansen’s dissertation, Copying Y Combinator, the most popular reasons were connections to future capital, brand connections, business support, product support, and financial support and initial funding, in that order.
John Ream and David Schatsky explored what attracts startups to corporate accelerators for Deloitte Insights. They found four driving factors:
Equity-free Funding: It's still common for corporations to acquire equity from startups they bring into their accelerators, but Deloitte's analysis found that Samsung, Microsoft, and Google have all adopted equity-free funding, which is perhaps an indicator of the increasing demand for talent.
Industry-focused Mentors: Mentors are crucial to a successful accelerator program, and startup founders often cite mentors as the single most important element. When corporations focus their accelerators on their own industry, entrepreneurs can tap into experts in the field, from executives and business unit leaders to product managers and technical experts.
Corporate Resources: Access to proprietary resources can be a critical differentiator for an accelerator program. Qualcomm, Samsung, and Barclays all provide startups with data, internal tools, and intellectual property. These ready-to-use established resources are integral to rapid startup development.
Future Customers: The corporate sponsor, and its market, are obvious early customers for a startup. Vending Analytics is a startup whose product uses data analytics to optimize vending machine stocking. The company was spawned by Coca-Cola's Founders startup incubator, so it wasn't surprising when Coke signed on to use the product. As a result, the soft-drink giant realized a 20 percent increase in revenue per machine.
Screening and Selecting Startups
Once a corporation understands what startups are hoping to get from an accelerator, the marketing can begin.
Corporate accelerators should be selective about the startups they bring into their programs. Although receiving a flood of applications seems to present an opportunity for programs to cherry-pick the most promising candidates, according to the Unitus Seed Fund/Capria Accelerator Fund survey, the most successful accelerators put out significant effort to ensure a good fit.
Selected startups or teams must have the elements necessary to succeed, including sufficient experience, a good product, a receptive market, and a plan. Here’s how to find startups with these characteristics.
Managing expectations from the get-go saves everybody a lot of time. Clear communication about the program's criteria, what it offers, and to whom, will help the startups understand what’s in it for them. This way, the corporation also can be confident that any applicants are at least on board with the bare bones of the program.
Deciding which channels through which to deliver the message depends on where the company has influence. For example, Sam Altman of Y Combinator states that an online class he taught boosted the entrepreneur applicant rate by 40 to 50 percent. For another company, an alumni network might be a more lucrative channel.
According to the report Bridging the "Pioneer Gap" by the Aspen Network of Development Entrepreneurs and Village Capital, the most common sources accelerators cite for startups are:
Referrals from entrepreneurs affiliated with the accelerator.
Impact investors (individuals and investment funds).
Commercial investors (individuals and investment funds that do not self-identify as impact investors).
Entrepreneurial associations (fellowships, scholarships) in the social-impact space.
Entrepreneurial associations that do not identify with social entrepreneurship or impact investing.
Sector-specific industry associations.
Sector-specific conferences (e.g., agriculture, education).
Social entrepreneurship or impact-investing conferences.
Inbound requests from program marketing efforts and social media.
Outbound direct, "cold call" recruitment (e.g., finding and contacting entrepreneurs on the web, Facebook, LinkedIn).
The report notes, however, that not all sources are equally helpful, and a corporation should decide where its outreach efforts will get the most bang for the buck in terms of attracting quality applicants, not quantity.
Startupbootcamp, which runs accelerator programs around the world, published a Startup Ecosystem Analysis for the year 2016. The accelerator ran 266 mentorship events in 53 countries in 2016, nearly double the number from 2015. It also finds teams at major conferences and industry events. Startupbootcamp representatives attended more than 40 such events in 2016, including Pioneers Festival in Vienna, RISE in Hong Kong, and Wolves Summit in Warsaw.
The program also relies heavily on referrals. More than a quarter of Startupbootcamp's startup teams came through referrals from mentors, alumni, investors, and staff members.
In its whitepaper, Impact Accelerator provided examples of its outreach approach, which includes using a network of earned, owned, paid, and shared media to reach as many people as possible. Messaging channels include live presentations, webinars, hackathons, traditional media, and social media.
According to Altman, one of Y Combinator’s problems is that the top of their funnel is so large, and the sheer number of applicants so vast, that the program risks discarding some of the good applicants with the bad.
The figure, below, shows the selection funnel for Impact Accelerator. In this case, of 160 million applicants, only 60 were selected.
The precursor to screening applicants is to develop selection criteria that are unique to the company-accelerator context. A case study by the Small Business Institute Journal examined leading accelerator companies in the United States. It found that each had a different set of criteria for selecting participants.
Selecting startups to participate in an accelerator isn't an easy process; accelerators that have been around for more than a decade admit that it's messy and imperfect.
The Perfect Question
Paul Graham, along with Sam Altman, of Y Combinator have devised a way of gauging applicants’ potential for success. The method asks applicants to describe a time when they'd hacked something to their advantage or “beaten the system” in some way. This question can reveal initiative, creativity, tenacity, and the ability to think strategically to solve a problem.
Intelligence is not the number one criterion that Y Combinator looks for in applicants. According to Graham, “That's the myth in the Valley … as long as you're over a certain threshold of intelligence, what matters most is determination." Altman lists the following characteristics that he looks for when selecting startups: clarity of vision, clarity of explanation, determination, passion, and evidence that applicants have done something great in the past. Moreover, Altman spends only ten minutes identifying these characteristics in an applicant.
How do you assess a whole team using these criteria? Graham looks closely at not just at how well startup teams work together but also how well teams get along. The relationship between the founders has to be strong. According to Graham, "Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be."
The Selection Process
In terms of the timeline for the selection process, most accelerators spend between one and three months recruiting each new cohort, according to both Bridging the "Pioneer Gap"and “Startup Accelerator Programmes: A Practice Guide.” One-third spend between three months and a year.
Selection processes have evolved over the years as accelerators have gained momentum within the startup community. As the numbers of applicants continue to increase, video applications and the use of alumni help weed out poor prospects.
In contrast to the relatively short duration of the actual accelerator, the time spent in talent selection is substantial. According to Nesta, it's common practice for accelerators to use selection committees composed of strategic partners, investors, alumni, and experts or mentors. Applicant interviews with these committees can range from a short, informal chat to an hour-long inquisition.
A graphic from Startupbootcamp shows their funnel-shaped selection process at the end of which only three percent of applicants are accepted.
This detailed example of Kickstart Accelerator's selection process and timing includes graded criteria.
Nesta's “Startup Accelerator Programmes: A Practice Guide” includes examples of accelerator selection processes from Techstars London, Fintech Innovation Lab, and Bethnal Green Ventures. While all three use online applications, their methods diverge after that. Techstars and Bethnal Green end the process with a face-to-face committee interview, whereas Fintech puts shortlisted candidates through a half-day boot camp during which they trial-run their pitch. In between, all three have expert and/or executive review teams that create a shortlist.
The guide offers three questions for accelerators designing a selection process.
What key criteria would you look for in your startups?
How will you structure your selection process to ensure you find the right startups?
Which other stakeholders could you engage in the selection process?
The Deloitte report, “Design Principles for Building a Successful Corporate Accelerator,” lists questions to ask in the selection process tailored to two different models of acceleration: 1) financial returns, in which the accelerator invests in startups and achieves economic benefit through exits and 2) innovation integration, in which the accelerator directly integrates innovative technologies or disruptive business models into the corporation's organization.
Questions for financial returns:
Will the startup integrate or exit within the next five to seven years?
Does it have the potential to return 10 times the funds invested?
Does the team have a prototype and traction in the market?
Is the founding team visionary, ambitious, and able to scale this business?
Is the founding team receptive to criticism and ready to pivot from the original idea if the market demands it?
Do we have a network of experts that can help this startup in its specific vertical?
Questions for innovation integration:
Is this a venture representing the edge of our business?
Is the marketing moving in such a way that this innovation could become the core of our business?
Do we have the specific resources the startup needs to develop the technology?
Do we have a network of experts in this vertical?
Is the founding team visionary, ambitious, and able to scale this business beyond borders?
Is the founding team receptive to criticism and ready to pivot from the original idea if the market demands it?
Additional resources for accelerator applicants:
A post by Paul Graham that gives insight into how Y Combinator partners choose cohort members.
A 2012 collection of questions commonly used in Y Combinator interviews.
Selecting the right applicants is only half the story when it comes to building an accelerator. Mentorship is ubiquitous among accelerators, and it works. At their best, mentors can provide startups with advice and access to networks and funding. Having top-performing entrepreneurs as mentors gives a startup an advantage.
Moreover, there's evidence from GALI that multiple mentors are desirable. More mentors can help startups separate ideas shared by successful entrepreneurs from thoughts that may be rooted in personal eccentricities. In fact, parsing the advice and input from mentors within a restricted timeframe and making decisions is one of the most complex and demanding tasks that accelerator teams will face.
Susan L. Cohen notes that an overload of feedback is how the real world works. Quoting a director at the accelerator Alder: "Your customers are going to do it to you; your family is going to do it to you; your investors are going to do it to you. Guess what? You're the entrepreneur and you get to cook, right? That's why you run the company and not us… you have to be good at taking all of that input and deciding what you want to do."
While involving more mentors can result in conflicting advice, Cohen finds that consulting with multiple mentors within a short period can help founders identify commonalities in the conflicting feedback.
Brad Feld also points to this information management process as a vital part of the learning process. According to Feld, "If you don't build your own muscle around collecting, synthesizing, dealing with, and decided what to do with all the data that is coming at you, then you are going to have massive problems as your company scales up."
Cohen suggests that accelerators schedule meetings for founders, which gives the founders a wider pool of mentors. It's also likely to result in a more diverse set of mentors than the startups are likely to assemble themselves.
Predictably, not all experts see mentor overload as a good thing. Fred Wilson, an investor, believes that too much mentor feedback creates confusion, wastes time and energy, and even results in loss of confidence. Also, the quality of mentors is bound to have an effect.
Rhett Morris is the director of Endeavor Insight, the analytics and research arm of Endeavor Global. His take is that mentors who had already achieved success in the tech industry were able to help younger tech startups outperform their peers by a factor of three. The benefits from lower-quality mentors were much lower.
Ravi Belani of Alchemist Accelerator went a bit further at the 2015 Wolves Summit in Poland saying that a subpar mentor can actually do harm to a startup by consuming valuable time.
So where do mentors come from, and how do you separate the wheat from the chaff? Here’s how to select the right mentor.
One method of mentor recruitment is more of a matchmaking process between startups and mentors. In a 2011 report, “Nurturing Innovation: Venture Acceleration Networks,” the World Bank suggests that mentors and entrepreneurs select each other. The idea is that the relationship becomes sticky and long-lasting for a period beyond the scope of the accelerator, creating a stronger entrepreneurship network.
The World Bank report also reviewed the methods used by leading accelerators for mentorship recruitment. Here are some of the methods.
MIT's Venture Mentorship Service: Mentor recruitment is based on referrals. MIT VMS mentors said their main motivations to join were the following:
Exposure to interesting MIT start-ups
The opportunity to educate younger generations
Connecting with talented people as peer mentors
Techstars: The selection process at this accelerator is informal and based on referrals. The managing directors typically know the mentor candidate directly, or they're referred to them by a trusted source in their social network. Beyond that, the typical recruitment process is described as follows:
A short discussion with the mentor and due diligence.
Mentors are selected for their extensive entrepreneurial experience. Academic credentials do not play an important role in the selection of mentors.
Mentors looking to develop relationships with companies in view of selling their services are not accepted.
Mentors are attracted by the high quality of the Techstars startups and of some of the other mentors serving in the program.
Once a company has identified suitable mentors, how is their knowledge best applied? According to venture capitalist and mentor Christopher Quek, there are three areas where mentors are most valuable.
As domain specialists, such as mentors with experience in specific areas such as finance, education, energy, or health (for digital health technology).
As skill specialists, for example, mentors who can teach and coach in specific skills such as UI/UX, sales, legal, business, or design.
As connectors or networkers, for example, mentors who are willing to expand and share their network.
An interesting insight from the GALI study is that accelerator program alumni may not be the best mentors. Moreover, including potential customers as mentors is a good idea, which makes sense given that the consumer is the ultimate judge of any concept or innovation.
Recruiting qualified people is only a part of creating a solid mentorship program. Even the highest quality candidates need to be trained in mentorship best practices. The following resources provide insight into successful mentorship models:
The Mentor Manifesto: The original “Mentor Manifesto” created by David Cohen with the help of Jon Bradford and Brad Feld outlines a set of principles supported by years of accelerator work and thousands of mentor interactions.
Deconstructing the Mentor Manifesto: Brad Feld goes in depth through each component of the manifesto. This series is broken up into 18 promised posts, 16 of which are live.
MIT's Venture Mentoring Service: MIT has created a unique model to coach early stage startups. The VMS has trained over 66 organizations from 18 countries on its mentorship model.
Establishing a Powerful Mentorship Program: Louis Goldish provides an overview of some of the most important characteristics of the VMS model.
Nurturing Innovation: Venture Acceleration Networks: The World Bank and Russian Venture Company present a review of venture acceleration models.
How to Build a Successful Mentoring Program: This guide lays out an approach for building mentoring programs within companies.
How to Maximize the Value of Mentors in Accelerators: Ben Yoskovitz.
Finally, any program needs to be monitored and assessed. The quality of mentorship can be assessed through feedback surveys that the startups complete. This information is part of a feedback loop that allows for constant improvement in the mentorship process.
And this brings us to Part 4 in building a successful and sustainable accelerator – Post program activities and alumni support.
Up next in corporate accelerators, Post-Program - Alumni and Investments