By Lloyed Lobo
Over the past year I’ve been running the Startup Next Pre-accelerator in SF, which is a 5-week program by UP Global and Google for Entrepreneurs that helps early startups prepare for an accelerator (or simply crash) by validating their ideas and building prototypes to test with real customers.
Startup Next is run in many cities around the world and our graduates have not only been accepted into accelerators such as Techstars, 500 Startups, AngelPad, Plug and Play Startup Camp and more, but they’ve also raised funding from big-name investors. And many have dropped their ideas after 5 weeks and are thankful because they were able to determine it was going nowhere without spending too much time and money.
We have a rigorous application process because the program is mentor-driven and our team works hard to connect founders to accelerators. We’ve had some awesome mentors from Google, Intel, Airbnb, Dropbox, Verizon, and Stanford to name a few. So it’s important for us to understand that the founders are committed and will continue to make progress over the 5 weeks.
Here are some tips from the Startup Next team based on conversations with accelerators as well as entrepreneurs who’ve been accepted.
1. Building a startup is a team sport and something that all investors tend to agree on. You’ve probably heard of the phrase “hacker, hustler, hipster”. What that means is you need to have a solid cross-functional founding team that has a good working chemistry and can build product, create great user experiences, and acquire customers at breakneck speed.
Sam Altman of Y-Combinator said in a recent interview at the Pre-Money conference “it’s really hard for accelerators to pick good companies at the early stages, so all your efforts should be towards getting awesome founders. Ideas often change from when you start out, but good founders will have the grit and determination to see it through.”
Team chemistry is a key factor because if the founders have worked together in the past, the risk of founder break up is mitigated. Co-founder disputes early on are a major reason why startups fail to raise capital post acceleration or even continue building the company.
Three co-founders tends to be a magic number for many accelerators. Having too many founders can give the impression that you’re not as confident plus the diluted equity could lead to motivation issues.
2. Show that you can be a big company. One of the values of going through an accelerator is they can help you raise your initial seed round. It is well documented that only a small percentage of investments lead to the majority of the returns for a VC fund, so VCs try to determine if their investment in your company has the potential to be worth more than their whole fund.
Peter Thiel, co-founder of PayPal and a reputable VC with a portfolio that includes massive success stories like Facebook, Palantir, Spotify and SpaceX, says entrepreneurs should ask themselves “What great business is nobody building? In business, every moment happens only once. The next Mark Zuckerberg won’t be building a social network.”
3. Have a prototype or minimum viable product. It doesn’t matter if you’re not working on your idea full time yet, just get something out there that can be tested. Justin Kan, Partner at Y-Combinator stated in an Entrepeneur.com article “The best way to get the ball rolling on an idea is to leap off of a cliff and force yourself to make incremental progress.”
4. Get traction in the form of money or users or both. This will significantly raise your chances of getting in. Accelerators want to see that you can accomplish what you say and can execute on the plan. Show that you’ve validated the market with real customers. If you get an interview, demonstrate how you’ve progressed from the time you submitted the application. Accelerator programs last only a few months, so it’s important that the teams they invest in can maximize the resources provided to the fullest.
5. Build a strong network and leverage it. Getting a strong referral is the best way to get in. For example, if you’re recommended by a well-known entrepreneur, investor, alum or pre-accelerator.
Take this further by creating a complete profile on AngelList and keeping it updated with information about your team, product, traction, press etc. Get references and followers from your network. Read this post by 500 Startups on the basics of AngelList, this one by Naval, founder of AngelList, on how they pick trending startups, and this one by Justin Thiele on how he got his startup to trend on AngelList.
6. Be concise in your application. Accelerators go through 100s, if not 1000s of applications, which means you have very little time to catch their attention. Avoid buzzwords and remember less is more. Before you submit, get feedback from those who’ve been through an accelerator (or experienced investors and entrepreneurs if you can’t get to someone who’s been through an accelerator). Make sure you apply early and not on the last day. And once you get a call for an interview, practice your pitch and responses. Be well prepared before going in as interviews can last anywhere from 10 to 30 minutes. Accelerators see a lot of companies, so they start to understand what may or may not work rather quickly (aka, their BS meter). You want to be educating them during the interview, not the other way around.
7. Do your homework before you apply. Research accelerator programs to see what value they can add to your business and talk to some startups that have graduated from the accelerator programs you’re considering. You want to get a real view of their accomplishments during and after the program. Make sure to ask questions that help you get a good understanding of the accelerator’s resources, mentorship and connections. Be sure to add vertical-specific accelerators to your research, for example hardware, health or enterprise-focused, as they might be able to add more value depending on the type of business you’re in.
If you’re a first-time entrepreneur, taking the initial step can be the most difficult. You might want to look into attending a local pre-accelerator program as a first step.
Lloyed Lobo is the co-founder of Boast Capital, which specializes in R&D Tax Credits, Plug and Play Canada, a subsidiary of Silicon Valley’s Plug and Play Tech Center which invests in early-stage startups, and The Cloud Factory, a premiere enterprise tech conference. Lloyed is very active in the tech startup community in Silicon Valley and Western Canada – he runs the Startup Next Pre-accelerator in the Valley, facilitates Startup Weekends, is on the board of Startup Calgary, and writes a weekly column called Startup of the Week for the Calgary Herald. Previously, Lloyed was the Head of Sales and Marketing at two venture backed software companies – TicketLeap in Philadelphia and AL Systems in New Jersey.