As program manager for FounderFuel during the last 2 years…I’ve been putting some thought into the state of Accelerators, what makes an Accelerator world-class and what the future might hold. Below are my attempts at summarizing these thoughts.
Definitions: Accelerators, Incubators
Let’s first review the difference between Accelerators and Incubators, to make sure we are on the same page.
There are various kinds of accelerators, some with a special market or industry focus. At a high level an Accelerator can be defined by 4 main traits:
The program is short, usually lasting anywhere from 3 to 6 months,
Companies coming in to the program have at a very minimum an MVP,
Companies will receive a minimal investment, usually pre-seed and the Accelerator will take equity in return,
The Accelerator will provide its companies with access to Mentorship.
Programs typically end with a demo day, or an event presenting the cohort.
Incubators generally provide the company with a physical space in which they can work to develop their idea over a longer period of time with less direct or managed interaction with those running the space. Incubators usually do not provide funding, so when it comes time to getting their product into market and raising Venture Capital, a company is more likely to go the Accelerator route.
The State of Accelerators Today
I recently attended the Canadian Association of Business Incubation Summit where Pat Riley, CEO of the Global Accelerator Network gave a talk on the state of acceleration and trends to look forward to. Below are some statistics that they’ve collected from their network of Accelerators from the past 7 years.
On average, it takes companies 4.8 months to raise money after completing the accelerator,
An average of 7 jobs are created per company after completing the accelerator,
52% of companies that have completed an accelerator raised capital and of those 62% raised over 500k,
79% are still in business today,
Accelerators help on average 6.4 companies at a time,
Accelerators receive on average 273 applicants per Cohort,
The Mentor network of an Accelerator has, on average, 84 members,
The average amount of equity taken by an Accelerator is 6.3%.
None of this comes as a surprise as it mostly fits within the parameters of an Accelerator that I defined above. However, what is really exciting to see is that 79% of the companies are still in business. This is exciting because one of the main mantras at FounderFuel is that we’ll either accelerate your success or your failure. So to see that 79% of companies that have gone through Accelerators are still in business leads me to believe that the model is working.
I was recently interviewed by a student and they asked me if the stat “9 in 10 startups fail” can be applied to companies that go through Accelerators. My answer to him was no, it didn’t apply. I justified this by telling him that companies that go through Accelerators are provided with every tool and resource that they need to be successful and if 9 out of every 10 of them failed, we just wouldn’t be doing our jobs. Accelerators would have no raison-d’être.
I was a little surprised by how low the number is for companies who have raised money after an Accelerator. The average stands at 52%. But then when compared to the amount of startups still in business, this stat isn’t as scary. It means that startups have found ways to monetize faster and grow without having to raise additional funding. Raising follow-on funding isn’t the only measure of success for a startup (but more on that later).
Where does FounderFuel fall within the stats of the average Accelerator?
It takes a FounderFuel company on average 7.1 months to raise money after completing the program,
FounderFuel companies have, on average, created 6 jobs per company after completing the program,
74% of our companies that have completed the program have raised capital and of those 40% have raised over 500K,
83% are still in business today and 11% of our companies have been acquired,
We help an average of 8.5 companies at a time,
We receive on average 389 applicants per Cohort,
Our Mentor network is made up of 151 members,
The amount of equity we take is 6% (or 9% for hardware startups, but they get 100K).
Something interesting that I’d like to point out is GAN has never analyzed the Accelerator space from the side of the entrepreneur, which is necessary to get a full and balanced view of the space. At FounderFuel, we make sure to do detailed and anonymous exit interviews with all our Founders in the weeks following their graduation. These help us regularly rethink and rework the program to ensure that we’re providing a top-level program that is always benefiting the entrepreneur. It helps us measure and evaluate ourselves based on more than just the numbers, which is a common mistake among Accelerators. Numbers can only tell you part of the story. I would highly suggest that every Accelerator out there makes this a standard practice.
The Future of Accelerators
Now, what does the future hold for Accelerators? It’s hard to tell, but one thing that is obvious is that the status quo won’t remain. We’re seeing Accelerators race to grow and rethink their standard practices (whether that means rethinking the classic program, focusing on specific verticals or expanding their reach) it will be interesting to see which ones will be successful in this evolution. During his talk at CABI, Pat (Global Accelerator Network), highlighted 3 points about where Accelerators should be heading.
Accelerators should start hosting multiple demo days, not just in the city you are located in but host Demo Day roadshows,
They should start focusing on one vertical,
Accelerators will be adding locations, it’s no longer just about the 1 city model.
I don’t completely agree with these points for various reasons. Investors are already suffering from Demo Day fatigue. I bet if you planned it properly, you could probably hit up a Demo Day almost every day of the year. Does it really make sense to encourage Accelerators to take their Demo Days on the road, will it really make a difference in the long run?
A better plan would be to continue building your brand, bring in great startups and work very hard to ensure they grow and scale and become successful. Doing so will attract Investors and they will want to travel from other cities to come to your Demo Day. It’s not easy but it creates much more value in the long run, not to mention the right kind of value. The same would apply for adding additional locations to your Accelerator. Is it really worth it? If you build a world-class Accelerator then companies will come to you.
It seems very “in” to start an Accelerator and they’re popping up all over the place, do we really need to move towards over-saturation at an even faster pace by encouraging Accelerators to open in multiple cities? I’m all for top-tier Accelerators expanding, but we’re close to (or some might say have already passed) the tipping point where there are too many Accelerators and not enough solid ideas worth accelerating.
Instead of opening up multiple locations and saturating the market let’s focus on collaboration between Accelerators.
Join us July 15th in Montréal during the International Startup Festival for another edition of the Accelerator Rally. See last year’s edition to get a sense of the topics covered and attendees. Stay tuned, as we will soon announce more details and open the call for speakers and panels.
That’s all for now, stay tuned, I’ve been putting a piece together on red flags to look for when considering an Accelerator.
Work in the Accelerator space and want to share your thoughts? Reach out! We’d love to chat.
[This is the second part in a series of profiles on Canadian co-founders making waves in the States. Here's part one.]
The startup’s evolution began with a carbon fibre hockey stick. Sohaib Zahid, co-founder and Chief Designer at Vanhawks, was in sports medicine when he designed the tech that mimics the human bone: virtually weightless yet difficult to break. It was after having developed the hockey stick that they asked themselves what could be done next. They decided to disrupt the biking industry, which they felt had been sitting in the past. From there they created the software layer to build the world’s first connected carbon fibre bicycle.
Their first bike, to be shipped this Spring, is called Valour. Valour is a connected bike for the urban commuter. It’s long list of features include app-connectedness, turn by turn navigation, blind spot navigation and ride tracking (recording metrics such as speed, distance, calories and time). Perhaps most noteworthy is the interconnected commuter network. In cases of theft, the Valour community is notified to look out for your bike. Furthermore, the more often you ride, the better informed others will be of road conditions in your area. It’s been speculated that the commuter information – rather than the hardware – will end up being the real product. While the team does see the powerful nature of this info, whether or not this is the real value of Vanhawks is, in their opinion, yet to be determined.
After building up a team of fifteen, setting up shop in downtown Toronto, and raising 8x their goal through a Kickstarter campaign (the most successful in Canada), the startup applied to Y-Combinator. Ali Zahid, co-founder and COO of Vanhawks, describes Y-Combinator and FounderFuel as representative of two entirely different niches. Ali credits a lot of Vanhawks’ success to FounderFuel, saying that they “would be nothing and nowhere without FF.” The team had moved from Ontario into the same apartment in Montreal to eat, sleep and breathe Vanhawks. FF, for Ali, was a family. While it teaches the fundamentals of entrepreneurship, YC has more of a hand’s off focus on constant growth. Further, YC’s vast network has been invaluable to Vanhawks. Ultimately, Ali describes Vanhawks in Montreal as feeling like a big fish in a small pond. In San Francisco, on the other hand, they’re just getting started in a huge body of water.
When asked about the difference in living and working in San Francisco versus downtown Toronto, Ali describes two very distinct lifestyles. Tech employees in the valley work 16-18 hours per day; they exercise, eat every meal and do their laundry at work. On the other hand, Torontonians in tech find more of a work/life balance. Ali maintains that Toronto has a “secret sauce that these guys just don’t have.” While they wish to maintain very close ties in SF, they don’t plan on leaving TO any time soon.
One ingredient in the Vanhawks secret sauce is company culture. In looking to create something that outlives them, the team wants never to stray from their core values. As they evolve – bringing in more personalities and more ideas – they place importance on always remembering the consumer. The community of people seem to be what makes up Vanhawks, exemplified in the fact that two of the four co-founders are brothers. This is further exemplified in the friendship that runs throughout the four person co-founding team. The remaining two co-founders are Niv Yahel, CTO and Adil Aftab Iqbal, CMO. Niv is the brains behind the tech, working behind the scenes to both produce the best product possible and to create a successful (and growing) tech team. Adil has been running manufacturing since day one, spending most of his time abroad to ensure smooth operation from the first prototype to the shipping of the product. With this in mind, their greatest challenge to date has been finding the right people for their company. They’re constantly looking for passionate, dedicated and intelligent individuals who are flexible and willing to take risks. They only hire the best of the best – those who would follow both their product and their consumer to the end of the world.
Although the team is proud of the intensity of their growth, they want to move faster. With no regrets – because “the everyday mistakes are necessary in order to learn” – they’re looking towards the future. Up next is shipping out Valour, prepping for YC’s Demo Day, and getting back into the Toronto community by hosting events. When starting at YC, Paul Graham told the team that someone has to do what they’re doing – the question is whether that someone will be Vanhawks. They realize the power of what they’re building and “believe in it like crazy.” The Vanhawks team is hustling to create something massive and it’s safe to say that they’re well on their way.
Stay tuned for next week’s profile on Spoil, a personalized gift concierge service.
”A startup is a company designed to grow fast…the only essential thing is growth. Everything else we associate with startups follows from growth” – Paul Graham
This week we had Ian Jeffrey, VP Product Marketing at PasswordBox come in to talk to the teams about User Acquisition. The talk started off with a big laugh as Ian asked, “how does one acquire users? I honestly have no idea…”. He then clarified by saying that it’s different for every business out there, there’s no set formula. It’s all about A/B testing to find out what works for you.
However, there are 6 KPIs that you can measure to see if the techniques you are using are working.
1- Retention: How long does the user tay?
2- Engagement: How active is the user?
3- Activation: This is different for every business, you need to find which metric is yours. What is it that a user needs to do to be considered an active user?
4- Acquisition: How many users can you get?
5- Revenues: How many users are paying?
6- Referrals: How many of my users are bringing in new users?
One key lesson that Ian shared was not to pay for advertising until you’ve figured out your KPIs, otherwise it’s just money down the drain. Once you know how to keep your users, then you can start buying ads. However, just because you don’t have the money to spend or you aren’t ready to buy ads, there are still PLENTY of ways to scale. You just need to find some kind of trick or exploit that is free. Look at some of these, now famous, examples.
But before we go any further, let’s get back to the basics. What exactly is product marketing? According to Ian, it means “getting the largest amount of people to experience the core value of your product as quickly as possible”. And this doesn’t mean saying that you’re going “to go viral”. Viral marketing is not a strategy, it’s a result of doing a great job.
At the end of the day, the best way to market your product is to have an amazing product. If you solve a real need, and do it well, then you’ll drive value and users will flock to you. Take Dropbox as an example. It adds storage space to your computer, by doing so it solves a real need and drives value to the user. They have a clear USP (Unique Selling Proposition), if you have that, then you have everything you need to grow. Great marketing should be indistinguishable from magic.
Check-out some of the articles Ian suggested be read as a follow-up to his talk.
We’re coming up on the 1 year anniversary of Vanhawks launching their Valour Kickstarter campaign, the most successful one in Canada, during their 3 month stint at FounderFuel. To celebrate this we couldn’t be more excited for the 2 major announcements Vanhawks made yesterday.
They announced through TechCrunch that:
- They joined the Winter 2015 Y Combinator class in San Francisco and have been making major strides there.
The future is limitless for Vanhawks. Co-Founder & COO Ali Zahid confirmed this in their TechCrunch article. “The vision is a lot bigger than just making bikes,” Zahid explains. “Think of us as the software layer for the bike industry of the future. Everyone says that software is eating the world, and we see that in the bike industry, too, which has been sitting in the past.”
We can’t wait to see what comes next for Vanhawks!
Yesterday afternoon we had a visit from 4 core members of the PasswordBox team. They came to chat with the current Cohort about team culture, how you instill it and how you can maintain it through growth and acquisition by Intel Security. On the panel were Marc-Antoine Ross (Co-Founder & Director of Data Engineering), Greg Whiteside (Employee #1 & Director Engineering), Olivier Beaulieu (Employe #8 & Technical Team Lead) and Ian Jeffrey (Employee #32 & VP Product Marketing).
Some of the key topics covered were:
- Always hang-out with a potential employee before hiring them. Would you want to have a beer with them on a Friday night after a long week of work?
- Always hire people who are smarter than you. If you feel dumb in the interview, that’s a good sign!
- PasswordBox has instilled a culture of attracting great people to the company and spending time with them before hiring them.
- Everyone should have options.
- PasswordBox has a culture of transparency. This is key in building a strong culture. Every employee is always aware of everything going on, from potential investors to potential acquirers and deals on the table.
- Set a weekly time to meet with the entire company, Monday works great because everyone is pumped up for the week. At PasswordBox they do all hands lunches every Monday where Dan gives the updates on the company and every team goes over what they’re working on.
- If after one week you aren’t convinced about someone, you should let them go. After 1 week it gets harder and harder to fire someone.
- The biggest mistake is trying to keep someone who you know isn’t a good fit
Here are some of the tidbits shared with the Cohort:
“Invest in the culture of people, not in the space you work in”
“Dan comes in every morning and fist bumps every single employee, he did it when we were 3, 8 and now we’re 50+ and he still does it.”
“Culture creates retention.”
“When does culture start? It starts day 1, when you meet someone and want to work together and build something. From there, it grows organically.”
“Every morning when I show up to work, my colleagues are genuinely happy to see me and greet me with high-fives, it’s like one huge family.”
“We’re 50+ employees and I honestly can’t imagine PasswordBox without any of them. They’re all part of who we are. That’s when you know you have a strong culture.”
The room is silent as our Alumni Meet-up panel kicks off.
Ty Danco (Director at Techstars Boston), Thiago Da Costa (CEO at Lagoa) and Lee Silverstone (CEO at GymTrack) make up our panel on fundraising and acquisitions. The conversation quickly evolves into a candid discussion about all things startups.
Ty, Thiago and Lee touch on choosing investors wisely, the importance of delegation, what they would have done differently, the surprises involved in growing a business and even tips on maintaining personal relationships through the stresses of scaling a business.
While tonight is an amazing opportunity for our newest cohort to soak up open and honest advice, it’s also about much more. Tonight is a manifestation of one of the most important aspects of the FounderFuel program. We pride ourselves on the networks that we make available to each team that walks through our doors. This event is meant to introduce the newest additions of the FounderFuel family to an amazing network: our Alumni!
Stay tuned for news on Show & Tell tomorrow!
“Success is focusing the full power of all you are on what you have a burning desire to achieve.”
- William Peterson
FounderFuel is gearing up to welcome its Spring 2015 cohort on Monday, February 9th. 7 companies will comprise our 7th batch of startups. This time around, we’re trying something new.
After a deep-dive re-evaluating the past 6 cohorts, we’ve altered the structure of the program in order to capitalize on our strengths and improve upon our weaknesses. We want to more accurately reflect our purpose: to offer an in-depth and mentor-driven acceleration of your startup.
This is why this cohort will see a refocusing of the program, oriented even more towards the specific needs of the entrepreneur, and towards providing them with what will satisfy those needs. We want to have a higher impact upon the outcome and success of each startup embarking on this journey with us.
Stay tuned for more changes to come.
To remain up-to-date on the progress of FounderFuel and the 7 companies within its 7th cohort, follow us here:
Vanhawks’s mission is to make connected bikes for the urban commuter to encourage bike rides for greener and less congested cities with the best experience possible. The Vanhawks Valour, is the first Bluetooth connected bike built from carbon fibre, giving riders safety,comfort and insight for every ride.
Vanhawks came into the FounderFuel program with a big idea and were in the early stages of manufacturing their prototype. They then went one to raise the most amount of money in crowdfunding in Canada through Kickstarter which was 820k, have attracted major media attention, made key hires and have a lot more exciting news on the way! 2015 is going to be a big year for Vanhawks! Let’s start it off right by helping them win Accelerator Graduate of the Year!
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