This is a guest post by Harry Davies, the Applied AI Lead at Tech Nation and Head of Investment at Wayra, Telefonica’s startup accelerator. Harry shares his experience and insight into accelerators for this comprehensive guide.
Since the first accelerator, YCombinator, was born in the US in 2005, growth has been unstoppable. In a 2017 report, NESTA identified 205 incubators and 163 accelerators that are active in the UK alone. Clearly, it’s no easy feat to determine which might fit your startup best. This guide introduces accelerators and how best to navigate the landscape.
What are Accelerators, and How do They Work?
A dictionary definition of accelerator gives, ‘a person or thing that causes something to happen or develop more quickly’, but I quite like a definition by Brad Feld, the founder of Techstars. Feld describes an accelerator as a place that facilitates rapid learning. He suggests that learning by doing is the most effective way to grow as a founder, but it’s often inefficient, and it’s best gleaned through trial and error, which may prove costly. Feld suggests that accelerators speed up the learning cycle in a time-constrained period, helping founders learn from others’ successes and failures such that they don’t have run those particular experiments.
The best founders get to their destination regardless. But, in a nutshell, the best accelerators aim to help get you there faster.
There’s also a distinction between ‘incubator’ and ‘accelerator’, terms often conflated. The former tends to be more in the business of venture creation, in other words taking you from 0 to 1. The latter is more focused on taking you from 1 to 10 when you have a company formed with some initial progress.
More practically, accelerators tend to have common characteristics:
- Co-working space: the earlier stage the accelerator, the more frequently this is a feature.
- Mentorship and coaching: most will have an ecosystem of experts that are utilised to support participating ventures. Others might have a more tangible curriculum that involves coaching and focused sessions.
- Investment: some accelerators invest in the ventures they support or offer grant funding.
- Peers: most still operate through a cohort model, giving you intimate access to a group of like-minded peers.
- Network: a strong network is the lifeblood of an accelerator. Besides experts, top accelerators should open doors to the best investors and corporate contacts. For example; SwiftScale is all about connections into enterprise clients.
- Events: practical ways to theme the connection into the wider network, often culminating in a ‘Demo Day.’
- In-house team: the best accelerators have experienced leads who work with you one-to-one to support your business objectives. Others, particularly corporate accelerators, provide fast-tracked mechanisms to partner with the sponsoring organisation.
Notably, accelerators tend to be powerful conveners. When you have a cohort of, say, 20 companies all at a similar stage in a similar space, it’s usually an efficient way for an investor, client, or otherwise, to stop by and meet multiple founders at once. The very best leverage their reputation to pull in the best people; for example, Y Combinator’s Demo Day is renowned for pulling in an incredible audience such as the founders of Dropbox and Reddit.
Broadly, accelerators fall into the following categories:
- Stage: most accelerators tend to focus on founders at a particular stage of development, which often tends to be pre-seed or seed, but not exclusively.
- Technology: some accelerators focus on the utilisation of a specific technology, for example, StateZero Labs focuses on early-stage founders using blockchain.
- Industry or sector: others, particularly corporate accelerators, focus on a particular industry or sector – for example, CyLon focus on cybersecurity.
When Should You Think About Applying for One?
Before you think about applying for an accelerator, remember that accelerators are not an end goal in themselves; they ought to be a [ideally faster!] means to an end. Yes, it’s important to celebrate your wins if you’re successfully selected for a highly competitive programme, but, fundamentally, you still need to build a business. Too many founders forget this.
An accelerator might make sense where the support mechanisms offered are highly aligned with your business objectives, balanced against distraction and cost. In other words:
Where Return > Time + Cost, it might make sense. Let’s take those in turn:
Cost: if they require equity, think carefully, as you would with any other investor. Whilst it often makes sense, particularly for a tier-1 accelerator, you want to avoid unnecessary dilution. Others have a fixed fee, which can be an easier transaction to evaluate, but, again, ask for clear expectations and balance against return. Some others still are free, usually funded by a Government or a corporate. Obviously, that’s ideal, but be clear as to how the accelerator is funded and whether there are any hidden implications for you.
Time: this is the variable most founders neglect. Some accelerators can demand substantial time commitments that, similar to cost; you must balance against return. Building a business demands extreme focus. Most accelerators will give you very clear expectations.
Return: The hardest one to measure! This can often be subjective, and it’s usually not transactional. For example:
- Learning: Accelerators can be periods of rapid-learning that allow you to learn from others’ trials and errors such that you may not have to go through the same, which can save on time and pain. These might be peer-to-peer within a cohort or alumni, or it might be delivered by experts, mentors or later-stage founders. This is hard to measure, but it can be immensely powerful; I’ve literally seen businesses saved from making near-fatal errors – commonly involving rogue investors or unfair dilution – and others that have almost been transformed by the process.
- Business development: some accelerators have corporate affiliations, or they facilitate them. This can be powerful, but cut through the hype and make sure you do your due diligence; many corporates simply lack the process needed for successful startup-corporate collaboration. Others get strong results and clearly demonstrate this objectively. For example, 30% of all pilots facilitated through Founders Factory have led to larger-scale enterprise contracts.
- Investment: as a convener, an accelerator might be able to offer warm introductions and investor readiness support.
- Exposure: particularly if early-stage or ‘in stealth’, an accelerator can be a way to get your story out there quickly and effectively. Should you get into a prestigious institution like the Ignite Accelerator, the badge can have an almost mystical effect on those you meet!
Coming back to the introduction, you must remember that this is a means to an end. Weigh the decision with where you ultimately want to be, and determine if this helps get you there faster. Don’t be too transactional though; appreciate that, yes, there can be huge, often transformational value in the conversations and sessions that the best accelerators run.
Don’t apply to accelerator if you think it’s going to solve all of your problems – it won’t. Building a business is tough either way you cut it.
It can sometimes be a good idea to go through more than one programme if they’re both sufficiently differentiated and value-adding but balance the above trade-offs. Think very hard about your time and whether any further dilution will be involved.
Quickfire Advice for Accelerator Applications
- If it is required that you give away equity or there’s a significant cost, treat the accelerator like you would any other investor. Do your due diligence and speak with alumni.
- Be succinct in your application and sell yourself. The best programmes receive tons of applications, and they won’t have time to sift through an essay. And you need to stand out. These can take anywhere from a few minutes to over an hour depending on the application, sometimes followed by a pitch or a face-to-face interview before a final decision is made. The process is always a balance; you want to give the application the attention it deserves, but you also have a business to run. If in doubt, aim for quality, not quantity.
- Plan. If you decide to do it, give it your all and make sure you’re ready. If your next few months are almost exclusively focused on product development, for example, there’s probably little point in joining a sales-focused programme.
- Get facetime with the programme team in advance of your application.
Firstly, you can find a relatively up-to-date list of all the accelerators in the UK on the Government website…Here are some examples.
- Entrepreneur First (EF): EF isn’t an accelerator as such, rather a talent investor. EF recruits founders before they become founders. They scout for those who have the talent to start the most ambitious technology companies (often pre-idea) and support by matching them with co-founders and guide them to take their first steps from concept to business.
- Wayra: Wayra is Telefonica’s (better known as O2 in the UK) startup accelerator and a good example of an initiative that helps match startups with corporate challenges. Formed in 2011, the accelerator has seen over 180 companies pass through its ranks in the UK alone, and over 1,000 globally. Wayra also runs sector-specific programmes such as the NCSC Cyber Accelerator and an Intelligent Mobility Accelerator.
- Techstars: Co-founded by Brad Feld, mentioned above, the Techstars brand speaks for itself. Nearly 2,000 companies across the globe have been through a Techstars programme, with a combined market cap of over $18bn.
- Founders Factory: Part of Brent Hoberman’s Founders Forum Group, Founders Factory runs a programme orientated towards commercial trials and pilots, of which over 60 have been completed so far across the portfolio. Hosted by Seedrs, the abovefund raise for Founders Factory will provide investors with access to a portfolio of technology-enabled companies by addressing the three key areas a startup commonly struggle with: proof of product/market fit, resourcing, and access to major corporations.
NB: Tech Nation: Not a classic accelerator in the sense of the definition above, but I include it here as it might fit some readers. Tech Nation is a Government-backed network that runs free programmes focused on scaling companies (post-seed to IPO), which pairs curated cohorts of founders all at a similar stage with top, later-stage founders who have experienced scaling challenges first-hand. Skyscanner, Monzo, Starling, Darktrace and other recognisable names have all been through programmes.