17. The Accelerator (Troy Henikoff)

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Troy Henikoff joins Nick on The Full Ratchet to talk Startup Accelerators including:

  • Troy Henikoff AcceleratorsCan you start us off with an overview of what an accelerator is and how it differs from incubators?
  • You mentioned that startups apply and go through a selection process.  Can you walk us through that process from application to matriculation?
  • What stage, product status, level of traction, and other criteria make a startup a good candidate to apply to an accelerator?
  • Once the “cohort” or program begins with a group of startup companies, how does the startup experience change for the companies that are involved?
  • Are there key goals, milestones and/or metrics that are established for startups in the cohort that you’d like to see them reach upon graduation?
  • I understand that TechStars and the majority of accelerators provide cash to admitted startups and receive equity or a convertible.  Can you talk about the standard structure that you use and how it was selected?
  • Can you speak to the key benefits of “acceleration” to startups, to the greater startup ecosystem and why investors should have an intimate knowledge of the accelerators in their area?
  • What are the success factors for the accelerator itself and how do you measure if you are winning?
  • How do individual accelerators tend to differentiate from one another?

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Key Takeaways:

 

1- Overview of The Accelerator
 
For the first takeaway, I wanted to recap both the characteristics and advantages of accelerators
 
So first, the characteristics:
  • Accelerators are a program that startups apply to, for admission, that lasts for a fixed time-period.
    • In this case it is a 90 Day intensive cohort
  • Admission to the top accelerators is often an order of magnitude more selective than the top business schools
    • For Techstars Chicago they received thousands of applications and admitted 10 startups
  • 7 out of 10 companies were pre-revenue
  • 5 custom KPIs or objects are set for each startup in the cohort
  • In the case of Techstars, not all accelerators, the first month is an intensive time of meetings with experienced mentors that challenge and help the startup identify issues and opportunities with their product, business model and/or go-to-market strategy.
  • It all culminates in an event called “Demo Day” where the startup founders get on-stage and pitch their startups for investment

And then the advantages to startups participating in an accelerator:

  • High-level, frequent mentorship
  • Seed Capital
  • Office Space
  • Legal
  • Accounting
  • Payment processing
  • Hosting
  • Travel Rewards

If you’d like to see more specifics on the perks made available to startups participating in Techstars, specifically, I will include a link in the show notes.

 
 
2- Getting In
 
The second takeaway I wanted to recap was on getting into the accelerators.  So Troy mentioned that they look for:
  • Strong Teams
  • Tenacious entreprenueurs that are also coachable… recall that he mentioned Steve Jobs would not likely be a good fit for Techstars
  • Customer engagement
  • Product-market fit
And when I asked what makes a startup a good fit for admission, Troy explained that those startups that need to iterate on…
  • The Product
  • The Business Model
  • The go-to-market strategy
  • and those that need to improve how they talk about their product and business
 
 
3- Differentiation
 
The third and final takeaway that I wanted to recap is on how accelerators differ from one another.
 
Troy mentioned the following items that distinguish accelerators…
Differentiation:
  1. Co-location of cohort companies and accelerator leadership/mentors
  2. Level of mentorship
  3. Selectivity
  4. Access to resources
  5. General vs. a specialty or focus area…  Accelerators may focus by:
    • Vertical
    • Horizontal
    • Geographic
    • Mandate or Mission Statement
    • Business Type
If you are a startup or startup investor, it is a great idea to review your focus areas and identify accelerators that share this focus.  I think it is safe to say that both startups and investors have much to gain from acceleration.

 

 

Tip of the Week:   Accelerate Yourself

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  • Adam Komarnicki

    Hi, Troy mentions there are custom KPIs set for each startup that enters the program. Could you please expand on this? For example, what kind of KPIs are the most common and what are the reasons for setting them?

    • The KPI’s are unique for each business – both by the type of business and the stage. For early stage businesses that are still trying to get Product Market Fit (PMF) we look at engagement metrics – how long users are on the site/app, how often they come back, number of interactions per session, etc. For businesses that have PMF and are looking to scale, you are looking at sales/viral metrics. Could be about the sales funnel if it is a B2B company, could be about the number of referrals if it is a viral B2C company. They really are all different. Hope this helps!

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Randy

@JavierMBGJ Had no idea @TheFullRatchet existed. This is exactly what I've been missing!