How To Utilise Accelerators For Deal Flow
If there is one element the UK’s startup ecosystem is not short of, it is startups themselves. However, this poses a difficult problem for angels entering or existing in the market, in terms of how to not only handle deal flow but possess good quality deal flow in the sea of new business opportunities. As Philip Wilkinson states in our interview, ‘it is one of the most important things’. So how does Philip, a seasoned and successful entrepreneur and investor ensure the quality of his dealflow.
Utilise the Huge Growth of Accelerators
As angels we live in a land of vast opportunity owing to the rise of incredible accelerator programs nurturing entrepreneurs and ideas into the next unicorns. However, our system advantage as angels lies in the realization that the accelerator to angel relationship is not mutually dependent. Angels do not need to accelerators to carry out their investments, absolutely it helps assess quality deals, but it is not a vital component of the investing process. However, for accelerators their future depends on whether their alumni companies are successful in raising future funds, which of course when graduating from accelerators do not traditionally come from VCs but from angels. This imbalance has led many accelerators to put a premium in developing relationships with angels and early stage investors in order to secure investment for their portfolio companies, when required. So how can we as angels harness this imbalance in order to attain quality deal flow from accelerators.
Rule 1: Be accelerator agnostic: As an angel, there is no need for you to limit yourself to one accelerator, scan companies from numerous different programs. In the past few years, it has become increasingly common for angels to collect one page executive summaries from numerous companies across a range of accelerators. Therefore, maximizing their ability to scope the landscape for the most attractive deals. These executive summaries are also very effective in providing a collection of companies that they have preselected and then can focus on when it comes to the demo days.
Rule 2: Accelerator Meetings Are A Must: As an angel a dominant element of ensuring quality deal flow is centred around relationship building. Accelerator meetings, which are traditionally before a demo day provide the chance for angels to foster a relationship with companies prior to funding being required. This allows you the angel, to assess the quality of the team ahead of time and provides an ealy start in determining which startups you want to invest in. It is also important to remember for ‘Hot Startups’, that pitch and have many offers of funding, if you have an existing relationship with them, there is a much greater chance they will choose your source of funding over another’s.
Rule 3: Always attend Demo Days: The power of a demo day really cannot be underpinned. Firstly, there is no other opportunity where you will be able to experience a wide variety of exciting companies in such a short space of time. It also allows you to hear the CEO pitch and really the true ethics of the company, so much more than what can be attained from an executive summary. It is also important to remember the services that accelerators provide in the wake of demo days with many offering to conduct due diligence and negotiate deals. This can significantly reduce the admin work for us as angels and allow us to focus on our portfolio companies themselves.
Rule 4: Be a Mentor: Philip Wilkinson is a mentor and as he stated in our interview, ‘there are so many companies coming out of entrepreneur first that I would invest in because they have fantastic people with great ideas’. However, access to this form of quality deal flow would not have been granted to Philip had he not given up his time and taken on the role of Mentor at Entrepreneur First. In some cases angels can even negotiate for equity in return for their time as a Mentor, making the process far more valuable than simply access to some of the most exciting startups. A large problem for many angels is the factor of time. However, this should not restrict you from taking part in the process as many accelerators actively seek angels to provide mentoring in single accelerator sessions or educate classes on specific and niche topics.
To summarise, the key to harnessing the true power of accelerators lies in one simple word, immersion. Immerse yourself an angel in the process, never turn down a demo day, always attend any additional events or meetups, these are fantastic networking opportunities and can provide the core for a extremely successful accelerator focused portfolio.