3 Fatal Mistakes Startups Make In An Accelerator
Depending on the day, who’s talking and the tilt of the sun, you might hear suggestions that there are anywhere from 700 to 7,000 known accelerators offered around the world.
From wearables, special needs, government, elderly, consumer, B2B, disaster, IoT and more, if you build it, someone out there will gladly attempt to accelerate it for you.
But do you even want to be accelerated? And if so, are you really ready for it? If you don’t know the answers to both of those questions, you could be signing the death certificate for your startup.
Here are three fatal mistakes made by startups in accelerators.
You were woo’d by the pitch. In accelerators, you can’t get away from the pitch. Some startups intentionally pitch in a competition to get into the accelerator. Some startups win a pitch competition and are offered a free seat whether they want it or not. Often you’ll practice the pitch near weekly during your time at the accelerator. And lest us not forget the big show itself: Pitch Day.
Pitching is a heavy focus on some accelerators. I’m not saying it shouldn’t be.
But some startups end up with a ridiculously high level of proficiency when it comes to spilling your guts eloquently in five minutes of stage time. For the best ones, it’s quite impressive. Now, if they had their wits about them, they would enjoy the moment, make some connections and go on their happy way to ACTUALLY DO WORK. But some startups fall into the “over-pitch” circle of hell and never get out. I can’t tell you how many startups I’ve run across that feel like pitching in competitions (and winning them) is winning. That pitching to a large room full of unaccredited people who can’t fund your company or sign the dotted line for a killer partnership, is moving the needle forward. I dare tell you that some of the most refined, sexy pitches I’ve seen were word-for-word repeated every time I saw them…and those companies, we always end up finding out, are usually selling air.
When I see a startup pitching their business at local and national competitions over and over and over for months and sometimes years at a time, I see dead people. Granted, this is a personal opinion, but one I share with a billion people (unconfirmed number) who have had the seat I’ve had. When you only want to spend time pitching — you are hiding something really ugly. We can only assume that the work at the office is too hard, your business is struggling (or doesn’t even exist), and you are hunting for a feel-good, pat-on-the-back, pick-me-up. Surely, you’re very good at pitching, so when you get a trophy or a small check, you feel like you’re doing something for the business. But you need to explore why it is you prefer to pitch than spend your time at the office…your valuation and potential is generally not improved on stage.
Don’t panic. Participating in a few pitch competitions is fine. But if we all see you on yet another stage (or the same stages) more than a year after you launched within an accelerator, and you’re telling us the same beautifully crafted story with zero actual progress? You need to know you’re throwing out some serious red flags. If you’re in a place to be pitching the company for investment dollars, go sit in an investors office and do an actual deal.
You barely scratched the surface. While just simply being accepted into some accelerators like Y Combinator or 500 Startups can signal a “startup to watch,” other accelerators rely on a different lifeblood. Their network. Accelerators love to promise a solid, powerful and unmatched network to applicants they’re courting. But is that true?
It depends.
Here’s a secret. A truly great accelerator has connections you’ve never seen before, certainly not advertised on their website. I can nearly guarantee that the individuals associated or employed at that accelerator have an even greater number of brilliant minds at their disposal than they’ve advertised to the outside world. And no, I’m not talking about their buddies, “those guys” who hang around the accelerator like it’s their social club, talk about how qualified they are as investors and go out to the strip club every time they’re in town. Investing in you just gives them something to do. Try not to get sucked into that wormhole.
Your goal should be to crack the bigger code. You’re looking for the modest or almost near invisible wealthy (in a “I don’t have to prove that to you” way) individual who begrudgingly but curiously arrives to hear more at a coffee shop in a random part of town when called about a special deal. You want to be that special deal. You will learn so much from having this person associated with your business.
The bad news, you usually can’t unlock this kind of information until you’re actually in the accelerator. Even then, you might need to become the darling of the head of the organization to matter to anyone. That’s really a game of relationships, and those don’t start til you’re all in. But if you’re on the fence, you can look for tell-tale signs. Accelerators like Capital Factory in Austin, Texas, for instance, take so much pride in their mentor network they require an endorsement from two mentors before they’ll even invest in you. That’s committed engagement.
On day one, dive in immediately. Get on the phone, send emails, work to get contacts. Ask mentors who they know. Find the guy who knows the guy who knows the guy. Skip reading the bios from mentors (when they write those, they often don’t know what you need to know about them) and get to actually know them. The startups that own their destiny and do this, build networks that their peers crave, but can’t even remotely fathom. When you click with a mentor, it’s dressed up as luck, but it is surely not.
Now, If you do the legwork and realize you can’t get what you need from the accelerator, you need to activate Plan B (I don’t know what that is for you, but you can figure it out, ask people smarter than you). Don’t waste time thinking the relationship can get better…a lot of broken hearted teenagers can tell you that doesn’t work. And don’t expect it to be easy. Note that I said “if you do the legwork.” That is key. If you’re late to meetings, behave unprofessionally or you just plain expect these kinds of resources to be made readily available (it’s noticeable when you feel this way), then you’re kidding yourself.
If you’re attracted to the sales pitch from an accelerator that they’ve got a great “network,” be ready to test that theory. But it’s on you to figure out how powerful it is. You and I both know many a successful startup that secured their dream investor, mentor or Board Member using this tactic.
You went there. I love the peer community that comes with joining an accelerator. Existing for at least three months (often longer) with other startup founders experiencing the same thing you are, is one of the greatest perks of these programs. It’s especially helpful if you’re a 20-something who didn’t opt for job experience before you dove into the startup world. There are professional skills you’re lacking (sorry to inform you of this), and you can pick those things up from your accelerator peers if you actually try. Your significant others, friends and your family won’t get it. These people can appreciate and understand your struggle — it’s real.
But.
The ugly side of this organically-built fraternity-esque, hand-holding ecosystem means some startups fatally bring their drama and childishness to the party.
Do not use your time in an accelerator to air your dirty startup laundry. Don’t use it to master your ping pong skills. Don’t waste precious time with valuable individuals to simply complain about the co-founders or team you willingly entered the program with — you knew better. Don’t fight with your team in public. Don’t just be there because you’re scared to enter the corporate world. Don’t bring a nearly dying startup into the space and leave it be while you skateboard around on the cool concrete floors. An accelerator is not your playroom. Your “why” is written all over your face, don’t be the last person in the room to figure it out (that’s awkward). Those of us who have spent any amount of time on the management or mentor side of an accelerator have an ant farm view and have seen it a million times.
You might be a small company, but in the perfect world, you want it to be something more. So act like a CEO. Everyone you’re coming in contact with has seen it before — and they are watching. They will find ways to peel away from you and disengage if you’re just spending time on useless things and never show forward progress.
What the heck, I’ll throw in a 4th.
You skipped the fine print. I’m always surprised by a startup that will receive a contract and sign it within minutes, clearly indicating they have no attorney or qualms about the terms within (could be a red flag for an investor, sometimes signaling desperation). If you’re building a good business, be aware that your relationship with an accelerator will not end the moment you exit stage right on Pitch Day. Which means you should have zero plans to use them, abuse them and lose them. That’s a fatal flaw. They are not simply a means to your end, they are one of your investors. Especially if you begin ramping up, gaining traction and showing signs of success — they will not forget about you or the deal you make with them. They are a business, with their own business goals in mind. Respect that.
If you sign a contract with an accelerator and agree to it, then you need to uphold it or you need to sever the relationship like a professional. This goes for contracts you make with your investors as well. Do not walk brainlessly into these kinds of relationships. A lot of very early stage startups mistakenly think any kind of money is great money — don’t be that startup.
The best accelerators will respect your equity, your Board seats and if you show them you’re willing to listen, they will do everything in their power to see you succeed.
Alternatively, if they’re pushing something on you that makes you uncomfortable, call your attorney. You are the CEO, after all. For best results, spend real money (note that I didn’t say a lot of money) and hire an attorney that you trust.
Side note: I will add here that I’ve seen more than enough startups take attorney and other resource recommendations from accelerators (generally there are a lot of great companies swimming about and a few specific ones that often offer great deals to that accelerator in particular). It is mind-boggling how a handful of startups can abuse the privilege of that access and angrily want for more, without paying for it. When a startup refuses to pay, mistreats a professional resource or “tattles” on them to their accelerator, that too, is a red flag. It just messages to investors you aren’t mature enough to manage a vendor relationship or respect professionals in other fields. Again, this is sometimes an unfortunate product of the hand-holding on-demand culture that can arise within an accelerator.
More than anything, when you’re joining an accelerator, remember that you’re a company, not a prisoner. If you’re worth as much as you think you are, then you need to respect your equity, team and time. If at any point the program isn’t delivering what it should, the staff of that accelerator isn’t giving you what you were promised and expectations aren’t properly set — there’s another fatal flaw. It’s your job as CEO to manage that relationship and get what you need, or go. Far too many startups blame their death on an accelerator, and it’s usually never that. I promise.
Accelerators are a fantastic way to launch your business and see success — I personally know and have invested in several startups who have fruitfully profited and raised great dollar amounts from the relationships they built within the program. You just need to get real with yourself and understand that it’s not the accelerators job to make you work, make you successful or make you return a dime. It’s their job to ACCELERATE YOU. If you aren’t ready to be accelerated, it simply won’t work. And you don’t have anyone to blame but yourself.
Always happy to share more suggestions and advice when it comes to choosing your perfect accelerator. Tweet me, message me on LinkedIn, you know where to find me.
