How to get into a startup accelerator — Part II
A multi-part mini guide for startup founders who are planning to apply for a startup accelerator.
If you haven’t read Part I, you may want to do that first.
These insights are based on my personal experience as an evaluator and advisor at NUMA: the top early-stage startup accelerator in France.
Focus on a single value proposition
When talking about their product startups are often tempted to present it as a swiss knife made to solve multiple problems.
For early-stage startups it is a very bad idea to take this approach for several reasons:
- It dilutes the strength of your claim
- It makes your product harder to define and memorise
- It shows lack of focus
You may have heard the expression “jack of all trades, master of none”: I find this expression doesn’t do justice to those of us with horizontal skill sets, but works well to describe a multi-purpose early-stage product or service.
A business that hasn’t reached product/market fit should focus on one value proposition and one customer segment only (or at least one at a time): the reason is focus and efficiency.
The biggest advancements during acceleration come from shortening the lean startup cycle of build-measure-learn, but if you multiply your value propositions you end up working on several of these cycles chained together: assuming your man-hour throughput stays the same you are effectively increasing the time to get to product/market fit.
If I review a startup application that promises to do everything for everyone what I picture is a product that doesn’t excel at solving any specific problem and doesn’t fully satisfy any customer persona (value proposition dilution).
Also it makes it hard to memorise and explain to other stakeholders at the accelerator, for example:
“ FoodMeUp targets bakers, restaurant owners, agribusiness companies and customers in B2C. We aim to progressively build a complete SaaS ecosystem that will include: supply chain management, ROI analysis, HR recruitment, accounting and legal assistance, point of sales, loyalty cards management, a marketplace and a forum. “
That’s a mouthful, isn’t it? If someone were to ask me “what does this startup do?” I wouldn’t know where to begin. I’d get a headache just by attempting to draw logical connections between customer needs and proposed solution.
Here the founder laid out his long-term vision of the product in 3+ years, instead of focussing on a clear value proposition and customer segment that could be understood, memorised and challenged by an evaluator.
Making a roadmap is a useful exercise, but at the very beginning of your journey it’s like an ancient world map: it only accounts for what you already know.
As you may have guessed FoodMeUp didn’t get selected with this application, but the founder (who recently raised 480K) applied for the following session with a much clearer description that got him into NUMA:
“FoodMeUp offers the first modern recipe-management SaaS solution for tech-savvy food artisans, it saves time and money in the production workflow and maximises recipes’ ROI.”
Startup founders tend to resist giving too narrow a view of what they consider a larger, richer and more complex system: it is a sin of pride.
Remember this: early-stage startup accelerators value focus and depth above breadth of scope and long-term goals, so avoid highlighting the latter if it detracts from the former.
Do your market research
“We have no competitors because no-one does exactly what we do”
We’ve heard this so many times it’s almost become an inside joke of startup accelerators.
If you’re a first-time founder you should memorise this concept: it’s not how you solve the problem, it’s the nature of the problem itself (and possibly the customer niche) that puts you in the same playing field with competitors.
If something solves the same problem in a suboptimal way, it is still an alternative solution.
If you’re making a dog-sitting robot for busy singles it doesn’t mean you’re alone in the market because no-one has developed an automated solution of taking dogs for a walk (oh, actually I just checked and someone’s already on it).
You are effectively competing with any solution to the single’s problem of not having time to walk the dog: professional dog-sitters, doggie daycares, the single’s friendly neighbours, pet-friendly workplaces and potty training.
This is to say that even when you have no competitors to name you’re still competing with your customer’s way of currently dealing with their problem and you’ll have to think of what will make them overcome the friction of adopting your solution instead.
Declaring that you have no competitors is counterproductive because we’ll assume that you either haven’t done your research, don’t understand what a competitor is or that you think evaluators don’t know how to use a search engine, it looks bad in all three cases.
Do your market research: it’s in the interest of your business development and something you’ll be asked to discuss in the live interview if you get through.
Don’t know where to start? Try by searching for the phrase that best describes the problem you are solving (I’m sometimes amazed by how rarely founders do this), usually you’ll find three types of results: websites of direct competitors, compiled lists of alternative solutions with their respective pros & cons and tutorials on how to solve the problem with your own means.
Your job is to distill this information and use it to pinpoint your position in the competitive landscape (you can even create a competitor analysis grid or a SWOT diagram).
Know your customers and their problem
One of the big questions evaluators ask themselves when reading your application is whether you are tackling a problem that is worth solving.
“But what makes a problem worth solving?”, you may ask.
Here are some factors to consider:
- Severity of the problem
- Frequency of the problem occurrence
- Size of the customer segment affected by the problem
- Customer profitability
- Coverage by other solutions
- Persistence of the problem
Let’s break it down:
Severity
How critical the problem is for your customer in terms of consequences, how big the downside of not solving, solving sub-optimally or working around the problem is. The downside can be situated anywhere between minor annoyance and global catastrophe (and, judging by this graph, even beyond that)
Frequency
How frequently the problem occurs for your customer. This can range from uninterrupted to once in a lifetime.
Customer segment size
How many people have this specific problem. Can range from one to world population.
Customer profitability
How much profit can be made by targeting this type of customer. This is a trickier one because the revenue model of a startup can drastically change over time. In some cases (like social networks) users and customers can be distinct groups. Users could be initially acquired and retained by solving a problem (or leveraging a behaviour) to generate valuable resources (data or ugc) that can then be monetised through a different customer segment (advertisers).
If your customer profitability is hard to estimate, the upside is you have margin for manoeuvre when giving possible projections: play this card to your advantage.
Coverage by other solutions
How well existing solutions solve the problem for this customer segment. Coverage can be deduced from your market analysis and has two dimensions: quantity and quality, the number of existing alternative solutions and their relative effectiveness in addressing the specific problem/customer pair.
Persistence of the problem
How long will the customer segment suffer from the problem. Some problems have a shorter lifespan than others.
Let’s say your initial customer segment is “first-time moms of children under 3 that are overwhelmed by requests of baby pictures from relatives” (if you think this segment is a bit too narrow, I invite you to read the CloudFlare case-study in Running Lean by Ash Maurya).
For this specific problem the persistence will be 3 years (you may have to figure out what value to deliver later to extend customer lifetime or widen the segment beyond early adopters).
If on the other hand your customer segment is “hi-tech optic companies that need to protect confidential information” your average problem persistence may stretch decades.
The above examples look only at the micro level from the individual customer perspective, but you can look at persistence at the macro level too: how long do you expect a problem to exist from the perspective of society as a whole?
When looking at the above factors we also try to take into account where the trend is going (for example: problems relating to big data have seen a growing trend).
Here’s an example of different problem/customer pairs compared using these factors.
Warning: estimates may not reflect reality.
Once an evaluator has made up his mind about whether you’re working on a problem worth solving the next step is looking at how well you understand the pain point you’re working on alleviating, the depth of your empathy with the customer and your ability to detach yourself from the solution you’re building.
Your solution is not a problem
In our program’s application we ask startups not to talk about their solution: founders tend to fall in love with their solution and forget that what matters is delivering value to customers.
A customer rarely cares about how you solve their problem as long as you do solve it.
A solution can rarely fix more than a single problem, but a single problem can be fixed many different ways, that’s why we look for people that are good at analysing problems first.
Here’s a useful insight from Product and UX Consultant Melissa Perri from her presentation The Build Trap:
Customers’ problems are not lack of your product’s features.
To test how much in love you are with your solution you can try asking yourself and your cofounders this question: “if you discovered that the best way to solve the customer’s problem does not entail using your favourite technology or the skill at which you excel, would you still want to work on it?”
If the answer is no, you’re probably driven more by the satisfaction of building something than that of solving a problem.
Define your competitive advantage
Your competitive advantage is probably the second most important factor after the quality of your team for tipping the scales in your favour when your startup is examined.
A competitive advantage can take different forms:
- A proprietary technology
- A secret you have discovered
- A privileged access to the market
- Exceptional speed
A proprietary technology
Assuming your technology is patented and more effective than existing ones in solving a problem, this can represent a real advantage against competitors: by the time it takes others to find a better technological solution without running into patent infringement you can hope to achieve a dominant position in the market.
Remember however that a patented technology may not suffice to give you a competitive edge in solving a certain problem.
A secret you discovered
In his book Zero to One, Peter Thiel encourages entrepreneurs to hunt for secrets.
Thiel defines secrets as “unpopular or unconventional truths”.
For example, a secret that Airbnb implicitly reveals is that the customer friction of renting an apartment from a perfect stranger can be lowered below the friction presented by the price of traditional hotel accommodation. Once this truth revealed, it changes the rules of the market.
Secrets that give you a competitive advantage are those triggering disruptive innovation in dealing with a problem or leveraging a need.
It is important that you identify in which way your approach relies on a truth that no one else has uncovered yet.
Notice the word yet: when dealing with unconventional truths about human behaviour (like those discovered by early sharing economy entrepreneurs) the competitive advantage lasts until a competitor is able to reverse-engineer your solution, work out the psychological triggers that make it successful and reproduce it.
This reinforces the importance of having an analytical approach to problems. Secrets can be uncovered by entrepreneurs who are curious, who perform extensive customer research, test different approaches, are not afraid of getting their hands dirty and prioritise learning over building.
Ultimately it boils down to to the question: “what have you understood about this business that your competitors fail to grasp?”
A privileged access to the market
This can be anything that gives you an unfair advantage: close connections to clients in your industry (like when your dad is the head of a telecom company and you’re selling SIM cards), being an active member and influencer in your own customer niche (like when you’re an e-sports superstar building a fantasy e-sports app), exerting direct or indirect political influence on policy-makers (like when you have connections at the UN and you’re tackling a humanitarian problem).
Privileged access can serve as a fence against competitors and is another arrow in your quiver. The question that reveals whether you have some sort of privileged access is: “in what way you are better positioned than your competitors in this market?”
Exceptional speed
Getting there before anyone else doesn’t guarantee success, one of the reasons is that when you’re the first one you cannot learn from anyone else’s mistakes.
On the other hand responsiveness to new developments in the market and speed of execution can allow a startup to keep ahead of competition.
When looking at speed as a competitive advantage an evaluator can rely on these indicators:
- The team’s efficiency and commitment
- The founders’ grit, stamina, reactivity and resilience
Some of these indicators pertain to the characteristics of a solid team discussed in Part I.
Some others relate to the entrepreneur’s personality and motivations that I hope to discuss in the next part of this series.
— End of Part II, stay tuned for Part III
If you run a startup accelerator or if you’ve gone through the selection process as a startup or you are planning to, we would love to hear your thoughts: what is the hardest part of the process? What are other tips that you would give to an entrepreneur applying to a startup accelerator? Have you discovered any secrets?
If the feedback is positive we’ll publish a Part III, which will probably include:
- Explain your business model
- Explain why you’re doing this
- Demonstrate resourcefulness
- Know how to measure progress
- Get recommended
- How to nail the live interview
For those of you who are serious about accelerating their startup and want to experience living in one of the most beautiful cities in the world: NUMA’s acceleration program starts next February in Paris. You can apply until December 16th.
