Surviving the Post-Acceleration Cliff: What Startups Really Need to Succeed
The post-acceleration cliff. It’s that moment when a startup leaves the daily guidance and mentoring they’ve enjoyed for weeks — months, even —in an accelerator, and fends for itself in an unforgiving market. Sounds daunting? Well, it is. The old adage is that nine out of ten startups fail. Accelerator programs give some startups a much better chance of success, but certainly not all. The question is, why?
Accelerators exist with the purpose of guiding startups to a stage when they can stand on their own. There are now more than 100 classic accelerators in Europe and a great many in Berlin. They offer programs led by mentors with a limited time frame (usually three to six months), five-figure seed investment for five to seven percent equity, and access to important contacts and advice — all designed to help startups get a beta version of their product completed and in front of investors.
The claims of some major Berlin accelerators sound promising: StartupBootcamp says, “Intense mentorship, get funded, and work together with global brands”; Wayra wants to “help the best entrepreneurs grow and build successful businesses”; Plug and Play “provides startups with mentoring, office space, and counseling”; ProSiebenSat.1 Accelerator’s goal is to “get startups in shape and help pitch to investors to secure follow-on-funding.”
Why, then, do startups sometimes take a turn for the worse after they exit accelerators? What is missing? Should we assume that startups just aren’t good enough — that either the quality of their product or their team has doomed them to failure? Perhaps being in an accelerator program simply helped them fail faster and any additional support would be cruelly (and wastefully) delaying the inevitable.
But it’s not that simple.
The real answer about startup success is: it depends. It depends on the type of startup, it depends on the industry vertical, it depends on what stage the startup has reached, it depends on potential for scalability. With all this uncertainty, continued support post-acceleration is imperative.
Why do startups still need support post-acceleration?
They’re mere fledglings.
Startups come out of accelerators at markedly different stages. Some have an unfinished prototype, or an incomplete team. Others have a product but no access to market and little money to sustain them until they find it.
According to Martin Weber, Program Manager of European Pioneers, “Many startups in classic three-month programs are very early stage. They spend the program getting the product ready but haven’t managed to enter the market and validate their hypothesis about the product.”
The truth is, tech startups can’t fully prepare for the market or prepare for an investment round in three short months, especially if they are developing a highly complex product. They simply need more time.
They need to maintain momentum.
Accelerator programs often squeeze startups into a rigid format —albeit one filled with useful, high-octane, all-consuming activities and workshops. Founders leave the program in that kind of post-exam blur, where you can’t remember the last time you got a good night’s sleep and your brain is buzzing with vital information, none of which you feel prepared to recall at the right moment.
It’s no wonder that when startup teams leave this rigorous structure they fall into a kind of post-accelerator stupor, in which priorities shift and time becomes much more flexible. The ticking clock for demo day is a thing of the past. Mentors aren’t constantly over your shoulder checking progress. You lose your desk in the coworking space and you’re back to slaving away at your kitchen table. This kind of switch is bewildering, no matter how positive your experience in the accelerator.
It’s not all about the money — yet.
Money is a major focus in accelerators, but oftentimes this area is not fully on track by the time the program is completed. “One of the weaknesses of scheduled accelerators,” says Benjamin Rohé, Managing Director of German Tech Entrepreneurship Center, “is that startups have to deliver on demo day and try to raise money because that’s the business model of the program. For many companies, three months is not long enough to be investment ready.”
In more practical terms, the issue is that if startups are hasty in raising capital, they risk compromising their potential growth in the future. Karel Escobar from Tetuan Valley in Madrid explains the reason: “If you do an investment round too early, you risk giving away too much equity.”
They don’t have the right connections.
Depending on the program, founders might miss key introductions to potential investors, strategic partners, or anyone else who is right for them from a business perspective. This might happen more often for those startups who are developing a highly specialized product. Tim O’Connell, the Accelerator Director at H-Farm Ventures in Venice, says, “Some of our best teams are not funded at the end of the program, since they are still looking for the right partners.”
Risk aversion from bigger companies can also be a challenge, explains Sonja Jost, founder of DexLeChem. This is especially true when it comes to collaborating with startups. Getting inside bigger companies and gaining access to the decision maker who understands the benefits of collaboration can take time.
What do startups need post-acceleration?
Facilities
Chances are, at the end of three months, startups will still need the office space and access to prototyping facilities most accelerators provide. Transitioning seamlessly into the real world involves continuous access to the right tech infrastructure — and better still if it’s free of charge. Nicholas Caporusso, Founder of INTACT Healthcare (a GTEC Lab resident), explained, “Removing this sort of hassle helped us keep our momentum going. We could focus on product and reaching out to the right people without getting distracted.”
A collaborative approach to this infrastructure seems like the right next step for the startup ecosystem. Spaces offering desks or working areas might partner with innovation labs or research facilities to keep support going for promising startups exiting accelerators.
Ongoing mentoring
Most of the accelerators offer continued support to startups post-program, but only upon request. If a startup needs an introduction to a particular company, they can ask for it. But this is not the same as having someone taking an active, weekly interest in your progress— someone to whom you feel accountable. Startups need to keep talking to people who have been there and done that, and continuously receive their guidance.
Access to market
Untested products shouldn’t stay that way for long. It’s crucial for startups coming out of accelerators to have “an introduction to a network to gain access to market in a cost-effective way,” says Rune Theill, Co-founder at Rockstart in Amsterdam. The quickest and easiest way to market usually comes from connecting with large companies. Ensuring this happens at the right time makes all the difference.
International network of well-informed investors
Startups may not be ready to take investments when they first leave a program, but that can quickly change within a few months after going through market validation. That’s when introductions to strategic investors are key.
For notoriously risk-averse European investors, understanding the product through many months of conversation — rather than just hearing a lightning round pitch at demo day — significantly increases their likelihood of striking a deal. Upon recognizing this, Toby Stone, Founder of EyeFocus, coined the idea of taking startups on “an innovation journey, along which investors get educated as well, so that at the end of that journey they are ready to invest.”
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While the post-acceleration cliff remains a challenge for many startups, key players within the ecosystem are beginning to recognize common issues and discuss strategies for finding solutions. But there’s still a long way to go.
Accelerators must take into account more long term, flexible, collaborative support for startups, with access to facilities, markets and investors. Only then can we ensure young companies continue reaping the benefits from accelerator programs — and that if startups do fail post-acceleration, they fail for the right reasons.
