29. October 2013–
It seems like a new startup accelerator pops up in Berlin each month, with everyone from Microsoft and Deutsche Telekom to Coca-Cola getting involved. Is this great, good or terrible? How can startups check if a programme offers value for equity?
Here, Alex Farcet, the affable cofounder of leading pan-European accelerator programme Startupbootcamp, which in Berlin offers $15,000, free office space and three months of intensive support in exchange for eight per cent equity, fronts up on exactly that.
Accelerators are supposed to foster innovation yet they turn out teams with the same ways of thinking about entrepreneurship – any truth to this?
The point isn't to produce the same type of thinking across teams, it's to give them the best possible starting point and accelerate from there. Part of the value-add of accelerators is educating entrepreneurs, and having run four programmes myself, I can promise you that even seasoned founders have knowledge gaps. That's why we have over 100 mentors – our collective knowledge is awesome. You can spend €100k to get an MBA to mostly sit in a class room or you can get micro-funding and have a cost-neutral attempt at launching a real business.
How much is too much equity for an accelerator to take?
There is a norm emerging in the six per cent to eight per cent range but obviously it's driven by the amount of funding. I'd say anything north of 10 per cent warrants a close look at the total package.
How do you make sure mentors really add value?
An accelerator should take mentor selection as seriously as startup selection. If you put serial entrepreneurs who are mentoring for the right reasons in a room with smart founders who are open to input then magic happens. I'm always positively surprised how engaged our mentors are and I systematically ask them why. The answer is because it's fun, you learn a lot, there's a great energy at a good accelerator, it's a form of giving back and there's great investment and networking opportunities.
The quality of accelerator programmes and their investor networks will vary. How can startups check this out beforehand?
The very best source of intel is to talk to alumni founders from earlier programmes – they'll give you the real story. If I was applying to several programmes I would ask for the list of alumni and randomly pick a few to talk to. You can also ask top investors for their opinion. That, plus some online research about track record and overall brand value.
The more accelerators in Berlin, especially ones with corporate backing, the more pressure to fill spots. Will selection standards drop and founders with ideas that will never fly end up wasting their time?
Is there a risk founders waste their time? Well I'd be more worried that the investors in the accelerator will not get their money back, but to answer your question an accelerator should not only accelerate success but also failure. Ideally, it's a small failure – otherwise known as a pivot – and there's time to adjust before running out of fuel. As for the explosion of programmes, give it a few years and two things will probably happen: second-tier programmes won't be able to raise funds to continue and many corporate programmes will figure out a big brand isn't enough to attract teams.
We have two VIP tickets to Startupbootcamp's Demo Day in Berlin on 6 November to give away, which include access to the Investors' Area and the after party. Interested? Just tweet us the best business tip you've ever received and make sure to include @VentureVillage and #SBCDemoDay in the tweet. Good luck!