What You Need to Know About Getting Into an Accelerator
Spending a couple of months in an accelerator can be an excellent way for a fledgling startup to make serious headway and begin to consistently grow. Not only do the investors who head accelerators provide access to funding, mentoring and valuable business connections, these programs are located within shared workspaces where founders can network and form long-term relationships with other smart entrepreneurs. There’s one caveat: Some of the best accelerators are tough to get into.
Take some advice on how to do it from Jason van den Brand,co-founder and CEO of online mortgage refinancing startup Lenda, which graduated from one of the planet’s hottest accelerators, Silicon Valley-based 500 Startups last year. Since then the company raised its first round of funding, has been growing 40 percent month over month since December and recently passed the $40 million mark in loans financed through the platform. Here’s how he says you can improve your chances for getting into a hot accelerator, as well as what you need to do if you succeed.
1. Make sure your business idea is a big one.
The bigger the better. Lenda, for example, is attacking a $10 trillion vertical-the kind of number which definitely will turn an investor’s head. “Having that kind of market size behind your idea is really, really helpful, versus having an idea on the back of a napkin,” he says.
2. Have a minimum viable product (MVP) in place.
You need a product that actually works. While it will never be perfect and you’ll always be iterating, what you want to grow in an accelerator should be something customers are touching and giving you feedback about. “You’re out there talking to your customers, trying to find out how to make that product better, and trying to find ultimate product-market fit,” he says.
3. Execute to the point where you’re getting traction.
You prove it with numbers. How many customers have you worked with? How many people are visiting your site? What’s your revenue? Are your numbers growing month over month? “‘Month over month’ is the big hairy metric that all of these incubators, accelerators and VCs are looking for, so the higher that percentage of growth the better,” he says.
4. Build a team.
While exceptions certainly exist, it’s rare to see a solo founder going into an accelerator. At a minimum you’ll need someone on the team who is a domain expert and another with strong technical skills. And it has to be a full-time gig for everyone involved. “You can’t be part-time going into it, so if you have another job you’re going to have to quit,” he says. “If you have multiple ideas and you’re not sure which one to go with, you’re going to have to pick and decide and work on one.”
5. Network heavily.
500 Startups states right on its website that a positive referral from mentors and founders who have already gone through the program is the best way to get noticed. It’s going to be the same thing with any other accelerator out there.
6. Nail your interview.
You have applied to an accelerator and have been offered the opportunity to pitch. The best way to sell your idea is to know your business inside out, including your vision, roadmap and every kind of metric you may be asked about. “How many people have visited your site? What are the conversions through each step of the funnel? What’s the cost to acquire a customer if you are using any kind of paid channels? What is an estimate of the lifetime value of your customer?” he suggests asking yourself. “You need to do a lot of the heavy lifting before you apply.”
7. Once accepted, make friends within the accelerator.
The other founders and team members you will meet are incredibly bright people who possess a wealth of information and experience. Plus, these people understand the difficult and often lonely road of entrepreneurship better than anyone else.
8. Be honest with yourself and everyone else.
When you tell your mentors everything about your business-even what’s going wrong-they can help you fix it.
9. Prioritize growth.
You want more users and revenue every month. When your month-over-month numbers are high you’re in a better position to offer excellent theatre during your demo day at the end of the program.
10. Close your fundraising round as soon as possible.
Van den Brand suggests allotting six months to complete your fundraising, but aim to do it in the first month. “Be ultra-efficient with your time and batch meetings together,” he says. “Start at 9 a.m., finish at 6 p.m. and talk to six people in the same day. The faster you fundraise, the faster you can get back to building and growing.”
11. Transition the CEO role.
Taking money from investors brings with it a huge fiduciary responsibility. It sounds counterintuitive, but at this point you need less hands-on time in the business and more time finding the top talent who can help you deliver.
12. Keep growing.
This is your final-and unending-responsibility. “You have keep the business growing so you can get to your next round, which will be sooner than you think,” he says. “Time flies when you’re building your own company. Those things what you must to know how to get into an accelerator.