I spent a little time at StartupWeekendHamilton3 in April as a mentor and was talking to a young founder who proclaimed that there was one great accelerator in Canada. Who he said it was surprised me a little and got me thinking, what makes an accelerator “the best” and why should an eager founder care? The baseline in my mind is Y-Combinator. No one can argue it is the best seed-stage accelerator based on its results. What is difficult for everyone to agree upon is what does it do to achieve those results or even harder, what defines success?
In my opinion the key things it does:
- Social Capital via Paul Graham: How he teaches founders and the hacker culture he has built provides entrepreneurs with access to the very best social capital that exists for anyone starting a technology-based company.
- Peer mentorship: The structure of the 12 weeks enables peers to hold each other accountable. This competition amongst comrades is powerful as it turns around the human nature of playing to our own strengths and pushes founders to “keep up with the Joneses.”
- Hungry founders: Funding is minimal. After a bit of a bump it has since been decreased and I would bet if you look at the successes out of YC the biggest ones started off with the least amount of financial resources.
There is some striking similarity to what YC does and the thinking and observations behind the Goldmine Effect by Rasmus Ankerson (watch it, it is interesting). The basic point is that if you can find the talent that has the potential versus the talent that has already been refined, you will get a better result. Money and facilities do not make a difference; identifying underdeveloped talent does. I think there are three core factors that go into determining the quality of a given program.
- Where is the program located? Are there companies in the immediate area just a stage or two ahead that can help you grow?
- Who is backing the program and what did they invest to make it happen? Do they get involved in the companies they invest in or do they “spray and pray” with their investment?
- What types of companies have been successful in the accelerator in the past? Who gets funding afterwards? Are they B2B or B2C, SaaS or something else?
What is less important:
- Demo day: The rock-show nature of demo days is not a good environment for investors but you need to take advantage of the intros and the social capital on offer to build those connections for yourself.
- Money: Funding amounts from the accelerator should not influence your decision to go there. Good companies will get funding, build a good company and spend as little as possible doing it.
- Mentor walls: In Canada, there is a relatively small pool of people with both time and capital but there are a lot of people who can help you move the needle in different ways.
Right away some might say that the above less-important items are what builds momentum and if you look at the YC companies’ momentum being three times that of TechStars, then how can I say they are less important? These things have the greatest effect after the startup object is already in motion, in my opinion. The less important items are used all too often as the way to get the startup object moving.
A simple scorecard to find out who’s best for you
If a scorecard was set up to measure a program it should look something like this:
Q: The program is located near companies that I am interested in working with:
1. None that I know of.
3. Some interesting founders.
5. Who we would exit to and would like on our advisory board are within walking distance.
Q: Investors in successful companies that have been in the program are:
1. Not involved in investments.
3. One of 12 investors in the companies that graduate.
5. Take a board seat and/or a significant position in the financing round following completion of the program.
Q: Companies that have been successful in the program in the past are:
1. Nothing like us, we are B2B SaaS and all the successful companies are gaming companies.
3. Some are similar to us, there is no particular pattern to the type of company.
5. Just like us, we are a hardware company and everyone that has done well post-program are hardware companies.
Q: Funding we receive from the accelerator program is enough to:
1. We can go six to 12 months no problem, it’s great to not have to raise or find revenue right away.
3. It is OK but in six months if we don’t have revenue or financing we are done.
5. We can pay rent while in the program but we have to move and stay lean to survive.
This is by no means research-quality metrics but it does start to assign some way to weight rankings for you. If I was going to score YC, I would give it a 5, 3, 4, and 5, for a total 17 out of 20.
What else should be on this scorecard?
This post was originally published on Jesse’s blog, Who you calling a Jesse?