Why bother with an accelerator?

Standing out just got harder for tech start-ups, says mentor and investor Ian Merricks. Time to consider a fast-growth programme?

This month, the UK revealed that in 2013 more than 500,000 businesses were started. Half a million new ventures.

Ok, not all are thriving start-ups like yours; some will be lifestyle businesses, some Special Purpose Vehicles, some subsidiaries, but still it’s an unprecedented number of new businesses being launched in the UK.

In my first column last month, I discussed how to select an accelerator (Spoiler alert if you missed it:  curriculum, coaching, community, connections, and capital were the highlights).

This perhaps missed the rationale for considering an accelerator in the first place. What value do they / can they / should they add to your start-up?

The short answer is differentiation. A degree of filtering occurs, both at selection, throughout the programme with the input of mentors and then at the investor event or “demo day”.  This screening has a real value.

If you are then selected, you have delivered your first huge point of external differentiation. In our programme you are one of 30 high growth start-ups we will work with that year (in three semesters each supporting 10 start-ups), selected from say 300 applicants.

In London, there are 13 accelerators and nationwide an additional 20-plus. Assuming an average intake of 15 entrepreneurs per programme each year, there will be less than 500 accelerated start-ups in the UK each year.

And our programme, the Accelerator Academy has recently teamed up with the UKTI to help deliver a programme of support, relocation finance and supply of 100-plus Tier One Entrepreneur VISAs to international graduate entrepreneurs.  The net result: serious competition and finite support!

Remember, from 500,000 companies created, that is just 0. 1% who receive the training, mentoring, community, contacts, exposure and access to markets and investors that quality accelerators can deliver. Point one per cent. That feels like a valuable differentiator.

So, why bother? Here’s four very good reasons:

1. A chosen one

Selection is the first acknowledgement that you are on to something.

2. Accelerated learning

“Graduation” is the next acknowledgement, whereby you will have hopefully:

  • Taken on extensive advice
  • Committed this learning to practice
  • Had the opportunity to market test and identify when revenue will occur
  • Grasp your risk factors and defences
  • Understand cost of sale and value drivers
  • Begun to map out a clear path to profitability and success, potentially with the requirement for external equity.

At this stage you should also be able to clearly communicate likely returns and exits for early stage value-adding investors.

This is such a valuable development for start-up entrepreneurs, and one that can take a year or more in the “real world” potentially condensed to 12 weeks through an accelerator (acting true to its name!).

3. Investment

The accelerator’s introductions to investors also provides a badge of quality and a sense of endorsement and further screening. I wholeheartedly believe that an accelerator’s output should be judged in no small part by its alumni’s investment success.

At the Accelerator Academy we have seen more than 75% of our graduated investment ready start-ups raise funding within the first two years of the programme.

That equates to more than £10m invested and that number is rising approximately every month as new deals are struck between our accelerated start-ups and investors. We now have investors returning to “look for deals” almost exclusively from our accelerated start-ups.

I chaired our December investor event, and with 120-plus investors in the audience, it was heartening to see many familiar faces; returning investors who have grasped the value of differentiation delivered by an accelerator.

4. Personal development

The final point of differentiation is, as ever, down to you. With the opportunity given to you by acceptance into a top tier accelerator, you should understand the important chance you have to

  • Move your business forward
  • Gain hard-earned advice from industry experts and mentors
  • Attract value adding investors and begin the next phase of growth
  • And all the ongoing differentiation needed to move from successful start-up to successful “stay-up”.

In the next column I will discuss more about the necessary first step of defining your vision, timely as we enter 2014 and New Year’s resolutions are made.

Enjoy the break, a great time to plan for next year’s success.

Ian Merricks is an experienced company operator and investor, with 15 years’ experience across music, media, marketing and tech businesses. He is currently principal at White Horse Capital’s commercial and corporate development consultancy and founder of The Accelerator Academy. www.acceleratoracademy.com

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