With competition in the job market increasingly tough, many individuals are looking to transition their idea into a business. However, with 80 per cent of start-ups failing in the first five years, gaining access to the necessary guidance and capital is more important than ever.
One way of doing this is by applying to a business accelerator, a scheme where startups can apply and, if accepted, receive equity investments and advice in return.
Each year, thousands of new startups try to get into different accelerators. The most famous accelerators – Techstars, Y Combinator, Angelpad and 500 Startups – usually get around 2,000 applicants for around 10 to 60 places, making the application process even harder than getting into Yale, Stanford, Harvard or any other high-end university in the world. This article presents some practical tips on how to stand out and elevate your chances of success.
The ultimate goal of all top accelerators is to boost up your company so that you can raise capital in a healthy environment. From the first day of the programme, pitching your concept is a crucial part of presenting the company and the idea to possible investors. The accelerators will ask each candidate the same question – are they ready for funding after the demo day? And if so, how can the accelerator help with this process?
All successful companies are started by a talented team of individuals. The staff baseline is often a key determinant in success. Start-ups are usually created by a team of two or three people. Sometimes incubators will accept single founder teams, but they almost never accept more than four founders per team. Investors tend to believe that the more founders you have the less confident you are in your model – plus, you will also have a loss of equity.
The only way to show how successful your team can be is to show the
accelerator the experience and skills that your team possesses. Magic words
such as Google, Facebook, Skype, Harvard and Stanford can help as well. An even
better way of catching their attention would be a statement – “I hacked my
first site when I was eleven years old”. If you are running an IT start-up, one
of your co-founders needs to be an engineer. One non-technical founder is fine,
but two will reduce your chances and three will suggest that you do not
understand what a startup is concerned with. The main question accelerators
want to ask is how will possible investors rate your team – can they deliver on
what they are pitching?
Investors also care about the length of relationship between co-founders. If there is chemistry between teammates, you can often see sparks and excitement in the room. If you have worked together for many years, the risk for the founders to break up is a lot smaller. This is particularly important given that disagreements between co-founders is usually one of the most common reasons why many start-ups fail to raise capital after graduating from the programmes.
There is no denying that applying to a business accelerator is an incredibly competitive process. But in order to put your startup in with a good chance of being selected, a well thought-out business plan is not enough. Strong relationships across the team will encourage investors that you have what it takes to stay motivated through difficult times. Enthusiastic founders are more likely to catch the attention of investors and make themselves stand out from other start-ups.
Ragnar Sass is serial start-up entrepreneur from Estonia.