In recent years the number of startup accelerators and incubators has increased hugely — in the UK alone the number of start-ups in these programs has grown by 78% each year since 2014.
Accelerators, for the uninitiated, are programs which bring startups and corporates together for a short, but intense period; typically between around 10 weeks and three months. The corporate could be a company which wants to explore how startups could help deliver their strategy, or it could be a consultancy which will connect the startups with their customers.
The key is that both parties should benefit. The corporate gets to explore new ideas quickly and at a low cost. Plus they get to experiment with new technologies and methods of working with people who have different ideas about how the world can work and often don’t “look like” their in-house teams. The start-up gets valuable customer feedback, data, connections, and ideally a commercial contract that would take many months to achieve from the outside. The accelerator provides an opportunity to test ideas quickly, and drop them just as quickly, or pivot, if they fail.
Have we reached peak-accelerator, or is it still worth joining one? I argue startups should absolutely consider joining an accelerator, but there are some things you need to know before submitting that application.
1: Will it cost you any Equity?
Some early stage accelerators may demand some of your equity to join them. The idea here is they will be providing you with a lot of value early on, and so would like a cut of any future success as a result.
This could have some very positive effects as they will be incentivized to maximize your success. It shows a sense of long-term commitment and could result in a productive partnership.
The program may well be worth it for you too. Benefits could include free office space, excellent customer feedback, and maybe a halo effect, assuming they have a great brand.
However, make sure you read the small print. Sometimes there can be anti-dilution provisions which ensure their % holding is maintained through further funding rounds. Speak to your investors and get their point of view before making a decision.
2: Can you afford the travel & expenses?
The chances are you aren’t flush with cash if your business is still young, and travel across states, countries, and continents could be a real drain.
Consider how often you’ll need to travel if you were to join the accelerator. Are the offices based near where you or your team live? If not, figure out how often you will need to travel and estimate the costs.
Sometimes you’ll be able to participate in a lot of the program remotely. After all, big corporates are often international and happy to work flexibly. However, it’s worth checking in with the program team and prior cohorts to see if there are any mandatory attendance requirements or top tips to ensure best engagement. On the other hand, perhaps you can save yourself a penny or two by basing your team at the accelerator site – a few months rent-free wouldn’t be bad!
Finally, consider taking any opportunities you have to reduce costs from the outset. For example, many will allow you to pitch remotely, saving both time and money.
3: Will you need to pay to play?
Some accelerators charge joining fees to their start-ups.
As with the first and second tip, this essentially comes down to an overall cost-benefit decision which you’ll need to make before joining. The main difference with this one is timing: the cost will hit you up-front and you can’t go economy to reduce it.
4: How will this impact your brand and reputation?
You’re going to want to shout about being in the program to anyone who will listen — it’s a sign of success that you’ve made it in, after all. The accelerator program will also be running its own press campaign, and so your brand will be associated with theirs in a lot of communications.
With this in mind, make sure they hold your values and that they are doing it for the right reasons. The halo effect of being associated with the right brand could be enough on its own to justify joining — both for attracting customers and your next investment round.
5: Do you have the capacity to do this properly?
What with the investment you are making by joining the accelerator, you need to make the most of it. If you can’t fully commit, maybe you should reconsider whether it’s right for you, or perhaps hold off for a later cohort.
Consider whether you’re about to onboard a new customer, or ramp up with an existing one. Will your teams have the capacity to juggle that with the accelerator, or might it backfire?
Work with the program organizers to do an honest appraisal of whether you should join. Look at the admin and communication efforts that you’ll be putting into it, as well as options to backfill team members.
6: What’s in it for you?
This might seem like an obvious question, but be sure that the program can give you the opportunities you need to achieve your goals.
Does the program offer new connections you don’t already have? Ask if there will be training opportunities for your team as part of the program – sales training and VC sessions are common.
Finally, if PR is a major part of this for you, find out what their rules are and if you can get a contact in their PR team.
7: What do they want to get from it?
It’s worth thinking about the motivations of the organization running the program; this will give you a good idea as to what your experience could be.
If this is just a way for their leadership to show they’re looking at “cool new tech,” then there might not be much value to gain from your time there. If this is their first program and so you have no reference points, take a look at who is sponsoring it — having CEO or chairman support is a good sign.
Are you sure they have the genuine intention of spending on new, high-risk startups? Take a look at their history of investing in, and signing commercial deals with, the program teams.
8: What do prior attendees say?
This is probably the best way of finding out whether this is a worthwhile investment of your time and cash.
Seek out prior teams and ask them as many frank questions as you can. For example, ask them if it really accelerated their journey, or gave them something they couldn’t have got elsewhere. Get their view as to who might be the best mentors, and who in the organization you need to get to know first.
9: Is your value proposition clear?
Another “obvious” one, but, believe me, many great ideas struggle to get buy-in due to this.
If you’re going to invest time in the application, take the time to ensure it really makes sense, explains who you are properly, and gives the accelerator team compelling reasons to bring you in.
I’ve met plenty of start-ups who, face-to-face, explain their concept well, and it sounds great. Then two months later the application comes in and I can’t make head-nor-tail of what they do. I’d suggest asking a friend or relative, who isn’t in the detail of what you do, to review key sections of your application.
10: Plan ahead
My final tip is for those who make it into the accelerator, and that is to plan ahead.
Treat the accelerator as having started as soon as you’ve been accepted, not on its launch. See if you can meet your mentors and send any early requests for data or key meetings in advance. Use the intelligence you got from your meetings with prior cohort teams to target key people and send in preferences of who you’d like as mentors.
Being well-prepared may also set you apart from the other start-ups in the program and impress the decision-makers. After all, this can also be seen as part of a longer procurement process. Small things like this can make a massive difference in what can be a very short accelerator program.
Full disclosure, I run the accelerator program at Lloyd’s of London, known as the Lloyd’s Lab, and we have welcomed around 35 insurtechs through our doors in the last 18 months.
In case you didn’t know, Lloyd’s is the birthplace of insurance and has a fascinating history. Despite having many centuries-old traditions, today it relies heavily on innovations and new technologies, making it an exciting place to be at the intersection of finance and technology.
Applications for cohort 4 of the Lloyd’s Lab have now closed, but if you’re interested in getting involved with future cohorts and events, join the Lloyd’s Lab Tech Network, here.