This video was NOT sponsored by Startup Chile,
DreamIt Ventures, or 500 Startups. Not directly, at least. But all three of them invested in
Slidebean and helped us get our company to where it is today.
My co-founders and I all went through these programs as we started the company. We ended
up living in Santiago Chile, then New York City, and finally, the Bay Area, aka Silicon
Valley. In this video, we are going to look into, What
startup accelerators are. Choosing a program that is worth it for you (or deciding if you
should skip them altogether), and finally How to get in.
This is startup accelerators.
The first thing accelerators will appreciate is that you don't get them confused with the concept of an Incubator.
An Incubator, like Elrich's, is a mostly outdated model where companies can benefit from the
program for a significant amount of time.
Incubators can still be seen in academia, where students or graduates get access to
office space and mentoring. An accelerator, on the other hand, is usually
a 3-4 month program that looks actually to ACCELERATE companies. Most accelerators provide
some capital so that the startups can invest more freely, and take a percentage cut on
the company either as equity or as future equity in the form of a SAFE. Go watch our
video on Convertible notes. The infrastructure of an accelerator is typical, One
or more physical offices where companies can work for the duration of the program (though
programs like YC don't offer a physical space). Managing partners and/or Entrepreneurs in Residence,
which work directly with the founders by meeting with them every week. Aside from their managerial tasks.
A network of mentors, some closer than others. The closest ones are regularly in the office and can assist
companies with specific topics such as ad management, pitch or design practice, analytics.
The rest are available for occasional one-hour calls on a first-come, first-served basis,
but you shouldn't count on speaking to them very often
Finally, a network of investors. There is by no mean a guarantee that you will receive funding
by getting into an accelerator, but you can get intros to most of them through the accelerator staff,
which does open a lot of doors compared to trying cold emails.
Now, choosing a program- as I said, we've
been through Startup Chile, DreamIt Ventures, and 500 Startups. The latter two, according
to this diagram by seedrankings.com, fit into the Silver and Gold categories.
We'll get back to this. Startup Chile doesn't show up in the chart
because the model is a little different. Let's start with them.
Startup Chile provides companies with a grant, funded by the government of Chile to promote
entrepreneurship in their country. Chile seeks to become a startup hub in South America,
so the government allocates about $35,000 for each company, for founders to get their
ideas off the ground. Over 200 companies are accepted each year, which means that this
a government investing about $8MM/yr in building this startup hub.
They've done it for a good amount of years now.
We were part of batch 8 of SUP, from November 2013 to June 2014, a six-month program. Actually
relocated the team to Chile, which is a requirement. Most companies coming into the program are
early on the idea stage- so if you don't have any traction yet, this might possible for you to get in.
The program is more of an incubator, where
you get free office space for six months, some access to mentors and investors, but
you are mostly on your own. Each company makes the most out of it in their way, but it's
essential that you come in with your objectives and your expected milestones very clear.
You don't have to give any equity in exchange for the grant- but you are expected to get
involved with the local community by organizing meetups and events: a very fair deal if you
ask me. You'll likely be able to find other government
grants like this one in nations that are just getting started with their tech ecosystems.
I don't know any specific ones, but feel free to share any you know in the comments.
Let's move to DreamIt. DreamIt is classified as silver in this chart. Having been through
it, I can speak first hand about what they do, which I expect will be comparable to other
programs in this Silver category. DreamIt used to invest $25,000 in exchange
for 6% common stock. They used to target early-stage, pre-revenue companies, and focus on their
pitch decks, their story, and product launches. This was when we went through it.
They have since evolved and doubled down on some specific industries where they have the
connections to make a difference. Urbantech, Healthtech, and SecureTech.
Companies are no longer required to relocate; instead, the program is remote, and they go
on a customer sprint, about halfway through the program, and then an investor sprint towards
the end. The industries Dreamit serves require a network,
to be able to find the right person inside a large company to become interested in this new innovative product
that the startup might be building. Their investment and equity requirements vary
from company to company, but they have focused their model on coming in at the same terms
as the investors they help you find. To be able to get in front of customers by week
7, companies need to have a live product by the time they come into the program.
DreamIt is a much more structured program than Startup Chile. Also, of course, more
selective. They only take about ten companies from each industry each year.
When Slidebean went through Dreamit, I used most of my professional time to meet with
their investor network. Most of my time went to getting meetings and pitching investors.
While that experience served me well for what Slidebean has become today and then I can pass it on to you, it didn't get
us any funding during the program. We got out of DreamIt with about $1,500 in MRR, which
was, of course, not enough traction to prove that we were going in the right direction.
Which brings me to 500 Startups. We had our doubts about applying but ended up going for it.
At the beginning of October 2014, we were three weeks from running out of cash when
we got a call from 500, inviting us to the interview. At this point, it wasn't a question
on whether or not we needed another accelerator- 500 Startups' $100,000 investment was really
the only cash we had access to. The deal back then was a $100,000 investment,
out of which $25,000 were 'paid back' for the actual accelerator program. They have
a SAFE-type document that guarantees them 7% of company stock, using the same preferred
stock terms as the next qualifying round of financing. I believe these terms have changed
to about $150,000 these days. 500 Startups ended up being the last push
we needed to get the company off the ground. Their growth-focused program consists of two
weekly meetings with an 'Entrepreneur in Residence.' EIRs are successful entrepreneurs or early
employees of successful companies who have first-hand experience in companies at this
stage. There's also a weekly meeting with the Growth
Council. That's not their name, but that's what they are — a team of 4-5 growth hackers
that help you crack your head about growth tactics for your business.
500 Startups expects their companies to come in with a few thousand dollars in revenue,
and to scale that exponentially during the program. A hockey stick chart is an expectation.
Our friends from Headout, a company from India, came into the program with ~$30K/mo and got
out with close to $100,000/mo. That's just 3 months of incredible growth.
On the other hand, their philosophy revolves around giving opportunities to 'unlikely'
entrepreneurs: foreign founders, women-led teams. There's no non-profit, altruistic reasoning
behind it (I think); on the contrary, they believe that they can get more for their buck by investing
in companies that might be overlooked by other firms and VCs.
But it serves you well if you are in that group.
Raising funding after the program ends is not guaranteed. 500 Startups get you good
press and credibility, but in the end, it's up to you and your metrics.
Now looking at that chart- I have never been through a Platinum level program, but my perception
for, say, 500 Startups vs. Y Combinator is that YC provides, A much stronger brand name. Let's agree to that. Access
to a stronger network of investors. Since YC has accelerated so many successful companies,
you are inevitably pre-filtered as you start getting into these meetings. By the number
of applicants and acceptance rates, it is harder to get into YC and even 500 than getting
into Harvard. I rarely get to brag about that.
Choosing the program that is right for you relates exactly to getting in. On a failed
Youtube show we launched a couple of years ago called Startups & Spirits, we asked Elizabeth
Yin, a former managing partner, why we got in. Here it is:
So there's your answer from the source. It's about finding the program that is right for your stage,
knowing your numbers, your unit economics, having some proof that the product is needed,
and, very importantly, being able to tell that story- for which you will need a Pitch Deck.
We help companies with their pitch deck, either
with our self-service AI design platform, or by getting involved in the writing and
design- which is done by me, even though we have a team of 25+ people — some more info
on that on this URL. Now let's move into questions for this week.