6 Things to Know Before You Enter an Accelerator
I took part in New Zealand’s startup accelerator, Lighting Lab, an accelerator modelled on Techstars. Here are six things I learnt. I tried to cover topics which are not frequently covered elsewhere.
Beware of people who state their opinion as fact
Our team interacted with 30-40 mentors though the program. The help and advice was invaluable in guiding our business and broadening our perspective. However, it is difficult to unify or distil many opinions or suggestions when so many contradict. When considering someone’s advice, one rule which helped us was to be wary of anyone who stated their opinion as fact. People who convey their opinion as absolute often do not consider multiple perspectives, or they may be applying logic which worked for them without acknowledging the unique factors and risks associated with your situation.
It is not usually a quick journey
There are many stories in the media of businesses which skyrocket to success. During the accelerator program, I was exposed to the stories of such a large number businesses that my perception of the typical startup journey changed significantly. I now know that the large majority of startups are not overnight successes. Instead, I expect a startup to take-up 5-7 years of my life before I will see a return. This revelation can cause a massive shift in an entrepreneur’s perspective. A runner who enjoys sprints may suddenly find himself in a marathon. While this shift in perspective has not caused my entrepreneurial spirit to waver, it has caused me to re-evaluate other aspects of my life and has changed how I will approach the next few years ahead.
It is not often clear when to end a business
In some ways, a team is lucky if it experiences a sudden event which undermines their business causing them to end the startup. Many teams continue in a state of limbo; there are no clear signs of imminent failure, and no clear signs of definite success. It can be difficult to know if the next 3-6 months will see the business grow or die. Is the current down period the beginning of the end, or just a lull? If a startup is in this situation, the founders are probably debating whether to continue or not.
This decision is muddled by the ups and downs of the team members themselves and the attractiveness of what they could otherwise be doing with their lives. When the team is tired and worn out, it is easy to have an overly pessimistic view of the business, and conversely there can be an overly positive view when the team is buzzing with excitement. When analysing the health of the business, a team should separate the business’s ups and downs from the ups and downs of the team. In addition, do not wait for a clear signal before moving on to another idea. Conversely, don’t jump ship when you hit a bump. Somehow, you have to manage these two conflicting pressures.
The importance of a big idea
At first, I was annoyed with advisors and investors who would frown on our initial business; it had a reasonably small market size and wasn’t going to be a 100 million dollar business. It was not going to be big, but it had a high chance of being something. As a 23 year old just out of university, I would much prefer to have a 50% chance of 2 million rather than 10% chance of 200 million. Why would people scoff at a ‘lifestyle business’ when a good lifestyle is most people’s dream?
I have come to see the importance of a big idea. A small business is not a lesser business, it is just not a very investable business. Some simple math can uncover the reasoning. If a business begins with two or three founders, receives two rounds of funding and allocates shares for early employees, very quickly each founder may find themselves with ~15% equity. If the founders spend 5 years working on the business and it exits for $2 million, 300K suddenly does not seem like a huge reward for five years of hard work with a high risk of failure. Investors would get a similarly small return; hence, they rarely invest in businesses with small potential even if they are likely to succeed. If you are lucky enough to be able to bootstrap a lifestyle business, ignore the disdain. However, if your business is going to need investment, it needs to have big dreams.
A balanced lifestyle beats long hours
There is a common opinion that accelerators are typically 3 months long as 3 months is the right amount of time to validate, build and present a business. I think 3 months is suspiciously close to the maximum length of time the average entrepreneur can work at full throttle before burning out. Like many others, I worked intensely with long hours throughout the program. The business became the focus of my day, every day. Family, friends, exercise and relaxation were a secondary concern. Some people in the program had more balanced approaches to work. They may not have made as much progress at the start of the lab, but by the end of the lab, they had more energy and more motivation remaining. After ‘Demo Day’, the people who had maintained a balanced work rhythm were more capable of leaping into the next stage of their business. My advice for people entering an accelerator is: prepare for a marathon, not a sprint. The end of the program is still just the beginning of your business. Don’t exhaust yourself on the first leg of the journey.
Some people will be lucky to come out with a business; everyone has the choice to come out with great friends and good networks
It is too easy to have a laser focus on building your business and neglect to socialise and connect with peers. For the shy or introverted, it is also too easy to just hang out with your own team. Prioritise having fun with your accelerator comrades. It will help you keep that work-life balance, it will make your experience more memorable and meaningful and you will gain friends and future work colleagues. In a few months your relationships and networks may be more valuable to you than your business ever was.
Was it worth it?
I thoroughly enjoyed my experience in the Lightning Lab accelerator. Our team came into Lightning Lab on the back of two years of part-time work on our business and it progressed in the lab at a far greater rate than it had anytime during the previous two years. We experienced many ups and downs; I managed to balance my initial habit of over working; I learnt a year’s worth of experience in three months and I gained some great friends. So, if I encounter anyone considering applying to enter the Lightning Lab or a similar accelerator, I will wholeheartedly encourage them to do so.