TLDR; Investor-focused accelerator programs no longer serve founders or investors.
Over the past 6 months, I’ve been hired by two different pre-seed accelerator programs to look at founder outcomes and make recommendations for improvements. In total I talked with 25 founders (growing, pivoting, sustaining and shuttered) and a handful of early stage investors, and I reviewed the current status of portfolio companies going back a decade.
In both, I found the same systematic mismatches between what founders need, what investors want, and what programs actually teach. But, this post isn’t about picking on these specific programs.
Over the years, I’ve been directly involved with a half a dozen accelerator programs and advised nearly 100 early stage founders. All of these programs were modeled off the playbook YCombinator drafted twenty years ago; select 12 promising startup teams, run a 12-week batch, provide mentor networks, teach founders to pitch investors, culminate in Demo Day, hope everyone gets follow on investment. All in exchange for 7% of your company.
Today, similar programs exist in every mid-sized city from Minneapolis to Columbus to Oklahoma City to Mobile to Appleton. Some programs are no equity, some are fully remote, some run 6 months or a year, but they all have the same key characteristics and they’re all investor focused.
But, the seed stage investor appetite has shifted pretty hard since 2022. Investors stopped attending Demo Days and programs have pivoted to “showcase events” open to the general public. More honest for sure, but a quiet admission a core value proposition of the program has evaporated.
“Founders need to talk to customers” & “Founders need to run napkin math.” – Investors that want solid fundamentals.
Founders across these programs were expecting continuous introductions to investors, and in general – they didn’t arrive. Perhaps because the investors still interested seed stage companies are looking for the fundamentals; early revenue, sales velocity, and unit economics – and the program managers knew it was too early.
“It took us a year after program to get the company ready for investment.” – One founder still surprised at the gap.
Yet, accelerators are still focused on pitching. I talked with two dozen founders, each winning numerous pitch competitions yet struggling to get a single customer sale.
This last point aligns with the most consistent regret I heard from founders – successful & unsuccessful, “I didn’t talk to enough customers.”
The cause:
- not knowing how to define their customer,
- not knowing how to find them once defined, and
- not knowing how to have a customer discovery conversation with them once they did.
A program that’s focused on the things today’s investors want, would look very different. No Demo Day, no pitching, no mentors. 100% customer pipeline-focused, napkin math-focused, early sales-focused.
Progress on these things will serve founders whether they pursue outside funding or not, and they’ll be a much stronger signal to potential investors in any market.
Cyberstarts.com is a potential model; tightly focused domain (cybersecurity only), pre-existing network of executive buyers (60 CISOs), rolling admissions.
Regional programs have geographic customer advantages in something – manufacturing, agriculture, healthcare, mining, aerospace. Build buyer networks in these domains. Connect founders to the five local mid-size customers they need to build sustainable businesses – and teach them how to develop those long-term, win-win relationships.