How to Maximize the Value of Mentors in Accelerators

The questioning (negative) press about startup accelerators and incubators isn’t going to stop. It’s going to continue and likely increase. Some of it will be meaningless drivel mixed in with a healthy dose of ranting and raving (not dissimilar to the endless and cyclical discussions on whether we’re in a bubble or not.) But a lot of the press and blog posts we’ll see about accelerators and incubators will be very meaningful and important. I suspect more and more of this will come from people that have actually gone through accelerators; they being the best ones to reflect on their own personal experience.

Francisco Dao’s article, “The dirty secret behind the incubator boom” is an interesting one. The title is great –perfect for generating page views, retweets and discussion– although a bit over the top (but that’s what you need for blog post titles.) The analogy of entrepreneurs being like the humans in Soylent Green is also catchy.

Francisco makes an important point in the piece:

It is fairly standard practice for incubators to advertise huge rosters of mentors, but I can’t help but wonder how available or effective they are. In many cases, they seem like little more than the photos of fit personal trainers on the wall at the gym. The trainers look great, while the people working out are still flabby and out of shape because they don’t actually get much guidance.

Mentorship inside accelerators is definitely one of the biggest challenges.

I recently wrote about my own approach and issues with mentoring startups. Accelerators have absolutely stockpiled giant lists of mentors in order to create as big a network as possible. The value of those networks remains to be seen.

At Year One Labs we decided to only have 20 mentors (many of whom were investors as well.) We also only had 5 startups, so that’s still a pretty significant ratio. It was hard for us throughout the program to consistently bring the quality mentorship resource to the table. Mentors are extremely busy people, they have varying skill sets, and it’s unclear how structured or unstructured any mentorship component in an accelerator needs to be.

One of the most important things we did was encourage founders to reach out to mentors directly. We cut ourselves out as unnecessary middlemen. We wanted founders to build direct relationships with mentors. And that worked quite well. Even after our companies left Year One Labs, those relationships continued and strengthened, which was precisely the point of having mentors in the first place.

Startup founders: If you want to maximize the value of mentors in an accelerator, then it’s 100% up to you to do so.

Turns out that’s pretty much the case with everything you’re going to do as a startup founder. At the end of the day, even with investors, employees, advisors, parents, friends, support groups, etc. all around you, it’s up to you.

So my suggestion when you enter an accelerator is to go through the list of mentors with a fine-tooth comb. Figure out which ones you think will be most valuable to you, and reach out directly. Build that personal relationship with them using the accelerator as the conduit for initial communication. No decent mentor should ignore your email or call if they’re connected to you through an accelerator. It’s a “free pass” to reach out. And accelerator programs should make those connections possible, even for their most prominent mentors. If the mentorship responsibilities at an accelerator involve nothing more than “teaching a class” or doing one session with the group – and you’re not, as a mentor, available for direct contact and relationship building – I don’t think you should participate as a mentor.

The other benefits that come from having a big mentorship list are around funding, partnerships and acquisitions. The mentors are usually very well connected, many of them are angels as well, and they’ll open doors. That’s the expectation. But if there are no personal relationships between founders and mentors, I don’t see many doors getting opened. People are always careful with their Rolodex, it’s one of their most precious assets. They’re not going to open it up willy-nilly, just because they’re listed as a mentor for an accelerator. It still comes down to personal relationships and trust.

Startup founders: If you want to maximize the value of mentors inside an accelerator, it’s your job to build that trust.

If you run an accelerator, it’s your job to create enough opportunities for that trust building to occur.

As startup founders, you have to remember that you’re competing for attention. That means you need to be extremely strategic and aggressive (within reason) in sucking out as much as you can from the accelerator experience. Don’t wait for anyone to hand over the value; you need to leverage your participation in an accelerator to get all the value you possibly can. Tal Raviv, co-founder of Ecquire has a great post on his experience in two accelerators.

Here are some other ideas for how to maximize the value from mentors:

  • Understand their specialities. Mentors all have different skill sets and experience. Do your homework and figure out which mentors are the best ones for you to engage with at specific times. Timing is key here. When it’s time to raise money, go to the mentors with that expertise. When it’s time to focus on user acquisition, get closer with different mentors. You have to build the relationships early though, but time your use of mentors properly.
  • Get to the point. Don’t waste mentors’ time, get to the point. Have an ask. Make sure when you connect with mentors that you know why you’re doing it and what you’re looking for. Mentors will appreciate that. Asking for “general feedback” is a death trap. Mentors won’t know how to help, they’ll get frustrated, and you’ll be frustrated as well. Trust will be lost.
  • Engage with them on social media. Mentors are people too. Usually with big egos. And many of them are actively working on their own startups or have their own interests. Engaging with them online is a good way of building a relationship. Tracking what they’re doing is a smart way of showing that you care.
  • Take the classes / training sessions / etc. seriously. Most accelerators have some structured components to the program. Some founders may feel like this is a distraction, but that’s the wrong way to look at it. Think of it like a crash course in all the elements of running a startup. That’s an education that others just aren’t getting. But also realize that these sessions are an opportunity to build better relationships with mentors. Have questions ready, stay engaged, be the keener and soak it all in.

Going through an accelerator is a journey. For many, I think it’s transformative. Michael Nussbacher throws it all out there with his story, “A slice of humble pie at the accelerator“. It’s a good read.

Not all accelerators are created equal.

The variance in quality between accelerators is probably going to widen as well, although the people running accelerators are always trying to improve. At least the best people running accelerators. I’ve spoken with many directions / managers / founders of accelerators, and they’re working hard to try and provide a great experience and create tons of value for founders. The model for acceleration as we understand it today is fairly new, and it’s evolving very fast. Accelerators are startups themselves, which means they need to keep trying things, measuring the results, and iterating.

In the next 5-10 years, I’d expect the model to have changed significantly. That’s almost a given.

That doesn’t mean you should cut accelerators any slack – we need to hold them accountable to very high standards and goals – but at the end of the day it’s up to you. There’s not a single accelerator anywhere that can guarantee success. And while they can make some things easier, they don’t grease the wheels that much. Be careful about your expectations going in; the process is not going to be easy. Accelerators in a lot of ways make things harder because they compress time, create intense demands, and throw a ton at you all at once.

The only people that radically and continuously change the odds of success are the people running the startups.

Designing a Game Incubator

mobile games

After writing several posts on startup accelerators and incubators, I received an email from Jason Della Rocca. He’s been working on designing a game incubator in Montreal. It’s a good idea, and one that I believe makes sense for the city. As I’ve said before, you have to play to your strengths, and in Montreal there are tons of big game companies. These companies can (and do) create spill-off entrepreneurs and indie game studios (although not to the extent that I’d like to see.) These big game studios also attract talent and money into Montreal. And there’s executive-level talent and top-level mentorship available as well.

Montreal is a good place, and perhaps a unique place, for building a game incubator.

Jason and I have spent some time going back and forth on how a game incubator could work. The game space has some advantages and challenges versus the web-centric world that most of us live in. One advantage is that games can monetize right away. You can charge for a game and deploy it through key distribution channels (I’m focused almost entirely on mobile iOS and Android games), or you give the game away and monetize through advertising, virtual goods, etc. The mechanisms for making money in gaming are well-known, accepted and proven. That’s quite a bit different from the web consumer world where monetization often only happens after you have a critical mass of users, and it’s not always obvious how you can do it (a lot of web users shun advertising, for example). So game monetization is fantastic.

But there are also challenges. Building a single successful game doesn’t necessarily equate to building a successful business – at least not a venture-backable one, or one that can be acquired. Game companies need to build multiple games – or franchises – that can demonstrate repeatable success and ideally a technology platform underneath the game(s) that has value as well. I’m certainly not saying it’s easy to build a successful game or game company…

Here’s Jason’s post with his latest thoughts (and some of mine) on building a game incubator: http://www.realitypanic.com/archives/476. I’d encourage you to go read the full post.

Here’s a quick summary of how it would work:

  1. There’s a 6-month incubation phase (not too dissimilar from what we see with Y Combinator or TechStars, with a bit more hands-on Year One Labs thrown-in)
  2. Projects graduate to the Studio or break out on their own (or fail.) The Studio is an actual game studio, which serves as a place for incubated projects to go and continue developing their games. Each team at that point is like a department or “pod” within the bigger Studio entity. The reason for this is twofold: (1) some projects/teams will need more than 6 months to bake fully and prove (or disprove) that they can scale and grow successfully on their own; (2) some projects/teams may not be massively scalable, but may be viable (i.e. profitable) games. In the latter case, these projects/teams won’t necessarily be fundable, and it won’t make sense for them to break out on their own. But as part of the collective Studio, they can add significant value. The Studio is a business onto itself, with multiple departments or “pods” that are each creating value. The sum of the parts is worth more than the individual parts on their own.
  3. In some cases, projects that go into the Studio may eventually break out, when it’s clear that there’s a (potentially) massively scalable business led by a solid, entrepreneurial team.
  4. Projects that break out (either from the Incubator or from the Studio) become separate businesses.

So you have an Incubator that’s attracting talent, baking projects/teams and outputting games. The Studio is a holding ground for projects/teams that need more time to bake and a fully functioning game studio that itself is a business with significant value. And the overarching corporation (that runs everything) owns a piece of the projects in the Incubator, the Studio, and those that ultimately graduate.

Here are some reasons why I like it and think it can work:

  1. It focuses on a specific niche, which means there’s leverage in a number of places. People can move from one team to another more easily. Mentors, investors, etc. are more focused. You can line up acquirers just in the gaming space and build all the necessary relationships to implement the full food chain you need.
  2. People joining the incubator don’t have to be hardcore entrepreneurs. They need to be entrepreneurial, but the bets you’re making aren’t exclusively on the people’s ability to start and run companies. The Studio for example, is a great place for director-level type individuals to continue building and designing games, without being full-fledged entrepreneurs. This should hedge some bets in the gaming space, which is less entrepreneurial, but has plenty of talent.
  3. The Studio (assuming the math works) is a unique asset that you don’t see with other incubators. You could have 10 individual games being developed inside the studio with 10 quality teams; the Studio should be profitable and therefore be attractive as an acquisition (based on financials and talent.)
  4. I haven’t seen this done in the gaming space, which means there’s an opportunity to do something different and stand out. From the perspective of building a startup ecosystem in Montreal, this could be the kind of spark that really makes a difference.

There are lots of details to work out. Jason is now working on a financial model to see if this makes sense. And it’s not clear yet if there’s enough entrepreneurial talent in the game space to build a successful, sustainable (read: profitable!) game incubator/accelerator. But I have a feeling there is, and it’s a matter of evolving the model so it makes sense for everyone and then working like crazy to attract the best talent, mentors, investors, etc.

Once again, here’s Jason’s blog post – http://www.realitypanic.com/archives/476 – stay tuned for more details!

Photo courtesy of Shutterstock.

An Alternative Model for Startup Incubation

Recently I wrote a blog post on things to think about when starting a startup accelerator. I pointed out that most accelerator programs take between 5-12% or thereabouts for a fairly standard amount of money and time. Year One Labs is a bit different (more money and more time = more equity taken); our belief being that early stage startups need more time to bake. But even Year One Labs only takes 20%, and we only invested in 5 companies, and we don’t follow-on, so we get diluted just like founders do as they take on more financing.

In thinking about alternative models for startup acceleration or incubation, I can’t help but ask the question, “What if the incubator owned 80% instead of 20% and the people working on the startup owned 20% instead of 80%? How could that work? And does it make sense?”

In some cases it might.

Here’s how this could work:

  1. The incubator recruits talented people who may have the potential of becoming founders, but aren’t required to do so. The incubator takes 80% and the employees/entrepreneurs/founders-to-be take 20%.
  2. The incubator invests more money, effectively paying salaries, but they’ll be discounted. This is the risk that people take joining, but they’ll earn more than a couple thousand/month. The flip side is that people will be getting much more equity than they would have otherwise as Employee #1 or #2 at a startup. And they have the potential to grow into founder roles.
  3. The incubator isn’t funding startups, it’s funding projects. The projects may eventually become startups – if they get enough traction (which needs to be defined by the incubator) – and will need founders to run them. The people working on the projects may become the founders or CEOs/CTOs/etc. But not necessarily.

    There’s clearly a risk here – a project takes off, has the right traction, but no real founders. This scenario is possible, and these types of startups will have a very hard time raising follow-on capital because there’s no leadership. So the incubator has to have a great network in order to bring in a CEO and leadership team, or be prepared to have one of its own take over the company (in the case where the people working on the project aren’t founder / C-level material.)

  4. If a person in the incubator is C-level / founder material, then the equity split changes. It might not flip completely (from 80-20 to 20-80), but the executive / founding team should own the bulk of the company.

    So why even start with the incubator owning most of the company at all, if it’s just going to change after?

  5. The incubator needs to be structured in a way that allows it to sell projects (or “near-companies”) very early. In these scenarios, the incubator owns the bulk of the equity and gets a good return. The employees still own a good enough piece that the reward is meaningful and they get fantastic experience being involved in an entrepreneurial endeavor.

    For these kinds of early exits, the incubator needs to have great relationships with acquirers. Creating a niche incubator focused on a narrow area of expertise can help with this. Having strong industry relationships will also be critical.

  6. It’s easier in this model to kill projects more quickly and get less attached to them. It’s also easier to transfer people from one project to another. This is especially true if there’s a vertical focus to the incubator, where it’s likely that people in Project A will be interested and familiar with Project B. People can shift between projects, you can double down on those that are moving in the right direction, and potentially continue funding them for some time (if you have the resources), so you don’t require external financing as quickly.
  7. It’s also easier to start projects quickly, resource them, see what happens and shift quickly (if necessary). If you’ve got enough talented people inside the incubator it can become an innovation machine.
  8. Talent is easier to find, because you’re not looking exclusively for founders (which is extremely hard to do). You’re also not waiting for fully baked teams to come to you with fully baked ideas. You’re plucking individuals, building teams, brainstorming ideas together, etc. True incubation.

    Incidentally, I think this incubation model could work inside larger corporations too, and be an interesting way to revitalize companies and innovate.

  9. In Canada, with our strong tax credit system (that pays a significant percentage of R&D costs back to a company), there’s a definite financial benefit to this approach as well. If everyone is an employee of the incubator, and paid a salary vs. receiving an investment, a lot of that money can be recouped.

For any place outside of Silicon Valley (and possibly New York and Boston), it’s near impossible to have all the pieces in place to build a strong startup ecosystem. There are just too many moving parts. That doesn’t mean companies can’t emerge out of any place and be hugely successful. But an accelerator or incubator is an attempt to build a “formula for success”, which does start to break down when pieces are missing. The model I’m proposing here is an attempt to circumvent some of those issues, including:

  • A lack of successful entrepreneurs
  • Inexperienced entrepreneurs without the supportive infrastructure
  • Lower risk tolerances (i.e. Not enough entrepreneurs)
  • Slower funding cycles (and in some places a lack of funding options)
  • Competition with other accelerators (i.e. What’s your differentiation and unique value proposition vs. other accelerators?)

There are clearly risks, and it’s far from a guarantee that this would even work. You might only find employee-like individuals who never grow into founders. If you can’t drop in C-level executives, you’ll be building projects and never any actual companies. People who consider themselves entrepreneurs and founders might be insulted by the equity split. Investors might be wary of the model. But all over the world right now, people are looking at starting accelerators built on the Y Combinator or TechStars model, and it’s not entirely clear if those models are feasible or sustainable elsewhere. It’s at least worth discussing alternatives that may be more appropriate in certain geographies, under certain circumstances.

« Older Entries
Ben Yoskovitz
I'm VP Product at GoInstant.

I'm also a Founding Partner at Year One Labs, an early stage accelerator in Montreal. Previously I founded Standout Jobs (and sold it). MY BIO >>

Follow this blog via email

Recent Posts
Advertisement
Startup Resources
A collection of posts I've written over time on key subjects:

Find Stuff
My Photos
 

The opinions and commentary on this site are mine and mine alone.
They do not necessarily reflect the opinions or positions of my employer, GoInstant.

Instigator Blog runs WordPress and uses the Minimal theme by Curt Ziegler.