Tuesday, March 27, 2012

A short (but important) list of things a startup accelerator is NOT

I found myself ranting again in a meeting today, a sure sign that another blog post was brewing...

The topic of the conversation was startup accelerators and the do's and don'ts for starting one.

Setting aside for a minute the broader question of whether the world needs yet another accelerator, here is a short but important list of things a startup accelerator is NOT:

A startup accelerator is NOT a real estate business.

I keep meeting people who own (or at least control) big chunks of commercial real estate. Some of these folks think that a startup accelerator is just a clever form of real estate arbitrage, meaning they think they can extract a higher net yield per square foot by renting individual desks to startups than they could by striking a deal with a single tenant.

In my experience, real estate is a necessary evil in the startup business. We aim to run our Founders Co-op space at breakeven (and usually run a deficit), because we're optimizing for quality and values alignment, not economic yield. The funds and programs we work with in other cities tend to think about their space the same way.

A startup accelerator is NOT a sales channel.

I have also run into people who see accelerators as a clever way to aggregate a cluster of uncommitted prospects for sponsors to advertise to, or for vendors (consultants, accountants and laywers) to sell to more efficiently. This circle of hell also includes my least favorite people in the startup ecosystem -- the "angels with sticky fingers" who are always eager to "help" entrepreneurs as long as they can round-trip some of that "help" back into their own pockets.

I know lots of great service providers who love to work with startups and treat them with respect. They are an important part of any startup ecosystem. But they are not the customer.

A startup accelerator is NOT a fantasy sports league.

Many talented people at big companies think about quitting and starting (or joining) a startup. Very few actually do, but the number who consider it tends to increase during boom times and decrease when the shit hits the fan. Right now there are a *lot* of people peering over the edge of the precipice, so many that they actually represent an addressable market segment. I know people who believe that giving this group a safer sandbox to play in is what accelerators are all about.

Starting a business is incredibly hard and unglamorous work and *anyone* who thinks seriously about it deserves all the support they can get. But a high-quality accelerator program like TechStars or Y Combinator is actually optimized to serve the weirdos and misfits who can't imagine doing anything else -- who build companies even when everyone else is running for the exits because they just can't help themselves.

A startup accelerator is NOT a pimp for the capital markets.

Most accelerator programs end with a Demo Day -- a big show-and-tell party where graduating companies have a chance to pitch a roomful of accredited investors. And Demo Days are absolutely a good thing for both companies and investors. But -- strange as it may seem for an investor to say this -- accelerators don't exist to serve the needs of the investor community.

There was a time, not too long ago, when money mattered more than talent. Thanks to the magic of open source + cloud, those days are gone and they're not coming back. So if you're going to choose sides -- and remember, the only thing in the middle of the road is yellow stripes and dead armadillos -- it's clear what side an accelerator has to be on: your customer is the talent and no one but the talent.

OK, fine, so what IS a startup accelerator?

Like most things in life, the answer is surprisingly simple: A startup accelerator is a system for helping the most talented and ambitious entrepreneurs in the world increase their (already considerable) odds of success. 

That may not sound fair, but then life isn't fair.

Accelerators only work if they attract the best possible candidates and deliver the maximum acceleration to those teams, producing the biggest wins for them and their investors. Those wins, in turn, draw new talent and money into the system, feeding the next cycle.

Any activity in this system that competes with or compromises the interests of the talent is not only a distraction from the core mission, it actually undermines the long-term health of the program.

Whether the world needs any more accelerators is a topic for another day, but if you're determined to start one in your community, do yourself a favor and post a big sign on the wall like James Carville did during Clinton's 1992 reelection campaign:

"IT'S THE TALENT, STUPID"