In Startups

Facebook, Google, Netflix, and Amazon are all going strong right now but one thing is for sure… No disruptor has lasted forever. Just as these leaders crushed their predecessors, new innovative companies will come along and crush them at some point. Maybe sooner than you think…

Why not you?

When you look at the crop of companies that keep jumping into current startup accelerators you might think all the great ideas have been tried already.

It’s just seems like the same old ideas are being recycled over and over again. And when something fresh pops up it usually addresses a market that is too small to actually create a significant business. A billion-dollar business.  And… That’s one key trait of a true disrupter.

First let’s agree that a successful startup, a real disrupter, as a minimum needs three things beside the elusive great idea…

  1. A dedicated team – The founders need to be extremely competent, fearless, and ready to give 110%.
  2. A clear “Distribution” plan – How the product or service will attract paying customers and deliver the product or service.
  3. A defendable moat – Once competitors (known and unknown) see what you are doing what will keep them from going after the same market the same way and putting you out of business?

Without any one of these three essential components a startup is only relying on luck to succeed. And luck is not a solid business strategy.

Could empty seats be the real problem?

The thing I have seen with current business accelerators is they have a certain number of seats to fill. There may be twenty, fifty, or a hundred. And no matter how good the current crop of startup teams might be they will fill all those seats.

Maybe this is the reason why Accelerators seem to be faltering when it comes to creating the next round of truly disruptive companies. An emphasis on the number of startups and filling seats could be distracting accelerator managers from focusing in on the few companies that can really rise above the others.

This numbers game worked well five or ten years ago when disruption was easier but today there is so much background noise in the acceleration game that good teams and ideas may be getting lost.

Is a new Accelerator model needed?

In the world of innovation, it’s a safe bet that if you are doing business today the same way you did business last year then you are probably falling behind.  Accelerators are caught in this trap. If the innovator gate keepers don’t innovate who will?

Instead of moving big numbers of startups through the acceleration process and hoping a few will get to the next round of funding and see some growth, why not focus on just a few startups?

This is probably a scary concept for accelerator operators because it puts the responsibility on them to pick winners. It’s a lot more difficult to select the five best accelerator candidates than to select fifty. But the key to this strategy is that ten times the resources, cash, time, and expertise can be dedicated to fewer companies. Vastly raising the probability of success.

Yes, this will leave many startup companies without a seat in an accelerator but I will talk a little more about how this could be mitigated later in this article.

So, if accelerators of the future only work with a limited number of companies how can they raise the probability that those fewer bets will result in wins?

If the following criterion is used companies that do get into accelerators should have a higher success rate:

  1. Customer Centric – Products/services that actually address a real market pain point or passion point.
  2. Distribution Focused – The company has a clear way to attract customers, deliver their product/service, and make a profit.
  3. Clear Objective – What does a win look like for the startup? Is a win about securing the next round of financing and foisting the startup onto another treadmill or about helping the company actually delivering a product/service that can be profitable?

All three of these selection criteria must be met to get into the accelerator of the future. If a company comes close it’s just not good enough and the founders should work to build up the weak areas or move on to another idea.

So… What would the future of accelerators be like if operators had five companies instead of fifty?

This more focused accelerator model would be interesting to see in action. But it won’t happen until accelerator managers and funders figure it out that enough is enough. The failure rate is just too high.

What about the forty-five companies that don’t make it into the accelerator of the future?

A better way to pre-accelerate startups should help that forty-five companies bridge the gap to get into the accelerator’s next round or move on to a better idea.  This is the way baseball’s farm teams work to develop talent for the major leagues.  This could be a way to get to the next disruptors even faster…

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