Is an Accelerator Right for You?

(This is first in a series of 10 blog posts from my interview with Scott Gerber for the Inc.com Founders Forum. We discussed a bunch of topics including choosing an accelerator, mentoring, acquisitions and the tech talent shortage. You can watch all of the videos on Inc.com.) Not every founding entrepreneur at the early stages should look for an accelerator. Only you can really make that determination. Here are a few guidelines for deciding if an accelerator is a good idea for you, and if so, how to select the right one. Should you apply to an accelerator? Here's the video in full, and below are some of the highlights. The biggest reason to apply to an accelerator is for the network. Most people aren’t doing Techstars for the $100K, they’re doing it for the people they get to surround themselves with and the deep connections they build. They're doing it more for the $1B in follow on capital that has been aimed at Techstars companies. And for the amazing people in the network already.  If you believe that a network can be additive not just for the company you’re working on, but for your entire career, then an accelerator can be an excellent choice. If you’re truly open to honest feedback, and looking for new ideas, an accelerator is a great place to find that. You can get rapid fire feedback on what you’re doing from a community that wants you to win. You’re surrounded by 100 smart people who have done it before, and they have an opinion about what you’re doing. It doesn’t mean you’re wrong and they’re right, but you have to be open to other points of view. You get a lot of data points to help you figure out what you’re doing that makes sense and what doesn’t. If, on the other hand, you have tunnel vision and are positive that what you’re doing is right and nobody could possibly change your mind, an accelerator is probably not a good idea for you. How do you choose an accelerator? There are a lot of accelerators now, with new ones being created every day. Not every accelerator is right for every entrepreneur, and some may not be reputable. If you’re searching for a good fit, here are some things to consider:
  • Look for something that is established and has funded some companies.
  • Talk to founders who have been through it and get their honest opinions about the positives and negatives.
  • Take a look at what’s provided by the accelerator.
  • Look at the track record. What were the outcomes of the companies that have been through the program?
  • Most importantly, look at the network around it.
Watch out for these red flags.
  • Lack of transparency: If you try to research the above items and you can’t get any information, that indicates they have something to hide.
  • Unreasonable terms: The accelerator takes 15 percent equity for a 25K investment.
  • Wrong people at the helm: If the people running the program aren’t entrepreneurs with operational experience, they probably won’t provide much value.
For more thoughts on this topic, check out the next segment: How to Choose an Accelerator (coming soon).

My Semi-Random Walk

It's always interesting looking back at the random events that affect your life. When you allow yourself to be open to randomness, things tend to happen that you would never expect and couldn't possibly predict. Derek Scruggs interviews all kinds of interesting people with intriguing stories of randomness for his Semi-Random Walks Podcast, where he also features little-known but excellent music from around the world. Since we're both part of the entrepreneurial community in Boulder, I've known Derek for a while and our paths have crossed several times. He's currently CTO of Avenir International, a provider of telecom software for hospitals. I interviewed Derek back in 2007 when he was kind enough to share his thoughts on failure. Now he has interviewed me.  You can listen to the podcast to learn all about:
  • The only job interview I ever had in my life
  • How that job led to the first business I started
  • How I met David Brown
  • The way the timing of the Windows 95 release impacted my life
  • How a watermelon and a broken down car helped me decide to live in Boulder
  • How David and I built a successful company without knowing what a venture capitalist or an angel investor was
  • My "graceful failure," which was a great learning experience
  • My random intersection with Sam Altman long before we were both running accelerators
  • How I became an angel investor by acting like an angel investor
  • The time Brad Feld and I went to the White House and told the government not to fund accelerators
  • The origins, development and future of Techstars
...and much, much more. You can listen to the full interview on Derek's site. He really does an awesome job with all of his podcasts, so be sure to check out some other stories of randomness while you're at it.

How To Not Be Heard

For years I’ve worked very closely with two individuals who get extremely excitable, to the point of anger and frustration, when they’re expressing their point of view. These two people happen to be among the smartest people I’ve ever met. However, they often deliver their feedback accompanied by something very off-putting such as the following gem:
“Someone with a brain will eventually figure this out!”
This is what they really said to me! It was immediately followed by some very insightful and important feedback. But it's feedback most people would never be able to hear. If you were on the receiving end of this feedback, it would be pretty hard not to feel insulted. The implication that you don’t have a brain would probably distract you from any advice or insights that followed. Fortunately, I have what I consider a rare and useful skill in my line of work--the ability to cut through the emotion and still listen to the content of the message. However, most people aren’t built that way. They’re going to get hung up on the fact that you’re insulting or berating them and how that makes them feel. As a result they will never give any consideration to your actual message, no matter how amazing your insights may be. I once heard a great phrase, which I’ve since successfully passed along to these two individuals:
“The fury with which you speak undermines the veracity of your statements.”
So this is how to not be heard: Scream. Hurl insults. Unleash your fury. If you do want to be heard: Stop. Think. Breathe. Set aside the emotion in your tone. When I work with startups and give them feedback, I always try to remain even keel and tone the down emotional content. Sometimes I’m really pissed off, and sometimes I’m really excited, but I strive to make sure my message is heard and not my emotion. If you’re the kind of person who likes to scream and deliver a lot of hellfire with your feedback, recognize that many people will never hear your feedback. If you’re the rare example of someone like this who also has amazing, important insights to offer, realize that you’re undermining yourself. Your ideas will almost never be heard. If you want to be heard, you have to learn to rein it in. If you’re prone to getting excited and emotional, remember: Don’t let the fury with which you speak undermine the veracity of your statements. Tone down the emotion when you’re providing feedback, so that your brilliant insights can be heard.

Between the Yes and the Close

When an investor says "Yes," that doesn't mean you can stop communicating with them.  Unfortunately, that's often exactly what happens. Entrepreneurs will take a Yes from an investor and then proceed to shut down all communication until it’s time to close the round. This is where many deals are lost--between the Yes and the close. I can think of several examples where an entrepreneur had a Yes, but then lost the deal by failing to keep the investor up to date. In one instance, four months passed after an investor committed to the round. When the entrepreneur contacted him to say “Okay, we’re closing,” the investor literally replied: “Sorry, that was a long time ago. I'm not sure I remember you. Can you remind me who you are and which company this is?” Obviously, that investor had moved on to other things. Another time, six months went by after a Yes with no communication between the company and the investor. So when they finally were ready to close, the investor told them: “Look, that was six months ago. We haven’t heard from you since then, so we assumed it wasn’t happening and we’re not planning on investing.” After you get a Yes, do not stop communicating. Typically after an investor commits to you, a couple of months--and sometimes more--will go by before you actually close their money. Particularly in equity rounds, it can take a long time to put together syndicates. Or you might have a complex situation where there’s a lot of herding of cats. Even in the best of circumstances, some time is going to pass between the Yes and the close. A lot can happen in a couple of months. Things change. People change their minds. Other hot deals come along. In an instant, a Yes can turn into a No. Don’t let that happen to your hard-earned Yes. Help it remain a Yes. The key to keeping that Yes is to keep the lines of communication open. Investors sometimes change their Yes to a No based on the entrepreneur’s behavior. The way you keep an investor informed and up to date during this critical time frame is an indication of how you’ll communicate with them in the future. That’s why it’s important to manage that relationship by continuing to let the investor know what’s going on. You should be updating them weekly, or at the very least biweekly, with a quick email. Keep them informed about your progress and the good things that are happening. Tell them about others who are committing to the round and new customers that have signed up. Let them know how much you have committed and when you’re on track to close. Then make sure they’re responding once in a while, even just to acknowledge that they are receiving your updates. No matter how much time it takes to put together the round, continue to develop your relationship with an investor in the weeks and months after they say Yes. And of course, after the investment too. But I've seen it before - If you don’t communicate well between the Yes and the close then time becomes your enemy and you run the risk of that Yes turning into a No.

Reconciling Vision and Focus

Which is more important for your startup--a big vision or a specific focus? Lately I’ve been hearing about this dilemma from several companies I work with through Techstars. These companies have mentors or advisors telling them they need a big, bold vision to draw others to the company, attract investors and be viewed as thought leaders. At the same time, they are also being told they need to focus--they need to do something very specific and really build up a dominant market share with good revenue in a specific area. Many view this as conflicting advice. It causes them to thrash about, between big vision and specific focus. In reality, it’s not conflicting at all. Having a long term vision and having focus early on are completely compatible ideas. The key here is that your focus should show how you’re executing along the path to fulfilling your vision. Recognize that over the long term, your company has a trajectory with a start point and a theoretical envisioned endpoint where you change the world. Focus on one concrete step that lies on the path of that long term vision. You need both your vision and a focus that is in line with that vision. When I was at the Disney Accelerator recently, this vision vs. focus topic was coming up a lot. It so happens that one of the participating companies is a great example of focus that demonstrates progress toward the overall vision. The vision for this company is helping parents and kids connect and communicate. They’re doing that right now, but they’re doing it in one very specific area--chores--with a suite of web and mobile apps called ChoreMonster. Of course chores are only one way that kids and parents will communicate. But what if you think of chores as one interaction along the path of helping kids and parents interact? By focusing on chores, the company is making progress while still maintaining their overall vision. Vision or focus? There’s no need to choose one or the other. Instead, choose both--talk about your vision while making progress with your focus. Just like with your eyesight, vision is of no use without focus.

Answer the Damn Question

An investor asks you a simple, direct question: “Have you ever lost a customer because they couldn’t figure out how to install your product?” Your answer might be: “No, that has never happened.” Or maybe: “Yes, that has happened once.” It was a short answer, but you answered the damn question. This is where it often goes wrong. Then comes the dreaded pause. You don’t like that pause very much. It makes you uncomfortable. So you fill the silence by veering off into other topics or offering up more information: “We’ve never lost a customer for that reason, because our product is incredibly easy to install.” Pause. “So that’s just not really the reason we lose customers at all.” Wait. How did that happen? Now you’ve brought up an issue the person wasn’t even asking about. You have created an entirely new line of questioning, when you could have simply said, “No.” Or, “That has only happened once out of 400 customers, so it’s definitely not a trend.” The next question is probably going to be "Can you tell me more about how you do lose customers?" That pause isn’t by accident. It’s a tactic many investors use. After you provide the short, direct answer, a savvy questioner will often remain silent for a moment, hoping to get you to say something beyond the answer you’ve already given. So when you’re asked a question, simply answer the question. If the investor wants to follow up with a related question, that’s great. But learn to be comfortable with the inevitable pause that will occur after you give a direct response to a direct question. You don’t need to fill the silence by elaborating on all kinds of other things or volunteering a bunch of additional information. Don't create the next issue and remember that less is more. Just answer the damn question.