At GrowthX, we sit at a unique position in the startup ecosystem. As a venture capital fund, we work with graduates of accelerator programs around the world to evaluate their fit for us. We also partner with accelerators around the world to help them make their programs stronger, and we run The Revenue Accelerator.
Because of this unique experience, we know the challenges that come with running an accelerator program, attracting startups, trying to get founders to change their behavior, graduating startups, and identifying and qualifying investment opportunities.
Whether a startup is B2B, B2C, industry-agnostic, industry-specific, at the idea stage, or post-revenue, the ultimate outcome for accelerators is usually the same: help startups become investment-ready.
The challenge that accelerators face when it comes to helping startups find funding is that there are simply more startups and accelerators than ever before. Accelerators need to differentiate themselves because startups have so many choices of who to work with.
Most of our accelerator partners are in nascent startup ecosystems, like Alabama, Arkansas, The Caribbean and Korea. They’re in areas where venture capital dollars are very hard to come by, which means the competition is even higher.
A strong technology stack, interesting product features and functions and a compelling pitch deck used to be enough to attract investors. But, the game has changed. To help startups meet the demands of the current fundraising landscape, accelerators need to re-evaluate their approach to the services they provide.
For accelerators based in up-and-coming ecosystems, it’s critical to also bring local wealth off of the sidelines and into the venture asset class. This is done by speaking more directly in the language of traditional wealth investors: milestone-driven, systematic customer and revenue growth.
This investor profile is interested in customer and revenue traction, not simply a good story, pitched well.
Traction speaks louder than words
The cost and complexity of building a product has never been lower, and the availability of trained and experienced product developers has never been so widespread. To attract investors for their founders (and to fund their programming), accelerators must empower their founders with a systematic approach to win customers and grow revenue, at scale.
Oftentimes, accelerators run a customer development week or sales week. It’s tough to help a company raise revenue in just a week.
They introduce customer interviewing and other high-level go-to-market concepts, and leverage their network of mentors for inspirational talks and anecdotal customer connections.
But, they lack a comprehensive go-to-market framework that empowers founders with the knowledge, skills, tools and training they currently lack to do the actual work of systematically growing customers and revenue in a repeatable and scalable way.
Too many accelerators over-rotate towards investor conversations, at the expense of customer acquisition.
If a startup can find customers, that means they’re able to protect runway. Then, when they go to fundraise, they’ll be doing it from a position of strength, not from a position of survivability.
The order of operations for accelerators and startups should be:
- Build an MVP,
- Acquire customers and revenue, and
- Leverage market traction to acquire venture capital
Customers are the greatest form of due diligence
At the early-stage of any venture, investors worry most about execution risk. Can the founders attract and retain the team necessary to accomplish the Herculean task, and can and will they do what they say they intend to do in their pitch deck.
Revenue generation proves that a startup is solving a significant problem in a sustainable way. If no one will pay for the solution, more financing won’t necessarily change that.
For accelerators to attract top founders, funding for their programming and investors for their startups, traction speaks louder than words (and pitch decks). Accelerators can move beyond concepts, theories, canvases and sporadic mentor sessions and empower their founders with the knowledge, skills, tools, training and hands-on experience required to systematically identify their target market and acquire customers and revenue at-scale.