Irish start-ups MagGrow, BonzaQuote and Countr have something in common: all beat stiff competition to win places on high-profile accelerators in the US and the Netherlands.
Accelerator incubation programmes are still in their infancy. The original of the species, Silicon Valley-based Y Combinator, was set up in 2005, with two of its best-known success stories being Airbnb and Dropbox. US-based Techstars and London-based Seedcamp were founded two years later. Techstars now operates in four US cities, while the pan-European Seedcamp is a leading provider of pre-seed and seed stage funding to start-ups.
MagGrow, a magnetic spraying technology company that helps farmers grow more while lowering their spraying costs, is on the Thrive accelerator programme in California. Its founders are seasoned businessman with previous start-ups behind them, so choosing to put themselves through the demanding accelerator selection process might seem like an odd decision.
"Collectively we have a lot of experience but without our involvement in Thrive we would have spent considerably greater amounts of time, energy and resources getting to where we are now. We have no regrets whatsoever and would gladly do it all over again," says MagGrow co-founder Gary Wickham.
The company heard about Thrive through Enterprise Ireland. "We found them very clued in about the best programmes available – some are better than others – and this one is focused on food and agtech which was ideal for us," Wickham says.
MagGrow fought off 240 applicants from 39 countries to secure its place. Only two companies from outside the US were chosen for the final 12.
“The programme is multifaceted and has provided us with invaluable information on commercial strategy, legislative requirements, how to do business in the US, grant availability, funding, and sourcing key people. In fact, it gave us the confidence to recruit US-based staff in order to progress faster in this market,” Wickham says.
“What you have to remember, however, is that you still have a business to run when you’re on the programme. We took the decision to buy into Thrive 100 per cent and did everything we’ve been asked to do. We have participated very actively in events and webinars and have generally been gold star pupils. This has really paid off. We have been introduced to Dole, a potentially major customer with whom we hope to start testing soon, and we have also had a very strong indication of interest from a potential funder.”
The number of accelerator progammes has grown quickly in the US and Europe over the last decade but demand for places still outstrips supply. A key component for any accelerator is the quality of its mentors and finding sufficient high-calibre candidates is a global problem.
There are a small number of accelerator programmes in Ireland but they are mainly in Dublin and demand is well above supply. Earlier this year Enterprise Ireland launched the Accelerator Development Scheme with the aim of investing alongside accelerator managers and the private sector to increase the number of accelerators operating outside the capital.
Countr founder John Staunton participated in the Startupbootcamp in Amsterdam in 2014.
“We chose this programme because it was the right ‘vertical’ for us. Amsterdam is extremely international, it’s a great gateway to mainland Europe and has a great early adopter culture for new products and ideas,” he says.
“We got a €15,000 grant (‘pizza money’) as part of the programme and we gave 8 per cent equity. People should be aware that some accelerators may have an anti-dilute clause. This means that if you take on further funding, your stake will be diluted but theirs won’t. It remains the same until you are valued above a certain level. This can be unattractive to later-stage investors.”
Countr faced competition from more than 200 international start-ups for a place and was one of 10 companies to make the final cut.
“The most valuable lessons we took from the programme were the concept of doing things extremely lean, of building a minimum viable product (MVP) and the importance of getting out of the building and meeting customers,” Staunton says.
“The programme took us a long way in only three months and ultimately got us to the point where we realised that the angle we were pursuing was not scalable and we ended up changing our focus.
“You can achieve a huge amount when there’s constant pressure on you, particularly with other teams around you going through the same thing. But that level of intensity is very hard to sustain, so most teams experience a drop-off in speed once the three months ended.”
Nesta, the UK innovation charity which has produced a number of reports on accelerators, estimates that fewer than 1 per cent of applicants for the most successful programmes will be successful. It also says that, “as with start-ups themselves, many of these programmes are yet unproven; some will undoubtedly fail”.
In its 2015 report, A Look Inside Accelerators, Nesta says three archetypes are now emerging for accelerators: ecosystem builders, investors and matchmakers. Ecosystem builders are typically publicly funded and work with entrepreneurs from the idea stage onwards. Investors and matchmakers prefer more mature businesses with a working prototype.
The report also says those applying for accelerators need to be mindful of which model they choose as the objectives and outcomes may be different. The jury is still out on whether “accelerators created with the purpose of ecosystem-building will have similar outputs as investor-led ones”.
Sleep became a precious commodity for BonzaQuote founder Jack Drea while on the Blackbox Connect accelerator in California in August last year.
“I had to keep things ticking over at home so I managed four or five hours a night maximum,” Drea says. “We were one of 12 companies selected from over 1,000 applicants worldwide and went through a rigorous selection process. But it was 100 per cent worthwhile.
“Apart from the formal component it was fascinating to see how other people ran their businesses. I got a lot of close-up insights as we all lived together for the two weeks of the programme. I picked up loads of useful small things, as well as meeting investors and developing relationships in the Silicon Valley ecosystem that prepare you to launch into the wider US market.
"We met some of the world's leading founders and investors including Greylock, August Capital and Scale Ventures. We also received in-depth presentation and pitch training. In my cohort we had companies from Lebanon, India, Finland, Thailand, Slovenia, UAE and Uzbekistan, so there was a fantastic international buzz about the place."
Accelerators: Different supports
Accelerators are different to other types of start-up support in several key ways. The application process is open to all but is highly competitive. Programmes typically recruit the very best among the cohort of budding entrepreneurs.
Accelerators are usually short (from 2-12 weeks) but intensive and limited to a small number of companies, with 10-12 being common.
The focus is on small teams rather than individual founders. Cohorts work together to speed up learning and develop strong networks.
Accelerators generally provide some sort of funding such as pre-seed investment in exchange for equity. The chances of getting funding following an accelerator are increased as they attract angel investors and venture capital companies looking for new talent.
Accelerator participants get intensive, mentoring and what is essentially a crash course in all aspects of running a start-up. Field trips to meet prospective customers and opportunities to pitch to potential investors are also usually included.