The best accelerator programs invest in their invitees, but the way accelerators invest and the mindset behind their investments is vastly different than venture capital funds and Angels, and a vastly superior process. Three key differences are:
Accelerators run cohorts of participants and thus choose companies in batches. Venture capital funds (and Angels, which follow the model of VCs and thus henceforth are lumped together) choose investees one at a time.
Batches concentrate dealflow, allowing for more obvious comparisons from one applicant to another and batches create discipline for making investments, as there are always great companies urgently waiting for capital and thus no excuse (beyond a global pandemic or economic depression) for investors to sit and wait to act.
Accelerators act while investors wait.
The job of venture capitalists is to find the flaw in a pitch and say no, until such a compelling opportunity comes along with small enough flaws to say yes. Meanwhile, every company that applies to an accelerator is flawed. If it weren’t, it would have passed that VC test and be funded.
The job of an accelerator is to find the big flaws in an applicant and determine if the flaws can be fixed within the accelerator program, thereby making the company ready for other investors and ready to succeed.
Accelerators make startups strong while investors wait to find strong startups.
First-time entrepreneurs need a lot more than capital to succeed. Every venture capital fund says they provide more than capital. Most of the time, that “more” is nothing more than advice in a board meeting and advice if and when the time comes for an acquisition. Most of the time that advice is what is best for creating the exit, rather than what is best for a long-term successful company.
Accelerators exist to provide training and mentorship to entrepreneurs. The best accelerators invest, but it is the training that is the focus during the intense months of the accelerator program and the best accelerators provide ongoing support to their alumni too.
As importantly, accelerators operate in cohorts, and the best entrepreneurs leverage the knowledge of their fellow founders in their cohort and the knowledge of the fellow founders in the whole alumni network. More than half of VCs are financial professionals, not former entrepreneurs, and thus most VCs don’t have real world startup experience to share outside of what they learn as a board member.
Startups as a whole would be better off if the norm were (i) startup accelerator, (ii) venture accelerator, (iii) growth accelerator instead of seed round, Series A, Series B. Startup accelerator being the idea-stage program that was the norm back in 2012-2015, back when the applicants were working on their MVPs. Venture accelerator being today’s accelerator, where invitees have customers and often profits. Growth accelerators being rare, with Fledge’s spin-off Africa Eats as one of the rare examples.
In this alternative ecosystem startups would have layers of support, all focused on fixing flaws, not repeating mistakes, and peer groups for overcoming challenges rather than today’s focus on raising the next round and using money to solve every problem.
Back to reality, Fledge does its best to provide this ideal for its participants and alumni.