I would like to dedicate this post to early stage startups. Those entrepreneurs who battle everyday as if it were their last and get up in the morning and do it all over again. As an early stage startup, I can’t stop thinking about what my father has said to me my whole life:
“Carly, there’s no free lunch.”
This simple one liner is the bread and butter of my everyday at the moment.
At BeConnections we’re celebrating a bittersweet victory. Our team just got accepted to DAT Venture’s accelerator, a Boston run program intended to introduce Spanish startups into the US ecosystem. Selected entrepreneurs are offered specialized courses at Harvard University and are trained by former Techstars mentors to help each team take their project to the next level.
Sounds great, right? Well, there’s a catch. The program costs US$ 10,000. The organizers of Dat Venture have very kindly offered to sponsor 40% of the program and now I have to find USD 6K more. Hence, the bittersweet success.
Do I find this strange? My innocent childlike self still believes that she lives in a land of flowers and rainbows, but the women inside me knows that, at the end of the day, we are all fighting for a common goal: business. So unless I want go into the non-profit sector, it’s probably better that I realize and assume that:
- Every business is a money making machine
- Yes, dad, there’s no such thing as a free lunch
Let’s look at accelerators, many of which give startups “free” money, right? Wrong. Mainstream accelerators have become smaller and more hands-on versions of venture capital firms. Why? Although the large majority of them offer thousands of euros worth of acceleration and cash, most come with a catch: it’s subject to equity.
Therefore, many startups heavily compete to be recognized by leading accelerator programs that only inject EUR 20K into a startup and ask for between 7 – 10% of equity in return. Of course, the credibility and mentorship are great, but it’s a fair amount of equity, which means that the business is left with less room to grow later on.
All of this would make sense if highly reputable accelerators focused on very early stage startups, but fact is that most of them don’t. Techstars, Seedcamp and Wayra claim to accept startups at any phase, but the truth is that most teams being accepted are revenue producing… and we’re not talking about a few hundred euros, but more so in the tens of thousands category.
With this said, if I am going to invest my money and time into a project and I could pick from two applicants–one that had thousands of euros of revenue, a solid product and enough money to motivate a team, and one that had none of the above except for a very minimal viable product (MVP)–the choice is easy, right? Most people would choose team one because there’s less risk, and startups tend to be ticking time bombs.
But then again, should that be the attitude of an accelerator? Opinions are welcomed.
I just went online and did some research on the qualification that startups must meet in order to be selected to a program. Many indicate that the team must have a product ready to launch in a 13 week program, which I interpret as it’s not necessary to even have a MVP to apply.
However, after my colleague spoke to a highly reputable UK mentor and investor, he disclosed that the reality is very different from what accelerators “About Us” section says. According to this serial entrepreneur, whose name will not be disclosed for confidentiality purposes, the accelerators that he is familiar with in the bustling London tech scene tend to take very advanced startups. He explained that it’s a result of competition. Leading programs get hundreds of applications and therefore, they can give themselves the luxury of choosing startups that have already proven themselves on the market.
Seem unfair? Maybe, it depends on what side of the spectrum you’re on.
Is paying to be part of a program any better? Perhaps, it depends on the price and I’m not only talking about money. In fact, that’s the route we’ve chosen, thus far.
Along with Dat Venture, we were recently selected by StartUp Next powered by Google Entrepreneurs and had to pay EUR 200 to be part of their 5 week program. We’re on our fifth week now and I’ve received personal attention nearly on a daily basis from the director of the program and from another mentor, who have combined their efforts to help us find leads in the European Commission and European Chambers of Commerce. Was the money worth it? Yes. Would I have rather given equity instead of money, no. So far, money has been a far better choice for us.
Nonetheless, there’s always a catch, and hence, my bread and butter of everyday and the voice of my father ringing in my ears…. There’s no free lunch, Carly.
Pitch by Pitch 