Top five tips to get into a US start-up accelerator
The last two years has seen an explosion in the number of start-up incubators, accelerators and co-working spaces in Australia, such as Angel Cube, Startmate and PushStart, to name a few.
The USA, however, remains the undisputed leader when it comes to start-up collectives that invest small amounts of money into new ventures and then ply them with expert knowledge and industry links in order to turn them into market-leading businesses.
These hubs are no longer out of the reach of Australian start-ups, as demonstrated by Sydney-based tech start-up Peeractive, which recently became the first Australian company to be admitted into US accelerator program DreamIt Ventures.
Other Aussie ventures look set to follow Peeractive to the US, following the decision of famed American accelerator 500 Startups to open its application process to international start-ups.
So how can you boost your chances of rubbing shoulders with the best and brightest start-ups in the US?
We spoke to the experts to gather these five essential tips on how to score a spot at a US start-up accelerator.
1. Demonstrate the problem
If you are travelling all the way to the US, you had better demonstrate that your business is solving a problem that currently isn’t being catered to by dozens of other start-ups.
“Make sure you are convinced by the problem you are trying to solve with your intended product,” says Haig Kayserian, a New York-based Australian who is CEO of Kayweb Angels, a start-up fund that is receiving applications for its latest round until October 31.
“Do not kid yourself. If the problem does not really exist, an investor who reads/listens to hundreds of applications a year is going to find you out and pull your pants down.”
At the very least, the decision-makers at American accelerators will want to see that you have done your homework.
“If you cannot prove very clearly that your problem exists (e.g. we are in the dark) and your solution is clearly a winner (e.g. the light bulb), conduct market research,” says Kayserian.
“Your solution may be for shoppers but the investor reading your application or attending your pitch may not be a keen shopper.”
“Do not assume something is obvious; prove it. Go out there and interview people in your intended market of entry; it also shows you are willing to go that extra yard.”
2. Get realistic
As great as you think your idea is, it isn’t the prime reason that a US accelerator will be picking you. Get real about what these potential investors are looking for and be prepared to answer the tough questions.
“The amount of folks who pitch to Kayweb Angels that do not have a business model amazes me,” says Kayserian.
“Get over the romanticism of your idea for a moment and realise the investor sitting in front of you or reading your application is in the business they are in because they want to make money.”
“Show that you understand that, you share that passion, and prove a clear path to monetary success with the business model you present.”
Viki Forrest, CEO of ANZA Technology Network, which connects Australian start-ups with the US market, states: “A compelling answer to these two questions will go a long way to grabbing the attention of a US investor.”
“Distribution – OK, so there’s a billion dollar market out there but how are you going to reach it and what will your customer acquisition costs be?”
“Competition – know who they are and be able to clearly articulate your unfair competitive advantage.”
3. Get up close and personal
To be accepted in an accelerator either here or in the US, you will usually need to go through a formal application process.
However, this doesn’t prevent you from directly contacting key people beforehand to flag up your idea and ask for their feedback. This is the approach taken, successfully, by the Peeractive founders.
Nick Rosenthal, co-founder of Peeractive, says: “Focus on what these people do and their history. Use networking tools such as LinkedIn to directly connect with the decision-makers before applying.”
“We did everything we could to get in front of them so that they’d remember us. We told them that we’d applied and asked if they had any further questions or for us to explain more about our business.”
David Stein, the business’ other founder, adds: “It’s important to follow this contact up and be persistent. These investors invest in the team as much as the concept, so it helps if they know you personally. If they don’t take your first or second call, keep at it – you need to stand out.”
4. Show you are committed
Moving to the US to take part in an accelerator is a huge commitment for an Australian start-up, but you need to show that you have been prepared to make calculated risk before this point.
“A key mistake we made was that we were working in full-time jobs for two years to make ends meet while working on our start-up in our spare time,” says Stein. “We could’ve just taken the plunge and done all of what we achieved in those two years in just three months.”
“People take too long with these things. Make assumptions. Test the market and show you are committed to it.”
Rosenthal adds: “Try an idea as quickly as possible, so that any failure will be quick. Then change your assumption and move on. We took a lot longer and we regret not having that approach.”
“Once you’ve convinced them of the team and your commitment, you are well set. Several start-ups pivot their ideas a couple of months in because the accelerator has faith in the team behind it.”
5. Don’t just give the hard sell
Rosenthal says: “The saying goes ‘you ask for money and you get advice, you ask for advice and you get money.’”
“These investors don’t like to be lectured by a start-up that thinks it knows it all. They like a two-way conversation.”
“Go and ask them for advice, rather than just sell your idea to them. They’ll be keen to be involved and it shows that you are keen to work with them.”
“Plus, it’s less daunting to go into that situation knowing that you are going to have a conversation about your idea, rather than just trying to convince them to give you money.”