ACCELERATORS IN THE UK WHY BOTHER AS AN INVESTOR?
I am writing this following on from a long discussion on twitter with Hussein Kanji of Hoxton Ventures. Hussein is very anti accelerators and I appear to be quite pro ( I am a mentor and investor in Techstars, Ignite and Entrepreneurs First ). Now being pro as an investor is quite different to be pro as a startup. So initially I wondered what an accelerator offered that mattered to me as an investor:
– They must get lots of dealflow so they get a decent choice of startups
– They must be able to get good teams to join
– They must care about teams
– They must help teams by giving advice and by introducing them to interesting people
– They must introduce founders to angels and funds
– They must increase the valuations at the end of the program when raising funding
So then I compared Techstars, Entrepreneurs First and Ignite, as a simple investor. To the outside world they are all the same but to me they are completely different.
TECHSTARS AS AN INVESTOR
– over 1000 startups apply to be in London ( including many companies that are way past a basic startup )
– most teams join if selected ( including quite advanced teams in some cases )
– teams get to meet so many people and have a huge demo day
– valuations afterwards can be silly with some companies raising millions
Techstars operates as fund and as such does not allow me as an investor to claim SEIS/EIS ( on initial investment or on exit ) which can make my returns a lot less as a pure %. But Techstars is great at helping companies raise decent rounds after the program.
ENTREPRENEURS FIRST AS AN INVESTOR
– many 100’s of smart people apply and EF helps them to create companies in London
– teams get to meet fewer people that Techstars but have a huge demo day
– valuations afterwards can be sensible but there is always 1 or 2 startups who raise large rounds
Entrepreneurs First operates as fund now and as such does not allow me as an investor to claim SEIS/EIS ( on initial investment or on exit ) which can make my returns a lot less as a pure %, The quality of the people is huge and hence they could invest in something massive
IGNITE AS AN INVESTOR
– many 100’s of startups apply ( including many startups that have poorly devised ideas )
– most teams join if selected, many teams are simply interesting teams with bad ideas
– teams get to meet fewer people that Techstars or Entrepreneurs First but generally get to know some people very well, this includes angels and vc’s
– valuations afterwards can be sensible, the decent teams and decent ideas almost always raise cash. Generally none of the startups initially raise large investment rounds
Ignite teams are generally less developed after the program than Techstars and mostly raise smaller rounds. But IGNITE is SEIS/EIS friendly investment and the people at Ignite have managed most of the legal and documenting filling, and as such has tax advantages without the paperwork nightmares. Several startups have evolved into companies that have raised at high valuations now.
Anyway that is my simple explanation as an investor. There are many extra advantages that happen due to being an investor such as:
– fun
– learning
– ability to see and get to know interesting teams early
All the best
Doug