June 21st, 2011

Five reasons your startup won’t be getting into that incubator or accelerator


Five reasons your startup won’t be getting into that incubator or accelerator
New models for accelerators and incubators are becoming the cornerstone of the early stage startup. And it's not just juggernauts like Y Combinator, TechStars, and 500 Startups. There are any number of incubators popping up all over the place. But what's it take to get into one of these things? And even more importantly, what are the red flags that are going to prevent you from making it into these programs? Well, the Portland Seed Fund---one of those new upstart accelerators---just sent out their first round of letters to prospective companies that didn't make the cut. And they shared some of the most common reasons why they chose to pass on those. So I'm sharing those reasons with you. In the interest of edification and with the hopes that they give you a better chance of getting into whatever incubator or program you're chasing.

How not to get into an incubator or accelerator

1) Be a single founder. We want to back teams of 2-3 founders with a stake in moving the company forward quickly in the next 90 days and beyond. They should possess relevant skills in doing so, and ideally some history together. 2) Have a fear of commitment. Inability for founding team to commit fully to the venture for the 90 days and beyond. We understand start ups are risky and it's good to see if there is traction before taking the leap. But as investors, we want to take the leap with teams who are ready to take the leap. 3) Over spend and under deliver. Your company has to be capital efficient. The business, the way it is currently envisioned, will require more capital than Portland Seed Fund managers believe is readily available in this market at this time for that business. 4) Stunt your growth. The business is not scalable. The idea may be compelling and some customers may be there, but in our estimate it will not scale to drive the extraordinary growth that fund managers are seeking in their investments. 5) Lose your way to the exit. Portland Seed Fund dollars are investments, not grants. They are intended to drive high-performance rapid growth companies with ascertainable exit strategies more than exploratory efforts. Thanks for the Portland Seed Fund folks for sharing their insights. For more information, visit the Portland Seed Fund.

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Background that may help (or may not)

10 Responses to “Five reasons your startup won’t be getting into that incubator or accelerator”

  1. Robert Z. says:

    Let me make sure I got this right. A single founder, with a great
    business plan, who could create a dozen or more jobs, based on linear
    growth, not exponential, but who is passionate about his or her work and
    believes it adds value to others and is committed to living in the
    neighborhood and sending his or her kids to school here, while taking an
    interest in helping to improve that same education system, and who
    believes that reasonable profits are a good model and doesn’t mind
    hiring a few extra hands even if it means the margins are a little
    smaller should not apply?

    Right. Got it.

    Wanted: Two or three person team looking to make a quick buck and sell.

    And we wonder why America is losing it’s leading edge status.

    There is no start-up genome. It’s just a new myth with buzzwords attached.

    How about someone puts the venture back in “venture capital” if you want
    any chance of success. It’s sloppy, messy, risk laden and there are no
    boxes to tick off. It’s passion, risk and gut instinct. Applying
    mediocrity and formulas will result in getting the same in return.

  2. BrophyWorld says:

    If you want to ensure that you’ll be accepted by an incubator, apply to Start-Up Chile. They accepted 110 of 189 complete applications. Even better, they won’t take any equity, and you get to spend 6 months in a great country that you might want to move to. And, they accept single founders.

    More info:
    http://brophyworld.com/start-up-chile-enticing/
    http://brophyworld.com/move-to-santiago-chile/

  3. Bill Lynch says:

    Robert Z – yep, that’s exactly right. Those types of companies should not apply and if they do they should not expect to get funded.

    First off, it’s nearly impossible as “a single founder” to succeed. Not saying it’s not possible (and it’s entirely possible for the right type of business) but it’s not going to work for the type of company PSF wants to back: high growth potential, fast moving, different perspectives & roles to play. One person can not do it all.

    Second, remember what’s competing for the dollars. Investors in PSF could go invest in the markets and get a decent return but in this case they’re willing to sign up for more risk but as such they demand a higher return. It’s not bad, it’s just how the market works. In terms of your example, I’d say the return on that investment is more like an investment in the markets – so why bother?

  4. bob says:

    I’d have to side with Robert Z on this one. The “only big growth quick buck” model is what leads to bubbles and unsustainable economic “prosperity”. Better to build solid long-term businesses that contribute to a community and provide real long-lasting jobs.

    SBA loans might be more appropriate, or bootstrapping maybe with angel funding from non “fund”investors. People who think 10% a year on a low-risk endeavor is a fine return.

  5. Jeff Brandt says:

    Rick, This is good advice, If you want money you will have to have a team.

    Basically, if you can’t convince others to work for free, how are you going to convince someone to give you money.

    Cheers,

    Jeff

  6. Someone says:

    To those who are whining that PSF won’t back their business model: Nobody said your kind of business wasn’t worth investing in. It’s just not what *PSF* wants to invest in. And that’s ok!

    You wouldn’t expect Royal Ahold to invest in the corner store would you? You have to match the business with the investor, and vice versa. If you don’t get that investors have niches too, and that different business models get capitalized dfferently, you’re not ready to run a business backed by investment in the first place.

  7. SomeoneElse says:

    @someone Since the foundation and core of the Portland Seed Fund is public money, we’re entitled to our opinions about how it can best be utilized for benefiting Portlanders (our tax payer money) not just the private investors who make up a portion of the fund.

    I have not heard one word about jobs or sustainable businesses growing from this fund, which is what I presume public monies are supposed to be focused on? If there’s a conflict between the Public and Private monies in the Fund that’s a whole other issue. I have seen that there is a commitment of public monies for next year already in place.

  8. [...] Five reasons your startup won’t be getting into that incubator or accelerator [...]

  9. jmartens says:

    I am reading this post (again) 6 months after it was first published and it has dawned in me that not only are these reasons an applicant wont get into an incubator, they are general reasons why many startups fail.

    GENERALLY speaking, successful startups need:

    -a team of founders
    -that are ready to risk it all
    -a plan to do a lot with a little
    -going after a big, attainable market
    -with a likely exit somewhere down the road

    Great post.

  10. [...] Five reasons your startup won’t be getting into that incubator or accelerator [...]


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