Understanding a Virtual Accelerator: What You Should Know!
Covid-19 quickly forced startup accelerator programs around the country to go virtual. But if you thought the virus might have tamped down investor interest in the next generation of startups, you’d be wrong. Understanding a Virtual Accelerator: What You Should Know!
Y Combinator says more investors tuned into this year’s digital demo day compared to last year, primarily because organizers weren’t hindered by venue capacity laws, says Michael Seibel, CEO of Y Combinator. The Silicon Valley-based accelerator’s demo day is traditionally a crowded affair, with around 1,000 investors typically in attendance. At its virtual demo day March 16, Y Combinator hosted around 1,600 investors.
Meanwhile, 500 Startups also said investor attendance at its March 26 digital demo day was up over last year. The San Francisco-based accelerator said 2,500 investors registered compared to 650 investors who attended the in-person event the year before.
In addition to increased investor attention at both of the aforementioned accelerators, applications for all three accelerators also are expected to balloon, the companies say.
Smaller programs are also seeing increased activity as they’ve gone digital. Boomtown’s accelerators, which are located in Boulder and Atlanta, have seen “a substantial uptick in interest” from founders and investors over the past two months, says Boomtown’s CFO Jason Searfoss.
“Accelerator programs are especially important for founders right now, given the coronavirus and how our world has changed, hopefully temporarily,” says David Brown, co-founder of Techstars, who declined to share both enrollment figures and the number of investors present at its virtual demo day, which took place on April 20. “Creating a network is more important than ever.”
Pros and Cons
On a basic level, the coronavirus and requisite social distancing make it harder to meet like-minded people. Entering a digital accelerator program gives founders that opportunity–with the added benefit of not needing to travel and uproot one’s life or leave a burgeoning company without a fearless leader, says Aaron Blumenthal, a venture partner with 500 Startups. “When you’re a founder, you’ve got a team and can’t just disappear for four months,” Blumenthal added.
Plus, joining a prominent accelerator–even virtually–still carries cachet, says Zack Gray, co-founder of Ophelia, a startup that helps opioid addicts find medication-assisted treatment. He was accepted into Y Combinator’s most recent cohort, the winter 2020 program, in October and participated in live events before the program went fully digital for the last few weeks.
Techstars further announced that due to the economic hardship facing startups, it’s extending the maturity dates for its approximately 1,000 outstanding convertible notes by 12 months. That’ll give founders a little breathing room before they have to repay that debt. The accelerator is also re-offering its $100,000 convertible note to founders who were part of programs that began between January 1 and April 1, 2020 and declined the offer while in the program.
Of course, some things get lost when your only connection to your network is over Slack and Zoom. Besides missing out on social events, the biggest challenge is forming personal connections with people remotely, says Gray.
“You don’t get a sense for who the founder is or who the team is,” Gray says. “So much of building a company is telling a story that motivates others to join you.”
Even so, Gray adds that the benefits have outweighed those negatives. Investors were more eager to connect with him after he joined the accelerator’s network. He has since raised a seed round but declined to share the details, as the deal hasn’t closed yet.
Work hard and listen
Accelerator organizers acknowledge that virtual programs present new difficulties for founders. Prioritizing communication and staying engaged is key to making an accelerator experience worthwhile, even one that’s digital, says Brown. “This is not the time to sit back but the time to lean into it,” he added, emphasizing that entrepreneurs should be scheduling video calls and seeking advice as much as possible.
Lastly, another product of the changing times: entrepreneurs should also be open to hearing bad news, beyond the typical critiques they might hear from naysayers. Advisors within the accelerator community may suggest delaying a startup launch or putting an idea on hold while the country grapples with the coronavirus, says Blumenthal.
Ultimately, entrepreneurs need to keep trying, says Brown. “As we come out of this economic downturn, it’s entrepreneurs that are going to grow and hire and get people back to work.”