Problems with Traditional Startup Accelerators for Investors
A startup accelerator can help with some of the challenges investors (and startups) face. However, traditional startup accelerators often have the following limitations:
1. The focus is on starting, running, and growing a new business before there is strong validation of the problem, solution, and business model, most often leading to unsuccessful outcomes for both startups and investors.
2. They have a limited number of startups which are chosen, with selection often based on limited (if any) real data, and flashy or passionate pitches, both of which are poor indicators for success.
3. They do not strongly encourage authentic Lean Startup and Customer Development approaches so that startups do not usually run fast and low-cost experiments to test their business model hypotheses.
4. They are usually only available in a face-to-face format in particular geographic locations, thereby limiting a greater number and diversity of startups and investors.
5. They have a set start and finish date and limited duration, which may not fit the schedule of investors, or provide startups enough time to achieve success, especially given the need to pivot.
6. They have a linear program with a specific sequence of activities and tasks, which doesn’t allow for major pivots, teams that are at different stages, or the need to start again.
7. They may provide some form of investment upfront to startups, when little progress has been made or after soft milestones, and may not be used to validate the business idea.
8. They may lead startups to have unrealistic expectations about their actual valuation and investment readiness after completion of the program.