Startup markets around the world are heating up, and more investors are competing against each other for the best deals. In the scuffle, VCs are turning to scouts to do the legwork, but that has meant being yet another step removed from their founders. Investors have already been signing the dotted line without meeting entrepreneurs in person.
I’ve sat at both sides of the table as a founder and a VC, and I understand how difficult it is to get them on the same page. However, I believe that accelerators can be the glue bringing the two together.
I’ve participated in a number of accelerators, including Disney and Techstars, and these programs gave me a noticeable advantage when I stepped into VC. It helped me understand how founders grow and what they’re looking for in their partnerships. I’ve also seen firsthand that investors have a greater appreciation for building from the ground up after spending time at an accelerator.
VCs have to be a direct extension of the teams they support, but they can’t align and succeed with teams if they haven’t experienced one of the most crucial parts of their growth trajectory.
In my current position as executive director of PRSTRT’s accelerator, parallel18, I’ve been inviting VCs to visit us and bridge the gap between business and capital. Here’s why I believe every investor should spend time with an accelerator:
See diversity in action, and mirror it
Over the past year, VCs have been quick to commit to diversity, with 40% of firms putting D&I strategies in place. To give those initiatives the best chance of success, VCs need to expose themselves to the communities they want to empower.
Accelerators are hubs for diversity. Most have quotas to ensure programs are made up of founders from all backgrounds, many pair with local organizations to support the communities where they’re based and some accelerators are specifically designed for minority founders (e.g., Techstars Equitech Accelerator) and women founders (e.g., Ogunte).
When investors spend time at an accelerator, they listen to brainstorming sessions, pitches and mentorship advice that includes a broad range of perspectives and opinions. They hear about the barriers that entrepreneurs from different groups face and learn what tools they need to overcome them. Likewise, they can take inspiration from the teams running accelerators, who are responsible for recruiting diverse founders, creating safe spaces and promoting equality through their programs.
At an accelerator, VCs not only get a more thorough understanding of the people they serve — they can also take the lessons around diversity back to their firms and implement them in the future. They can also bring more diverse startups into their portfolios now, because founders are more likely to trust their pledge for diversity if they’ve dedicated time and effort to an accelerator.
Boost serendipitous, strategic meetings
Investment is much like dating — VCs could go for 40 coffee meetings a week with founders, but only one or two really catch their eye. It’s not that there aren’t incredible startups out there, but VCs aren’t always placing themselves in the right crowd.
When a VC spends time at an accelerator, they’re in front of a number of talented founders at once. What’s more, they’re on an equal playing field as investors roll up their sleeves and take part in the accelerator activities. Investors can get a feel for founder personalities, hear soft pitches and share connections, ideas and commonalities that don’t naturally come up over Zoom. The same applies to founders, who can suss out investors’ priorities and ways of communicating and determine whether there’s business compatibility.
Accelerators pre-screen all their startups, too, meaning investors don’t have to perform the same level of due diligence as when meeting a founder cold. The result is a much higher quality of deal flow for VCs.
Investors will also be introduced to the greater startup ecosystem where the accelerator is located and network with other players (governing bodies, NGOs, universities) that could offer valuable support to their portfolio companies. This kind of serendipity is much harder (almost impossible) to curate via a phone call.
Reconnect with impact investing
Spending time in an accelerator isn’t just educational for investors, but it can also offer a sense of personal fulfillment that many VCs seek. Despite increased claims of purpose-driven investment, corporate VC firms are often more motivated by strategic payoffs, leaving individual VCs feeling like they’re not creating the political, societal or environmental change they believe in.
By rubbing shoulders with the people who are building companies that can enact change, investors can reignite their passion for impact. I’ve seen investors come to parallel18 and be reminded of their core mission.
Their recent deals might have been oriented toward investment trends like online gaming, but being part of founders’ discussion around niche areas like tech accessibility and cyberbullying can bring investors back to their ethical roots.
It’s easy as an investor to make arbitrary promises of impact. But an investor who spends time at an accelerator and connects with impact-driven founders has greater awareness and accountability. An accelerator offers a strong network of people that can keep investors honest.
VC is ultimately about people, not ideas, but in the current landscape, investors aren’t sufficiently getting to know founders or their experience. Being at an accelerator allows investors to empathize with entrepreneurs and establish a relationship beyond the checkbook — one that can encourage diversity, impact and success.