As a result of the pandemic, accelerators have moved operations fully remote to abide by social distancing. The shift has forced well-known programs like 500 Startups, Y Combinator and Techstars to go fully online, while encouraging existing venture capital firms to launch new digital-only fellowships like Cleo Capital and NextView Ventures.
Before the pandemic, accelerators could advertise their value by lending desk space once used by Airbnb, Twilio and Brex’s co-founders, plus a glitzy demo day. Now, stripped of their in-person element, the actual value of an accelerator program — and the network they provide — is being tested in new ways.
So a question remains for participating founders: Are they getting the benefits of what they thought they signed up for?
In the Zoom where it happened
The last thing Michael Vega-Sanz wanted to do was was join another Zoom get-together for entrepreneurs. But the car-sharing company he co-founded with twin brother Matthew was in the middle of a pivot, so they joined NextView Ventures’ inaugural remote accelerator program.
“I envisioned an accelerator with awkward happy hours, mass Zoom calls,” Vega-Sanz said. Fast-forward one month into the program, he says it “has been quite the opposite.”
Before joining NextView’s accelerator, Vega-Sanz did an in-person incubator at Babson College in Boston, but there’s “a lot less fluff” in being virtual, he told TechCrunch.
“[With in-person] the reality was you’d go to lunch, and by the time you drove over there and had all your side talk, small talk, chit-chat and actually got into the nitty-gritty of the event, there was a lot of time loss,” he said. “You could have been working for your company during that time.”
If possible, Vega-Sanz still recommends that first-time founders attend a physical accelerator instead of a virtual one for the energy it brings, even with the downside of useless events.
“If you’re a competitive person, like we were, you’ll see other companies kicking butt, getting praised in front of everybody,” he said. “I know this sounds a bit narcissistic, but we were like, ‘Damn, we really need to pick our game up.’” Peer competition might sound insignificant, but founders, much like investors, thrive on FOMO and rivalries.
Note that NextView invests $200,000 for an 8% equity stake, so it’s up to founders to figure out which objectives they want to achieve in return for some of that equity.
Bottom line, Vega-Sanz said it is good for more experienced founders to go virtual, and more first-time founders to be physically present and benefit from the competitive side of accelerators.
His advice works, as long as you are a founder with a business idea. That’s the exact opposite of the audience Cleo Capital’s Chrysalis fellowship was trying to attract.
Cleo Capital founding partner Sarah Kunst launched Chrysalis after seeing an exodus of tech talent due to COVID-19-related layoffs. Her goal was to put action behind Marc Andreessen’s high-flying post, asking — no, telling — the tech community that it’s time to build.
Chrysalis was designed to be a place for recently laid off individuals to brainstorm how, or even if, they wanted to start a business. No hard feelings if you get a job during the program and want to leave, Kunst added. It is free to attend, and Cleo Capital does not take any equity in the startups that are formed during the program.
Cheryl Kemp got an email from Cleo Capital while she was about to embark on a 30-mile bike ride. Because she was recently laid off, she applied. Within six weeks, Kemp went from having no job to being the CEO and co-founder of Indifit, an outdoor and virtual group fitness company.
“[The experience] depends on how you execute,” Kemp said. Chrysalis used Icebreaker, an app that randomly pairs you with another person and gives you prompts to discuss, to replicate “watercooler” conversations. Beyond those exercises, though, Kemp says that founders need to be intentional about investing a lot of time in virtual coffee chats.
“I walked out of that program with co-founders,” she said. “We got married effectively, we started a company together. I’m sharing a legally established equity stake with folks who I met in a virtual environment.” Kemp recommends the once a week happy hours to make sure vulnerability and honesty continues between team members. Cleo Capital’s Slack group still exists for founders to stay in touch.
Beyond camaraderie, Nicolas Hourcard, who is currently in the YC batch, says that online networking has helped his startup QuestDB form a stronger virtual business strategy.
“Many companies, including ours, will stick with a remote-first culture going forward,” he said. “This first YC remote batch is a great opportunity to find better ways to grow a remote-first business.”
Another founder, Max Rand, is working on Grow42, a service that analyzes data about startups, and is four weeks into Pioneer. The accelerator was created by former YC partner Daniel Gross and has been remote since inception. It pivoted from a Reddit-esque startup contest to win cash to an option for remote founders to create their first businesses.
Rand described Pioneer as a “Sparta for startups,” where founders vote, give feedback and set deadlines to force-rank companies within the cohort in terms of progress. He says the online-only aspect limits the amount of expert guidance he was promised, though.
“You don’t feel like you are some part of a community, you have much less attention and loyalty to an accelerator, and much less emotions and tips for you,” he said.
‘We’re learning this right now’
Michael Seibel, the CEO of Y Combinator, said that most of the new advice in the accelerator has been around fundraising over Zoom instead of in person. He said that the incubator brought in alumni from the previous winter batch to give advice on their experiences.
When asked for the biggest hurdle for the accelerator, Seibel said, “We’re learning this right now.”
An alleged YC graduate, who went under the pseudonym Peter Weyland, tweeted a thread against Y Combinator on Tuesday. TechCrunch reached out to the Twitter account for comment but did not immediately hear back. According to Garry Tan, a former YC partner, there’s no record of the individual in the network.
With that caveat, the alleged graduate’s broad critique was that YC has gotten too big for its own good. In its last batch, 197 companies “presented” on Demo Day. In 2005, 21 companies presented. The problem with a big batch is that founders must compete with others for advice and lose out on the community that comes with a tight-knit cohort.
Y Combinator’s response to this critique is that it has increased the number of partners proportionally to the growing batch sizes, saying that the ratio of companies to partners is lower now than in past years.
Another critique that the Twitter user pointed out is that the check sizes are too big, which impacts the actual innovation that happens in the accelerator.
Per YC, in 2007, the YC Standard deal was about $20,000 for 7% of a company. Now it’s $150,000 for 7%.
It’s true that it is less financially risky to become a founder through YC than it was over a decade ago, which is good for founders from lower socioeconomic backgrounds. The Twitter user argues that the opened door might be too wide: “If you didn’t have conviction in yourself or your product there’s no way you would have been there. For those who made the leap, it made success the only option.”
The utility of accelerators is a debate that flares up time and time again in Silicon Valley, albeit usually not as publicly. Broadly, though, their thoughts suggest that the biggest problem for founders in accelerators is not that they are remote, but that they are hinging their success on the name brand of another company.
Sammy Abdullah, the co-manager at Blossom Street Ventures, has a warning for founders: Be careful of all of the new virtual accelerators flooding the market. In Abdullah’s LinkedIn, he states that they are the “anti-VC.”
“The cost of launching an accelerator has fallen to zero because I don’t have to buy the real estate anymore,” he said. “It’s a terrible thing, at least when you had to have a location it takes a real time commitment.”
But at the end of the day, Abdullah argues that accelerators are never the make or break factor that makes a successful entrepreneur. No matter what, you still have to build.
“I don’t care what accelerator you come out of,” he said. “Whether it’s virtual or not makes even less of a difference.”