Accelerators bring clarity to entrepreneurs

Tech Page One

Technology accelerators help provide first-time founders with direction and resources to scale emerging ventures.

Accelerators bring clarity to entrepreneursTechnology accelerators help provide first-time founders with direction and resources to scale emerging ventures

By Ritika Puri - Tech Page One Mar 17 2014

Big data entrepreneurs need coaching, structure, connections and mentorship to get their new ventures off the ground. Company founders have historically relied on MBA programs for guidance, but today, the cost of business school can inhibit entrepreneurship.

Many MBA grads must take corporate jobs to pay off their student loan debt, instead of starting their own ventures.

Like many entrepreneurs, Lamarque Polvado started his business out of a personal struggle – not a desire to build a big data startup.

That’s where technology accelerators — formal programs that provide founders with business education, mentors, workspace and funding — enter the picture. They take a fraction of the time of a business school education but cover many of the same topics.

“We provide $120,000 funding per company and then surround them with mentors for three months,” says David Cohen, CEO and managing partner of Techstars, a leading U.S. accelerator. “We introduced the model that mentorship and network rather than capital are the most valuable resources for high-growth startups.”

Techstars started in 2007 and has provided a launch pad for more than 200 companies.

“The average company raises $1.6 million after Techstars,” says David Cohen. “We’ve had 33 acquisitions of our portfolio companies.”

The accelerator model helps transform high-potential ideas and teams into thriving, focused businesses.

Refining a vision

Take the story of Lamarque Polvado, founder and CEO of CareStarter — a health care information delivery system — as an example.

Like many entrepreneurs, Polvado started his business out of a personal struggle — not to build a big data startup. In his case, it was the impact that his daughter’s diagnosis with autism had on his family and his life. His goal was to simplify how health care providers, doctors and nonprofits exchanged health information.

“Big data wasn’t really on my mind when I started,” says Polvado.

An experienced entrepreneur, Polvado joined the Health Wildcatters accelerator program to help bring added perspective to his new venture. The program gave him more than just an additional viewpoint, however. Health Wildcatters helped him redefine and expand the vision behind his emerging venture.

“When you work with large amounts of data, you can become myopic, and assume that everyone understands the importance of big data. But they don’t,” Polvado says. “The mentors at Health Wildcatters helped us refine our message so that we could better explain what our product offers.”

Health Wildcatters helped Polvado refine his company’s product-market fit.

“In defining the product in a way that was understandable to customers and potential investors, we saw several places within the product design and the user interface where we could do a better job of presenting the information,” he says.

The accelerator process left Polvado’s original vision unchanged.

“We’re still out to change the way families dealing with a child’s chronic illness get information about all of the services their child needs,” explains Polvado. “What the accelerator program helped us do is refine the business model so that we can deliver that information free to the families who need it and help health care providers meet their population health and readmission goals.”

Understanding trade-offs

Accelerators give startups the infrastructure — funding, mentoring, training, networking, workspace and events — they need to get off the ground.

These benefits come with a price.

“The majority of accelerators takes equity from the startup and will become the company’s first investor and partner,” says Lucas Olmedo, co-founder of fligoo, a technology company that recommends gifts to consumers.

Olmedo and his team were part of NXTP Labs, a seed fund accelerator in Latin America.

“We learned how to build upon every area of our business, including how to build a strong team, keep motivation strong, discover new markets, build for scalability, and explore complementary business models,” he says.

Founders typically have a number of options for getting their businesses off the ground — the most common being self-funding, angel investment and experienced venture capitalists.

There are trade-offs to each of these options. An angel investor, for instance, may have more flexible terms for equity. A person who self-funds her business will retain total ownership over her company. An accelerator program will negotiate its equity stake in an early stage startup on a case-by-case basis.

Olmedo says the exchange for equity was worth the reward of participating in the NXTP accelerator program.

“NXTP Labs gave us the possibility of knowing much more about technology, marketing and business development,” he explains. “The program gave us visibility in the world and strong networking opportunities that we wouldn’t have otherwise had.”