There are only two accelerators that European VCs care about
According to around 20 leading European VCs, only two accelerators are really worth launching: Entrepreneur First and Y Combinator.
The VCs flagged these programs as the only ones “still capable of attracting incredible talent”, with one investor going so far as to suggest that all others are “a waste of the founders’ time”.
More than half of the VCs Sifted spoke to had a good word to say about London-based “talent investor” Entrepreneur First (EF): “[It has] has been brilliant in providing an actionable pathway both in connecting founders with potential co-founders, but also in commercializing academic research,” says Carlos Eduardo Espinal, Partner at Seedcamp.
Just under a third say they are watching Silicon Valley’s Y Combinator (YC) closely, in part because it has done such a good job of maintaining its world-class reputation. “YC has done an amazing job building their product and brand as THE best accelerator,” says Sam Cash, Partner at Project A Ventures.
But some investors think even EF and YC haven’t cut the mustard, with one saying the accelerator ecosystem “It doesn’t mean anything anymore.” A total of 23 accelerators received at least one positive mention from the VCs we interviewed – and considering there are hundreds of them across the continent, that seems pretty damning.
So, 17 years after the launch of Y Combinator, why are top VCs paying attention to so few accelerators? And which ones stand out? Continue reading.
Advantages and disadvantages
There is a plot more accelerators than there used to be in Europe. At the same time, several VCs say they are needed less.
“I would say the [YC] the brand has eroded slightly as cohort sizes now number in the hundreds.
When the European ecosystem was immature and just beginning to flourish, accelerators held a “special place”, says one investor, but this relevance has “diminished over time”. “With struggling markets, they are becoming ‘fashionable’ again,” they continue, but the benefits of early support for sponsors are outweighed by high operational costs, which”can be a distraction from basic investment activity for many”.
Some accelerators have also increased the size of their cohorts and, as a result, have become less selective, according to some VCs. Techstars and Plug and Play (PNP) are guilty of this, some say – as is YC, as Sam Cash adds a caveat to his praise: “I would say the [YC] the brand has eroded slightly as cohort sizes now number in the hundreds.
Despite this, graduating from YC is still often a shortcut to meeting many VCs. But that’s not the case for other accelerators, says one investor: “Whether [a startup] graduating from a program does not influence whether we take the meeting or invest at all.
One investor’s recent experience in an accelerator revealed that it was “losing its flavor, and I don’t think it ever really took off in Europe.” Emma Phillips, partner at LocalGlobe, echoes the sentiment, saying “we still don’t have that YC brand that top founders want to pass here.”
That said, Emma, along with several other VCs, points out that accelerators play an important role in increasing the diversity of the startup ecosystem. “When managed and managed well, [accelerators] can be great to give a broader set of diverse talent the opportunity to start a business, form a group of (often relevant) peers, and gain access to capital (or at least venture capital intros)” , she adds.
Top Five VC Accelerators
Entrepreneur First (EF)
To concentrate: Individuals with founding potential
Portfolio companies: More than 600 since 2011
Average investment and equity taken: £80,000 for 10% equity in Berlin, London and Paris
Notable alumni: Accurx, Magic Pony Technology (acquired by Twitter), Sonantic (acquired by Spotify)
EF defines itself as a “talent investor” rather than an accelerator, as it does not focus on startups in need of development, but on individuals with the potential to become strong founders. Applicants don’t even have to have an idea for a business. The program is designed to help participants find co-founders and then launch a startup together from scratch. So far, 626 companies were trained in the program, of which 450 are still in progress.
It’s free to apply and participate, and EF offers a stipend for living expenses – £2,000 per month in London, €2,000 per month in Berlin and Paris and roughly the same in Singapore, Bangalore and Toronto programs. He won’t share the number of applications received or the likelihood of someone joining the program, but he says around 30% of applicants will make it to the interview stage.
To concentrate: Pre-Series A companies, independent of the sector
Portfolio companies: Over 3,000 since 2005
Average investment and equity taken: $500,000 in each startup, split between $125,000 for 7% and $375,000 on an uncapped vault with a most favored nation provision
Notable alumni: Stripe, Monzo and Airbnb
Based in San Francisco, Y Combinator is one of the most well-known accelerators for startups and investors. Its semester-long, three-month program offers one-on-one and group office hours, during which startups can get advice and ideas, attend interviews with industry experts, and access an internal networking platform.
Each successful startup receives $500,000 upon acceptance, or $125,000 for 7% equity, and the remaining $375,000 on an uncapped vault with a most favored nation (MFN) provision. A safe, where early stage startups receive an investment that converts into equity after an agreed valuation on a certain date, would typically have a valuation cap so investors get more for their money if a company is valued higher than the agreed figure. On an uncapped vault, however, there is no such limit and the shares convert at the rate of the realized valuation. The MFN provision means that the company cannot offer a better deal to subsequent investors – so if a YC-certified company wants to offer a second investor more attractive terms, it should offer YC at least the same terms before be able to close this. second deal.
The accelerator introduced these new terms earlier this year, with the hope that “it removes the immediate pressure [on startups] raise funds and agree to less than favorable terms”.
Given its reputation, it is in high demand: out of more than 30,000 applicants, about 2% pass each year. Startups are not expected to pay for any step: the application process is free, as is participation in the program itself.
Wise Guys Startup
To concentrate: B2B through SaaS, fintech, cybersecurity, AR/VR, sustainability and industry 4.0
Portfolio companies: More than 300 since 2012
Average investment and equity taken: €90k up to 9% of equity
Notable alumni: AR/VR start Ready player mefintech Ondato and software company StepShot
Startup Wise Guys offers five-month industry programs across Europe, which can be in-person or remote. They focus on scaling and sales and mainly accept B2B startups in various industries. Around 200-300 startups apply for each program – for just 10 places.
As long as they meet a set of performance goals throughout the largely online process, each startup in the program receives an investment of €90,000. Around 35% of applicants pass due diligence, with 20-30 companies invited to “Bootcamps”, which are usually the last step before a decision.
Although the application process is free for founders – and those who are too early are offered a place in a free pre-accelerator course – companies selected for the program are expected to cover the cost, which is between 25 and 30,000 €. , on the investment granted to them.
To concentrate: Industry independent, for pre-seed founders from all over the world.
Portfolio companies: 3,300 since 2006
Average investment and equity taken: $20,000 cash up front and an optional convertible note of $100,000, for 6% of fully diluted share capital – that is, the number of shares remaining after all conversion opportunities, such as employee stock options and convertible bonds, have expired
Notable alumni: Sendbird API chat, Safello cryptocurrency platform and broker and cloud computing company Digital Ocean
Techstars’ three-month programs admit a cohort of over 500 startups each year and are either industry-specific (like the Norway-based Energy Program, which anyone can apply to) or industry-neutral and industry-specific. a place (like the Stockholm program). focusing on startups in the Nordic-Baltic ecosystem). Thousands of companies apply every year.
Applicants can flag a first and second choice program to increase their chances of landing one, and can reapply on the next admission if unsuccessful. Accelerators based in Europe – in Germany, Sweden, UK, Italy, Norway and the Netherlands – are in person, with a hybrid program in France.
Each founder accepted into the accelerator gets the same funding deal: $120,000 consisting of $20,000 in cash and $100,000 in convertible notes, with Techstars taking 6% equity, which they receive immediately before the next funding shares of the company of $250,000 or more. . So far, 22 unicorns have graduated from the program.
Plug in and use
To concentrate: At any stage, according to the needs of its corporate partners
Portfolio companies: 5,269 between 2013-21
Average investment and equity taken: No equity is taken by the accelerator. Plug and Play’s VC arm writes checks between $50,000 and $500,000
Notable alumni: BetterVet pet care provider, DropBox and PayPal online file storage
Plug and Play (PNP) is an early-stage venture capital firm with a separate accelerator program. It partners with large corporations, governments, and NGOs, who have issues, barriers, or inefficient processes they need help with — and seeks startups developing services designed to meet those needs. The accelerator then accompanies the teams to produce a proof of concept to show to partner organisations.
It receives thousands of applications for its sector programs. It runs programs around the world, including Germany, France, Spain, Austria, Italy and the Netherlands. However, most of the startups selected were scouted by the team to meet the needs of a partner, who selects the companies they will work with in the accelerator.
Sadia Nowshin is an editorial assistant at Sifted. She tweets from @sadianowshin_