Food and agriculture technology startups are getting more support than ever before. So far in 2016, 17 new startup resources have already launched, adding to a total of 77 active programs dedicated to helping agritech entrepreneurs get off the ground and into the market.
Accelerators, originally made famous by technology-focused programs such as Y Combinator and TechStars, are one type of resource emerging specifically to support early-stage food and agritech ventures. So far in 2016, 13 new accelerators focused on food system ventures have launched, bringing the total number of accelerators in the ecosystem to 32.
Some of the accelerators have graduated numerous cohorts of well-funded startups and are expanding to other geographies. Others, though, are newly-established and have yet to graduate, or even launch, their first cohort.
With all these options for support, it’s becoming increasingly complicated for startups to navigate the landscape. When is the best time for a startup to join an accelerator? Which accelerator will best support their vision? What are the factors entrepreneurs should consider before applying?
Both old and new accelerators generally tout similar benefits, such as world-class mentors, access to leading agritech investors, guaranteed funding, and a community of like-minded innovators.
But when it’s not always clear what benefits such as a “mentor network” really mean, how does an entrepreneur know where to begin and what to look for?
In an effort to provide some feedback on what to look for in an accelerator, we surveyed 13 startups that have taken part in nine accelerators to get their feedback and main takeaways. For balance, two of these accelerators were general sector-agnostic accelerators, while the other 11 all identified food or agritech as a focus sector.
First, what is an accelerator?
The term “accelerator” is overused and, unfortunately, poorly understood. In hopes of bringing some clarity to the term, we proposed the following definition for accelerators in a recent report:
Set duration program where a cohort of selected early-stage companies get access to a business development curriculum, mentors, and/or investor network.
According to the report, on average, accelerators in the food system take 4-9% equity in exchange for approximately $50k and an additional in-kind value of services given to the startup. Some accelerators offer more capital (e.g., $100k). On average, the accelerator curricula run for four months each, and the cohort comprises 8-9 companies.
However, we have found that agritech accelerators vary in the following ways:
- Investment terms — including the amount of money invested, and the % equity stake taken — if investment is indeed offered at all.
- The quality, size, composition, and degree of interaction with the network on offer.
- The location, duration, and makeup of the program, and whether it’s entirely remote, in-person, or a combination.
- The stage, and area(s) of focus within the food system, of accepted startups into the cohort.
There is no one-size-fits-all model for accelerators, especially when it comes to startups in the food system. Some startups may need access to farmers, more capital, or longer timeframes, while others may need access to distribution channels or technical expertise. Each startup needs to carefully consider their goals and current status when joining an accelerator.
This survey revealed that some startups do not ask enough questions before they join a program, so entrepreneurs must make sure they understand the process fully before accepting a place on an agritech accelerator.
Hopefully, learning from the good, bad, and ugly experiences of accelerator graduates will help future agritech entrepreneurs know what questions to ask when considering this type of support.
The Good, Bad, and Ugly of Agritech Accelerators
1. TERMS
Investment is a key part of joining an accelerator for startups, whether it’s investment from the accelerator program or investors that are introduced to the startups as a result of the program. The amount of investment startups raise throughout the program is a key metric of success for many accelerators too. As mentioned above, some accelerators set fixed terms to govern the amount of money they invest in, and percent of equity they take from, every startup that joins their program. Other accelerators do not offer funding, or they negotiate the terms on a case-by-case basis. This variance
What to Look For (The Good):
- Terms set upfront before the program starts
- The ability to negotiate terms to fit your stage, previous valuations, etc.
- The option to decline investment
When to Think Twice (The Bad):
- The accelerator controls the whole fundraising process — sometimes for a fee — but does not start actively fundraising until after demo day.
“This process has drawn on,” said one startup. “There hasn’t been much drive from their end to close quickly. I’m not sure if this was by design to mitigate risk, or they were busy. I don’t know the norm so I can’t really compare, but closing the investment round has been really frustrating and slow.”
- Aggressive terms that undervalue the company based on previous rounds.
- Not enough capital based on your stage and previous raises to make it worth the time.
- No terms upfront.
- No offer of investment at all.
Run for the Hills (The Ugly):
- Unclear terms from the outset
One startup complained that they were presented with terms three-quarters of the way through the program that were non-negotiable and involved the accelerator wanting rights to invest in and take a certain portion of future rounds. The startup told us, “to receive this contract half-way through was a bit of a slap in the face and it seemed like they were trying to push us around a bit.” Another startup complained that it wasn’t clear from the start that investment was limited to a set number of startups within the cohort, or that only the demo day “winners” would receive funding.
2. NETWORK
Many accelerators pride themselves on the network they open up to their cohorts. In the best cases, accelerators provide startups with customers, investors, mentors and advisors, and collaborators. The startups we spoke with said that the potential for them to raise funding in the wake of the program, and to connect with customers was one of the most beneficial elements of being part of an accelerator and its network. However, not all networks are as high quality and useful as they may claim to be.
What to Look For (The Good):
- A relevant network of experts with specific experience in food and agritech, and ideally in particular subsectors of interest
“I would recommend this accelerator any day of the week. And I’d recommend it specifically for agtech because of the contacts they have in the agriculture industry. They are the experts. Having a domain-focused accelerator was really important,” said one agritech accelerator graduate.
- Lots of face-time with the network, especially investors.
One accelerator had a practice demo day every week in front of real investors who gave feedback. Startups felt this was hugely helpful, not only in refining their pitch but also in getting to know potential investors before it was time to raise money.
- Structured, incentivized access to a high-quality mentor network.
Accelerators may find it challenging to incentivize high-quality mentors to spend time (for free) with startups. To avoid this problem, one accelerator gives chosen mentors part of their equity stake in the startup. The mentors then have a clear incentive to remain continually involved with them.
- Introductions by the accelerator team to relevant network, including potential board members, team members, and service providers (e.g. legal advice, graphic design).
“Having access to specific services via the accelerator, like autocad, graphic designers or even lawyers to start writing up the legal documents, would have been really helpful so that once you know what you need, you can just get it done. [These services] wouldn’t have to be free, as at that point you’re desperate and will take whatever you can get. I would have even given shares away at that point just to get things done and move forward.”
When to Think Twice (The Bad):
- Audience at pitch day not relevant or a good fit for the startups in question.
- No official mentor assigned or structured access to a mentor network.
- No structure to guide interactions between startups and network.
Run for the Hills (The Ugly)
- Irrelevant mentor network (i.e., inexperienced, lack of domain expertise).
Some startups said they did not get assigned mentors and instead had weekly calls with the operating team of the accelerator but the operating team often didn’t have the domain expertise to be that useful.
3. PROGRAM
There are many different program models for accelerators, but largely they focus on a series of talks, presentations, or lectures designed to help startups develop the business skills necessary to scale their company. Some programs may be online (e.g., via webinars or video conferencing), while others are entirely in-person. As expected, we received a lot of feedback on the programs’ curricula, which were influenced by the stage of the startups accepted into the cohort.
What to Look For (The Good):
- A combination of in-person sessions and time to work remotely.
A few startups told us that while in-person days are really intense and therefore valuable, it helps to have space between these sessions so they can put what they’ve learned into practice before coming back again to focus on the next milestone.
- In-person sessions that allow startups to compare notes with each other and learn from the expertise within the cohort
- Lab access and domain-specific support for product development
- A small cohort (<10) to feel more unique and supported
- Optional classes, so you can skip sessions that may not be relevant to your stage.
- Lots of support for developing and practicing your investor pitch.
When to Think Twice (The Bad):
- Lectures by guest speakers from overseas that speak over Skype, or lectures with too much “talking at you” and not enough time to engage and interact.
- Too much focus on product and pitch, and not enough on necessary operational logistics, like human resources, incorporating a company, and valuation.
A few startups suggested that accelerators with in-house capabilities to help with some of the operational logistics would be hugely beneficial, even if they were for hire rather than included as part of the programming.
- Programming focused only on one stage of startup, rather than tailored to the varied stages within the cohort.
Many startups felt that classes were too elementary, as they had been created for much earlier stage companies.
“The cohort was a mix of companies at different stages, so the curriculum had to cater to the lowest common denominator, which is early stage. Segmenting by stage could really help,” said one startup. Catering to mixed stage startups also limited the amount of relevant and useful peer-to-peer interaction.
- Not enough in-person workshops to share candid feedback with peers and create a community.
- Forcing function to scale.
The accelerator model was developed, generally, for software companies looking to raise venture capital and scale to 10x returns in a few years. However, this model may not be desirable for all companies. Some startups found that the accelerator pushed them to scale when they weren’t ready, or even when scaling was not part of their vision.
- Lack of domain-specific support.
Startups found general business advice to be useful but suggested that the curriculum needs to appreciate the challenges of the agriculture industry, such as timeframes needed to complete trials or get user feedback to incorporate into the next development iteration. Logistics must also consider the agriculture domain. For example, classes between 9am and 11am may not be suitable considering farmers’ time frames are 6am-3pm, complained one startup.
Run for the Hills (The Ugly)
- Poor internal communication
One startup complained that the accelerator organizers were not up-to-date with the progress of each startup, which often meant covering old ground again in meetings and interactions.
4. LOCATION
Various states in the US are competing to become the leading hub for agritech innovation, and launching an accelerator has been one way to try to achieve this. While there are a growing number of fully or partially remote accelerator programs, many still offer a physical location or office space for the startups to work from during the program. Many of the startups we talked to described location, whether full time or part time, as a factor in their overall experience of the accelerator.
What to Look For (The Good):
- Access to relevant local businesses.
For example, an accelerator based in the MidWest of the US is good for a startup focused on commodity crops; one based in the central valley of California will be better for horticulture and permanent crop-focused technologies; and one near San Francisco will be good for tapping into the investor community of Silicon Valley.
- Access to land or local universities and facilities for field trials and other product testing.
When to Think Twice (The Bad):
- Some startups complained that the physical location was remote and hard to get to, meaning they wasted time journeying back and forth.
- Location can limit network and adoption opportunities to those within that state or region.
What do you think? Have you recently graduated from an accelerator? We want to hear from you! Email [email protected].
