Measuring the progress of startups in corporate acceleration models

In the last blog post I shed some light on the difference on how corporate incubators / accelerators measure progress, compared to young technology ventures.

This comparison demonstrated that while corporates tend to measure progress by looking at the big picture (KPIs) startups (especially first-time entrepreneurs) measure their progress by taking their development step by step.

Taking this difference into account the developmental progress of the startup in acceleration can be measured.

Using little steps to measure the journey

Steve Blank stated that startups need to figure out several unknowns when building the company.

Startups need overcome and solve the unknown needs and wants and guide it towards a viable business model. Especially for first-time entrepreneurs a lot of business aspects are “unknowns” and the accelerator has the responsibility to help the entrepreneur to understand the basics and provide mentorship (besides providing some basic financing, infrastrucuture and other intangible resources).

By pooling related key success factors a key performance indicator can be created which can be used to measure the developmental progress of startups in the acceleration program.

In order to successfully do so the corporate accelerator should include the Key Success Factors used by the startup to measure the performance of the acceleration. By doing so the accelerator can utilize the Key Success Factors of startups to support the Key Performance Indicators.

Which Key Success Factors should be utilized?

It is possible that startups focus on success factors which might not be needed at the current state of development. Here the accelerator needs to step in and provide guidance for the startup to focus on the crucial success factors. This professional guidance is one of the most important aspects for a successful acceleration.

In the end the accelerator needs to ensure that the key success factors support at least one of the nine following points.

The Key Success Factor should aid the startup in…:

1. … defining its mission, vision, and goals;
2. … understanding the market;
3. … establishing and building acquisition models and network;
4. … understanding and building internal processes;
5. … aggregating of entrepreneurial know-how;
6. … aggregating of managerial capacities, leadership, and team building;
7. … understanding of project management;
8. … actual development of the business, the product, and service;
9. … undergoing a reality check.

The reality check, especially in terms of market size, is an important aspect to execute. Young ventures tend to have a reality distortion in terms of what can be achieved and realize in the efficiency phase that their expectations might be unfunded.

Check also Marmer, M., Lasse Herrmann, B., Berman R., „Startup Genome Report- A new framework for understanding why startups succeed” Report version 1.1, Stanford University, 2012, page 58

Helping startups to understand where they stand in their development and what is possible to achieve in a relatively short timeframe is important feedback especially at the start of a venture!

Especially first-time entrepreneurs and very young startups which just joined a corporate acceleration program experience a hart reality check when joining an accelerator. Very quickly they have to learn that the meaning of a successful acceleration means that they will be provided support and needed resources, however they are fully responsible for their own progress and have to work hard for it.

Understanding Key Success Factors means understanding crucial parts of a startups internal context and being able to assess the wants and needs of the venture. This heuristic understanding forms a basis for efficiently and effectively supporting the startup on its search for a viable business model and the right product / market fit.

Overall the corporate acceleration performance can be visualized by pooling related startup success factors and by putting them into a matrix.
How this can look like I will explain in the nexts posts.

The basis for successful business acceleration

In the last blog post I explained the parallels between incubators, accelerators and company builders. This comparison demonstrated the difference in the length of support and the difference how they measure progress.

In order to successfully support a startup a supporting program needs to recognize that startups may see and understand success as well as progress differently.

Understanding of success / progress

A corporate business acceleration program aims at supporting a startup in finding and developing a viable, repeatable and successful business. But being corporate by nature most corporate acceleration models might experience difficulties in doing so.

The corporate accelerator needs to match its goals and interests with the ones of the startup in order to provide an efficient and effective program. It also needs to understand and include the entrepreneurial nature of the startup.

Only by doing so it aligns the efforts of both parties towards a sustainable progress.

Goals and interests of startups

The main goal for each venture is to find a scalable, repeatable and profitable business model.

Several major causes for young ventures to fail within the first four years of being founded have been identified. The two most important are:

• Incompetence or inexperience (46%)
• Lack of managerial experience (30%)

Other causes include a limited range in the business network of the startup as well as insufficient financial resources.

In 2014 the European Commission identified in a European Accelerator Assembly  the most important benefits a startup is looking for in an acceleration.
These interests included

1. Mentorship / Coaching / Feedback (over 80% of respondents)
2. Network / Alumni / Prestige (over 80% of respondents)
3. Investment / Financial Benefits (over 30% of respondents)
4. Connections to Investors (over 30% of respondents)

Guided mentoring, together with an extensive network of experts and coaches, and effective resource allocation can help to solve the incompetence / inexperience (managerial, entrepreneurial, etc.).

Goals and interests of an accelerator

Fast-paced markets, industry competition, and the fact that innovators establish a leading position in their markets, form the necessity for traditional companies to stay innovative in order to survive.
The globalization of markets and the digitalization of industries leads to increasing transparency, decreasing information and transaction costs.

This evolution of doing business amplifies the importance for innovation and forces established companies to scout for innovative trends, products and services.

Innovation inside of an existing company is much harder than a startup. Accelerators as one approach to identify and potentially insource innovation therefore have to scout for

• innovative / disruptive business models,
• innovative / disruptive products,
• innovative / disruptive services.

Comparison of interests

A comparison of the interests of accelerators and startups shows that they are matching. It demonstrates that a cooperation can generate a mutual benefit in the form of a win-win situation. If both parties are clear of the mutual benefit is not totally clear.

But the comparison also demonstrates that solely providing financing does not suffice to accelerate a startup.
This is falsely understood by some accelerators as a point of differentiation. More investments shall attract better startups.This however is not always the case. Wide and effective networks, excellent trainings and good mentors are other very important factors startups look for when being accelerated and have to be offered to increase the efficiency of the acceleration program.

Therefore accelerators need to be able to provide additional services and resources to successfully support innovative business models, products, or services. This effective provision of services and resources is what attracts talented ventures to join acceleration programs, together with a clear vision how the startup can benefit from being an acceleration program alumni.

Understanding the startup

Understanding the startup not only in terms of goals and interest but also in how it measures progress is the basis for a successful business acceleration.

Startups tend to measure their performance by measuring Key Success Factors. A Key Success Factor is those few things that must go well to ensure success for the organization, and must be given special and continual attention to ensure a high performance.

This means that startups tend to measure every single step they take. For first time entrepreneurs it can be progress to understand how a balance sheet works, or which legal aspects to consider when trading, etc.
Key Success Factors include what is essential for the achievement of a desired result. They describe an outcome and the result of an action.

Accelerators tend to measure their performance through Key Performance Indicators. Key Performance Indicators are a type of quantifiable measurement and are used to evaluate the progress of a specific activity in terms of effectiveness and efficiency.

They reflect the Key Success Factors of an established organization.

A KPI describes what is essential in order to successfully put an activity into execution. It hence describes the efficiency of an action and is quantifiable. Strict KPIs and rigid processes are the main obstacles for corporate or public companies to become agile and responsive innovators.

This demonstrates to some extent that established companies and startups measure progress differently. However the mutual benefit from business acceleration can help the corporate as well as the startup to grow faster, better and more efficiently.
What this means and how it can be achieved will be described in the next blog.