October 25, 2019

Thoughts on Accelerators (Especially Newchip)

Simon Le Pine @Lakebed_io

A marketing person from Newchip has reached out and expressed interest in me/Lakebed joining their next accelerator cohort. They don't have any pricing on their site and in some places imply there is no cost to participants and in other places they imply there is a cost but not what the cost is. Has anyone been through this or any other accelerator? Any thoughts on questions to ask? Red flags to look for? Beyond accountability, which I already have in my co-founders/advisors, what is the value of a remote accelerator?

Any input/thoughts would be very greatly appreciated, thank you.

  1. 4

    Thanks for helping me discover @IndieHackers Simon!

    How We Find Companies:
    We use a mix of machine learning to find founders with great startups (even ones in stealth mode or founders that just sold startups that are 'likely' to be working on new ones) alongside data from TechCrunch, Crunchbase, AngelList, PitchBook, LinkedIn, pitch contest, conferences, and PR releases in niche industries.

    How We're Different:
    We launched the accelerator in 2019 but we've been helping startups with fundraising for years as a company as we built the top app in the app store for startups and helped companies raise $20M via it.

    As an accelerator we're focused on partnerships and co-investors. We have 100+ partner funds in our network that work with our own fund to sponsor companies into our program.

    So rather than taking 10 companies 1-2 times per year, and having a 3-4 person team a few months per year, we're able to operate on a university type model and launch about 10 cohorts per year with 30-50 companies per cohort divided into Pre-Seed, Seed, and Series A.

    About 50% of the companies accepted into our program every cohort receive a full sponsorship (100% scholarship) in exchange for a warrant to invest $50-$250k at a set valuation (usually between $3-$10M).

    The majority of these are Seed and Series A, we rarely give a full scholarship to Pre-Seed as it's too early stage (we're transparent on the requirements for each program on the site) and there is little traction- so if we do it's because they are exited founders in Pre-Seed.

    The Reality:
    We receive 500+ applications per month so only the top 25 startups with the most traction get a full sponsorship offer, whereas the top 25-50 get about an 80%~ sponsorship and the remaining top 50-100 gets access to our online bootcamp to prepare them for a full accelerator in 1-3 months (we rank companies by traction and KPI's).

    Everyone Else?
    Anyone not accepted or offered a partial scholarship is asked to apply again later once they have traction or after completing the bootcamp, and many do. As for the cost- what our funds pay in sponsorship to the accelerator is $15k-$20k per startup depending on stage, as our programs run from 3-6 months in length.

    What's in it for them and us? $ Rather than write you a $1M check, it's a smaller bet to see if the company is worthwhile for them to invest millions down the line. Seed funding has been broken for awhile but we built this model to help as many companies as possible.

    Lastly, for the 50% of companies that don't have enough traction for a full scholarship/only receive a partial scholarship, typically there is a remaining tuition of $2k-$5k~ and typically their investors cover this or they pay it out in payments over 6 months.

    Why We're Different / Our Goal:
    With only about 1,000 companies graduating accelerators each year but with 25 million startups launching, we wanted to create a model to fix the outdated 19th century school lecture model and doubled the graduation rate of companies.

    So we invested a few million into building an online module based curriculum, hiring top mentors, and combining 30+ years of entrepreneurship (10+ exits) into a remote, after-'work' type of accelerator that is accessible for everyone everywhere.

    We've made our bootcamp program entirely free to early stage founders with less than $50k raised or $50k in revenue, and we're continuing to see how we can help offer the basic essentials and community to the earliest stage founders that are nowhere near a point where they can be "accelerated".

    We're here to actually "accelerate" the top companies, however a partial scholarship model for many of our companies allows us to 1. help founders that would not receive help otherwise and 2. manage our risk of working with a company for zero-equity that has little traction and runway, and 3. often we're helping do "turn-arounds" for these startups.

    By turn-around I mean they raised $500k-$1m, are making a major pivot, or need an active investor to actually make referrals, partnerships, grow, and sometimes lay off staff. I've personally turned around about 10 startups this year from next to no runway and burning investor cash (some about to go out of business) to profitability and successful rounds.

    It requires a lot of work on our end and there are plenty of other accelerators out there that only help a few companies per year. I encourage all of our founders to apply with our accelerator partners (helping startups isn't competitive for us), however the reality is most of them are not going to get into Y-combinator and even if they did, they wouldn't move.

    Does that mean they are a bad company/bad founder/bad investment? Not really. Many of them aren't traditional VC investable (spray and pray 1-10 hope succeeds) or don't have the network to get in.

    However, our fund and many of our partners are very oriented towards building value driven companies that are acquirable and we've led a few acquisitions this year for founders- we even partner with PE firms and corporate VC arms that are looking at our co's to acquire and they even send us companies that they want to acquire and our program is the due diligence.

    For companies that do have to have some skin in the game for us (ie have to cover a percent of their own tuition), the average company sees anywhere between 50-100x return on their tuition during the program in funding alone, this is because compared to other programs we are fundraising and funding oriented (you have traction, let's help you fund it to grow).

    The greatest challenges we honestly have is when our entrepreneurs do something stupid - such as recently we had a entrepreneur get a $500k term sheet, not tell us about it, and they kick it back and ask for $1M 'if VC really believed in them' of course the VC pulled out.

    Also had a founder ruin a deal by refusing anything less than $250k salary for a pre-seed stage company. Many of our founders consider our accelerator to be a MBA of sorts in startup funding and being a CEO that can scale, and often we do just that in helping "round out" technical founders into being able to fundraise, or non-technical founders into being able to vet and hire technical teams, and build product, etc.

    All in all, we do our best to help founders, but founders are our own worst enemies (even me). So we fight to equip founders with every skill, tool, and knowledge set we can, and we double down on building a startup driven cultural mindset (not always traditional venture either as many of our companies don't need to live on the rails spending more than they can afford).

    I recommend hearing from our founders here:
    https://launch.newchip.com/reviews-and-testimonials/

    1. 2

      Wow! Lots of info there. I'll take some time to process it.

      Glad I helped you discover a new community. Sorry the to e of my posts is a bit negative/pessimistic, I'm constantly working on some personal things that negatively impact my views/communication.

    2. 1

      This comment was deleted 5 months ago.

  2. 2

    I have an opinion and it is not kind. The paid mentor model is parasitic in my view. Like Vistage @$2,500 per month to have a facilitator network and manage peer accountability.

    In my view, if you cannot find a patient mentor who can help you shape your position to be attractive to the wide range of startup investors, paying to learn will not be effective. The entire Newchip marketing experience is laughable. Scholarship means tuition and assumes you need to be educated.

    The startup market is full of vipers, rats and parasitic vampires. Their are more than enough no cost resources available through the SBA, etc. If you are looking for easy money - keep looking.

    Just my opinion. Concept, formation, Reg D, MVP and launch and get some revenue. Reg A or round B etc.

    1. 2

      I went through the pre-seed accelerator and ran across this today so thought I’d speak on my experience what I liked and what I didn’t like -

      1. Unlike many accels they don’t make an investment on Day 1 - they work with you and 3-6 months in they invest in the companies they like (imo the companions that do the work, keep in loop and have some traction- co’s that didn’t show up for class didn’t get invstmnt).
      • I actually got into a well renowned program but I didn’t want to move my company, our cost would double for talent in a big city. Meaning our round would need to double too. I didn’t like that I had to work more for the investment from newchip but it eventually paid off.
      1. I received an investment commitment from them after around 3 months in and they helped me circle up a million for our round, we’re closing the round next month- they helped me with terms, leading and negotiating the round.

      2. I received a scholarship to the program and paid $2k in the remaining tuition, they did a payment plan for me so it was like around $300 a month- someone else in my group was $4k and someone else was totally free on a warrant (they had a lot more raised than me I came in with only a little traction so I get it).

      • I personally liked the model because I didn’t have to give a huge amount of equity, the other program I was accepted into wanted around 7% for $150k. Josh and Ryan helped me get my whole $1mil round down to 20% and I liked the investors. Very real. Down to earth and honest. Didn’t feel like they wanted to screw me like some vc’s I’ve met. They do want to make a return though so we spent a lot of time on exit strategy and market positioning.

      • I didn’t talk to Ryan or Josh at all really in the program and thought I would actually. I was disappointed at first. they do weekly pitch deck workshops with the teams but I only really worked with my mentor 1-1 and in our groups until the end and then after the expo they were suddenly involved and were negotiating the round, it happened really fast but it worked. They immediately knew what I was doing, how it worked. My mentor must have taken really good notes because they knew my challenges and everything.

      So yeah overall it cost me $2k over a few months but it was worth it to not sell a 1/3 of my company- on a pure hourly basis I see where the scholarship comes and the warrant for the fund because it was a lot of time and they can’t have made a single dollar except the investment- I calculated it all up and if they were making less than my assistant per hour they’d have lost $1k on my tuition so I don’t think they are in this for $.

      Other Co’s in My Group:

      1. Another company in my mastermind got a full scholarship and paid nothing, they just negotiated a warrant in them.

      2. Another company in my group didn’t get an investment from them and wasn’t crazy happy about that but they also didn’t show up half the time so I get it.

      3. Another company actually after going through the program realized they don’t have a co and shutdown- that founder joined another company which was cool tho.

      I think its really based on how much you put in tbh. The only thing that could have been better was less self accountability and Newchip being more on our asses- I gave some feedback to the director on that.

      I busted my ass because thats who I am but I think a few co’s that didn’t get investment would have if they’d been made to keep up on the program coursework and attend more or been kicked out otherwise.

      But maybe thats the model? Maybe they want to invest in us that actually do the work. Either way I was happy with my experience and I’d do it again.

      Out of my mastermind group of 8 only 3 of us got term sheets from Newchip so its not a guarantee but even if I hadn’t got investment it was worth it.

      Funny enough we had another co that didn’t get money from them but they used what they learned and raised another mil from their previous investors, paid their full tuition and said thanks and just bounced out like month 2.

      So everyones experience is really based on what they put in, I busted my ass and we hit our goals, so they invested in us, my recommendation would be if you get in try it out, they have a guarantee in the contract (I literally read it and its there) so not much to lost.

      My background I’ve had 2 previous startups so I thought I knew everything but you can teach an old dog new tricks. Probably what I got most out of it was it really cemented my CEO persona, what I should be doing, they helped me establish a firm roadmap of what worked in the past for me and helped me overcome a few of my own faults.

      Thats about it, I givem a 9/10 on my experience and only last advice is build in more accountability for founders that need that extra push.

      On Reg A I had considered that but after researching it i saw that only a handful of Reg A’s have ever been funded compared to just reg d.

      I talked to Newchip about it as they had experience in crowdfunding and were experts there and they advised that most of the Reg A’s were spending hundreds of thousands in marketing and were doing really poorly in the market.

      I forgot in my other post a few of the co’s we worked with did do crowdfunding and I highly recommend Wefunder out of the whole group- I got to see how their campaigns went on different platforms and from what I could see wefunder experience was the best (thats my limited 3rd party view outside in tho)

  3. 2

    Our experience with newchip was that it was waste of time and money. The only value you can derive is to observe what bad automation looks like.

  4. 2

    Concerning the price :

    Our fund and venture partners, based on your traction and interest in investing in you, subsidize up to 100% of program cost in exchange for a warrant option to invest up to $250,000 into you.

    The cost to run each cohort equity-free for mentors and advisors is $20,000 per company and we offer a limited number of 100% full sponsorships to the top applicants.

    After these scholarships are exhausted, we offer a 60-80% scholarships based on traction, allowing the remaining tuition to be broken down into monthly payments during the accelerator.

    We believe advisors and mentors should get paid for their work and program tuition goes toward this as well as program materials, software licensing, and the cost to run the showcase.

    We do our best to work with every founder and startup budget, so we offer limited scholarships to each cohort - make sure to apply ASAP and ask in your interview about them.

    Our data shows that Founders with skin in the game, especially when it's equity-free, have a higher graduation rate than Founder's with no skin in the game.

    The fund is simple in that it invest in the top graduates of each cohort at the terms of their round alongside co-investors- unlike programs that have non-negotiable terms.

    Most accelerators invest up front in a handful of startups per year and taking a large chunk of equity- we actually guarantee our warrants if you don't get an investment offer, you can void it.

    We focus on building a mutually beneficial relationship with you and invest in you if you meet our due diligence requirements and graduate our program.

    Regardless of whether we invest, included in accelerator tuition is connecting to investors and venture capital firms via our quarterly investor expo - it's basically a demo week.

    It's as easy as that - not everyone chooses to utilize us and that's okay, not everyone is a fit for our program or investor network either.

    We created our accelerator to help as many startups as possible and that's what our mission is.

  5. 2

    I just filled out an application, they are suggesting that if I am 'good enough', they will get back to me in 3 days. We are all skeptical of these organizations and should be. I'd love to list all of the scams that organizations/people have tried to pull on me. I am going to ask this question even though I think I know the answer... have any of you gotten any investment money from Angel Groups, or have any of you had any success with these online investment sites? My experience with Angel Groups, it is limited, is that most of the Angels don't really seem interested in actual investing or want to put in $1000!

    1. 2

      I hate scams as much as the next guy, we started our equity crowdfunding platform to combat them actually and help founders, so many founders don’t know how to vet investors, let alone attract and close them and we believed the crowd would help. We did that for nearly 4 years and sold that platform recently. We now run an accelerator where we work 1-1 with companies to help them and we love what we do.

    2. 1

      I never ended up applying. I'm weary of anyone who'll invest without seeing a pitch deck or asking some hard questions. I'm also weary of giving up equity/votes/control to anyone who doesn't ask questions.

      I've had at least two ideas that will require investment to move forward. I've just passed on those ideas because it's too much work. Maybe I'll revisit them when I have a proven track record.

      Good luck and let me know if I can help,

  6. 2

    I talked to Newchip on Friday with my co-founder. There is indeed a $3k price tag on their pre-seed accelerator program. On the other hand, it looks to me that you can learn a lot from them even by studying the things that they offer for free. We were given free access to their Bootcamp program.

    1. 1

      We actually started off ourselves in the bootcamp, thats what sold us on the program as the free bootcamp helped us raise our friend and fam round.

    2. 1

      This comment was deleted 5 months ago.

  7. 2

    We received the same email a couple days ago.

  8. 2

    I receive the same emails from Newchip. It seems to be some automated campaign but maybe I'm mistaken. So far, I haven't reached out to them. So also curious if someone here has experience with them?

    1. 1

      Interesting! That makes me feel less special...

      In all seriousness, that makes me skeptical of the value they provide.

    2. 1

      This comment was deleted 5 months ago.

  9. 1

    I went through the pre-seed accelerator and ran across this today so thought I’d speak on my experience what I liked and what I didn’t like -

    1. Unlike many accels they don’t make an investment on Day 1 - they work with you and 3-6 months in they invest in the companies they like (imo the companions that do the work, keep in loop and have some traction- co’s that didn’t show up for class didn’t get invstmnt).
    • I actually got into a well renowned program but I didn’t want to move my company, our cost would double for talent in a big city. Meaning our round would need to double too. I didn’t like that I had to work more for the investment from newchip but it eventually paid off.
    1. I received an investment commitment from them after around 3 months in and they helped me circle up a million for our round, we’re closing the round next month- they helped me with terms, leading and negotiating the round.

    2. I received a scholarship to the program and paid $2k in the remaining tuition, they did a payment plan for me so it was like around $300 a month- someone else in my group was $4k and someone else was totally free on a warrant (they had a lot more raised than me I came in with only a little traction so I get it).

    • I personally liked the model because I didn’t have to give a huge amount of equity, the other program I was accepted into wanted around 7% for $150k. Josh and Ryan helped me get my whole $1mil round down to 20% and I liked the investors. Very real. Down to earth and honest. Didn’t feel like they wanted to screw me like some vc’s I’ve met. They do want to make a return though so we spent a lot of time on exit strategy and market positioning.

    • I didn’t talk to Ryan or Josh at all really in the program and thought I would actually. I was disappointed at first. they do weekly pitch deck workshops with the teams but I only really worked with my mentor 1-1 and in our groups until the end and then after the expo they were suddenly involved and were negotiating the round, it happened really fast but it worked. They immediately knew what I was doing, how it worked. My mentor must have taken really good notes because they knew my challenges and everything.

    So yeah overall it cost me $2k over a few months but it was worth it to not sell a 1/3 of my company- on a pure hourly basis I see where the scholarship comes and the warrant for the fund because it was a lot of time and they can’t have made a single dollar except the investment- I calculated it all up and if they were making less than my assistant per hour they’d have lost $1k on my tuition so I don’t think they are in this for $.

    Other Co’s in My Group:

    1. Another company in my mastermind got a full scholarship and paid nothing, they just negotiated a warrant in them.

    2. Another company in my group didn’t get an investment from them and wasn’t crazy happy about that but they also didn’t show up half the time so I get it.

    3. Another company actually after going through the program realized they don’t have a co and shutdown- that founder joined another company which was cool tho.

    I think its really based on how much you put in tbh. The only thing that could have been better was less self accountability and Newchip being more on our asses- I gave some feedback to the director on that.

    I busted my ass because thats who I am but I think a few co’s that didn’t get investment would have if they’d been made to keep up on the program coursework and attend more or been kicked out otherwise.

    But maybe thats the model? Maybe they want to invest in us that actually do the work. Either way I was happy with my experience and I’d do it again.

    Out of my mastermind group of 8 only 3 of us got term sheets from Newchip so its not a guarantee but even if I hadn’t got investment it was worth it.

    Funny enough we had another co that didn’t get money from them but they used what they learned and raised another mil from their previous investors, paid their full tuition and said thanks and just bounced out like month 2.

    So everyones experience is really based on what they put in, I busted my ass and we hit our goals, so they invested in us, my recommendation would be if you get in try it out, they have a guarantee in the contract (I literally read it and its there) so not much to lost.

    My background I’ve had 2 previous startups so I thought I knew everything but you can teach an old dog new tricks. Probably what I got most out of it was it really cemented my CEO persona, what I should be doing, they helped me establish a firm roadmap of what worked in the past for me and helped me overcome a few of my own faults.

    Thats about it, I givem a 9/10 on my experience and only last advice is build in more accountability for founders that need that extra push.

  10. 1

    THANK YOU for your prescient tirade about NewChip. I spent over an hour filling out their forms. Within the promised 48 hours I got a congratulatory email letting me know I was accepted to round 1!!! My phone call is scheduled for a 10 days from now. I was going to do my due diligence (which I should have done before filling out those stinking forms) but checked this thread before wasting my time. THANK YOU again, what a great website, full of guys/gals all in a very similar position. I ran into a very similar scam a month ago, unfortunately I can't remember their name. This startup world is full of scammers feeding on folks like us. They all should be horse whipped! I'm not even going to cancel my phone call... one less time slot available to some poor startup who maybe won't get ripped off.

    1. 2

      Sent you an email Tom. I love your idea and I think interactive yearbooks are disruptive and innovative. I went ahead and cancelled your call and I’m sorry that we won’t get the chance to work together.

      We started originally as a idea stage accelerator that was 4 weeks long with a $200~ course, so yes several of those inaugural companies never launched given they were idea stage.

      Our vision has always been to help entrepreneurs so once our original company was acquired, we made that entire 30+ hour accelerator free on our website and I recommend you check it out since this is your first company.

      After acquisition we shifted our focus to a later stage companies with significant traction (you can see our requirements on our site) and the accelerator is now 6 months long so that we can be there with you the entire length of your fundraise:

      I recommend reaching out to some of these companies next time you apply:
      https://www.globenewswire.com/news-release/2019/11/28/1953706/0/en/Newchip-Accelerator-Launches-November-2019-Pre-Seed-Cohort.html

      https://www.globenewswire.com/news-release/2019/11/26/1952678/0/en/Newchip-Accelerator-Launches-November-2019-Seed-Series-A-Cohort.html

  11. 1

    Update: I have replied and asked for more info on the accelerator and what specifically attracted them to me. We'll see if I get a decent response or another canned/automated email.

    1. 1

      Another thought, the fact they're sending all these emails but not engaging with founders on Indie Hackers is another red flag. If I were a VC or accelerator I'd be on here building a network and social credibility.

      1. 1

        This comment was deleted 5 months ago.

    2. 1

      Look forward to hearing more... I’ve also been contacted by them and their automated emails! :)

      1. 1

        Check my comment above ^ :)

        1. 1

          Thanks Ryan! Will digest the info!

          1. 1

            This comment was deleted 5 months ago.

  12. 1

    This comment was deleted 5 months ago.

  13. 1

    This comment was deleted 3 days ago.

    1. 2

      Check my comment above ^ :)

    2. 1

      Thanks.
      I'm highly doubtful I'll devote my already limited time to this but we'll see what they reply with.