Dave McClure often shows a slide when he is explaining how 500 Startups works. It only has three bullets:

• Find Smart People.
• Give Them Money.
• Wait for Good Shit to Happen.

It seems simple but it pretty much sums up what makes 500 Startups so awesome. Our no bullshit style and #HaveFunGetShitDone motto has been one of the factors for the success of our accelerator program, which Dave McClure and Christine Tsai launched back in 2010.

The program runs four times a year and accepts less than 3% of applicants, so technically it’s harder to get into 500 Startups than an Ivy league college. Its also been named a top-tier accelerator in numerous studies, including one by the Kauffman Foundation that came out this week.

500’s managing partners are now opening the playbook and will be sharing how they achieved this feat in only six years of operation.  

Venture Capital Unlocked: Accelerator edition kicks off in just three weeks in San Francisco. Here we give you a sneak peek at some of the tips and tricks we will be sharing with participants. If you want find out more, join us May 2 – 6th in San Francisco.

1. Find your special sauce that will add value to startups (and market the hell out of it).

Studies have shown that the three major factors entrepreneurs consider when selecting a an accelerator program are: (1) brand (2) quality of mentors (3) networking opportunities. Meanwhile, the top reasons founders cite for not applying to an accelerator are lack of awareness of the program and lack of understanding of the benefits.[1]

The majority of accelerators are less than five years old and are still making a name for themselves. It’s important that they quickly identify their differentiating factor and clearly position themselves in the ecosystem.

Whether you are a corporate accelerator focused on digital health innovations or an accelerator within a public university with no sector focus, you need to be explicit about the benefits of your accelerator.

500 Startups became a top-ranked accelerator that is recognizable around the world by zeroing in on our secret sauce of making lots of little bets on companies and then helping them with distribution and growth (because we realized we were pretty good at that).

Having a strong brand and value proposition will in turn help you to attract good mentors and increase the quality of networking opportunities for your founders.

2. Don’t be afraid to iterate on your program.

We are constantly making adjustments to the design of our curriculum and trying out new programs in response to our founders’ feedback and the types of services we predict will be most helpful to them.

When we started out, we used to market 500 as “design, data and distribution” and then evolved to focus on “distro.”  As we have progressed, we have iterated numerous times on the curriculum, adding elements such as the hugely popular Marketing Hell Week (MHW – one week chockfull of talks on marketing).

In the batch thats kicks off in May, we switched the order around to start with MHW, then we’ll spend 2.5 months on Distro, followed by Demo Day pitch prep and DemoDay, and then the last month will be spent on fundraising.

We have tried several new programs in different geographies. We ran five accelerator programs in Mexico City focused on Latin American startups and their specific market needs.

We also launched a traveling Distro Dojo in ten different cities around the world to train post-seed, pre-A companies to do better growth marketing, and we give them the funding to do it. And we’ve even started running pre-accelerator programs in other countries to help companies get up to speed at the idea phase.

3. Find smart people (and give them money and wait for good shit to happen)

An accelerator is all about the people. Your accelerator will only be as good as your people, and that includes both your team and the founders they select to participate in the program.

Your team members recruit and select startups, implement the curriculum, organize events, and maintain the relationships with investors and mentors. All of this adds up to your reputation. You better trust them completely.

 

As for founders, you have to get out there and look for them. No matter how strong your reputation, you need to be continually recruiting quality founders.

As with most things in life, quality is much more important than quantity. A survey by Unitus seed fund found that even the accelerators with a well established brand put a significant amount of effort into sourcing quality applicants for their program. [2]

At 500 Startups, we do this by traveling all over the world to meet with founders and making ourselves available to them even if they don’t live in the top 5 startup hubs. We have partners on the ground in 20+ countries who help develop local ecosystems, create relationships with local entrepreneurs and keep tabs on founders who are ready for one of our accelerator programs.

4. Think your model works? Prove it by tracking KPIs and surveying your grads.

Start by defining what success means for your accelerator. Most measure the success of their programs using a range of criteria, including revenue growth, company survival rate, financing activity, follow on investment, investor returns, frequency and size of exits, alumni network, place in comparative accelerator rankings, job creation, impact etc. etc.

No matter how you define it, having a database of quantitative data to back up your claims is always a good idea. Its also a good practice to survey the companies in each batch both at the beginning of the program to measure expectations and at the end of the program to see how well they were met.

Asking for the Net Promoter Score is an important measure you can use to communicate how happy your founders were with the less quantifiable aspects such as quality of mentor advice or community building events.

5. Build the community you want to see. Be an important link in the innovation chain.

The reason accelerators exist in the first place is because human beings are social creatures. Entrepreneurs who go through a good accelerator program tend to be more successful than those who work on their own because they feel supported and part of a greater community. 

Your accelerator should play a key role in building this community and strengthening the innovation ecosystem in your geography or sector. This means bringing together many different actors including founders, investors, universities, VC funds, corporates, other accelerators, and a large number of supporting actors and organizations. You can’t create a “Silicon Valley” mindset overnight.

Studies have also shown that accelerators that interact with their investors deeply and in a number of different ways are associated with large, involved investor networks as well as higher success metrics. [3] 

The more active you are in your community, the easier it will be to attract top mentors for your founders, not to mention investors who will start seeing you as a filtered source of deal flow, much the way top ranked universities provide a filtered source of candidates for top jobs.

500 Startups stands out as one of the only funds in Silicon Valley that is aggressive about investing in international markets.

From the getgo, we made it a top priority to be present in different countries and this strategy is paying off as we have become a brand name in many different entrepreneurship communities around the world, which helps us attract quality founders, mentors and investors and build a truly global entrepreneurship community. 

Shameless plug: If you want to know more and get into the nuts and bolts of how to run a top-notch accelerator, join our our one week bootcamp on how to run a successful accelerator on May 2- 6th in San Francisco.

 

Many thanks to Yiying for artwork and Christine Tsai, Bedy Yang, Susan Su, Marvin Liao and Tanya Soman for their help and input.

 

[1] Michael Birdsall, Clare Jones, Craig Lee, Charles Somerset and Sarah Takaki, “Business Accelerators: The evolution of a rapidly frowing industry.” University of Cambridge, Judge Business School. 5/1/2013 http://startup-accelerator.com/sites/default/files/cambridge_startup_%20accelerator_research.pdf

[2] Unitus Seed Fund, Capria Accelerator Fund: 2015 Global Best Practices Report on Incubation and Acceleration http://usf.vc/wp-content/uploads/2015/10/Unitus-Seed-Fund-2015-Global-Best-Practices-Survey-of-Incubators-and-Accelerators-1.pdf

[3] ibid