In a nutshell, Expert Insights is where we showcase some incredible people who’s domain expertise is to help founders succeed, which usually involves raising capital or unlocking business growth. They have insights into the startup fundraising landscape and have a knack for nudging founders in the right direction and thus, will have many gems of advice for founders.
So let’s dive in!
Hello Sam – It’s a delight to have you give us some insights into your world of startup mentoring through all of your experiences in various accelerators & university entrepreneurial programmes you’ve been involved with.
We’d love to start with an introduction
1) Tell our readers a little about your background, what you currently do and anything exciting you are working on?
I’m Sam Larke, and I had a business in the 2000’s, and it did incredibly well when I was young. I saw the impact of the credit crisis and got out with my tail between my legs with something, just about!
My wife was pregnant with our first child and I thought I needed to spend more time with the family. So since then, I’ve been in the world of business support with universities, charities and social enterprises for the past 12 years. I tried a couple of side-hustles along the way, but they didn’t go anywhere, so now, I like being on this side of the fence.
I might get back on the horse again when the kids have grown up but thinking back, I have been through the trenches and more recently, I’ve been involved in the community with Leicester Startups – a spin-out from Leicester University so it is hyper-focused on high-growth, scalable startups in Leicester and Leicestershire. I’m a director with the organisation and work part-time on that.
I was recently also at Loughborough University, running an accelerator programme which I’ve just finished. I’m now joining Innovate UK from the 1st of October and working exclusively with high-growth scalable startups so I’m really enjoying it.
“It doesn’t look like the appetite for founders to get onto these accelerator programmes has gone, it’s actually increasing.”
Perfect, thanks for the intro, that really sets the scene well for us!
Let’s dive in then!
Given your accelerator experience let’s start here. We know most startups consider the contribution of the accelerator they attended to have been significant or even vital to their success.
Is there lots of competition for places, or the opposite?
With Leicester startups, it was relatively easy because we launched as a consequence of the Pandemic, it was all online and people had lots of spare time to think about what they might do. By the time we got to the second cohort it was over-subscribed. We have lots of time to plan and prepare and we run engagement sessions beforehand. It doesn’t look like the appetite for founders to get onto these programmes has gone, it’s actually increasing.
What type of numbers do you take on per cohort?
We cap it at 12, and we expect 1 or 2 to drift off or decide this isn’t for them and that’s a success for us. We’d rather those that decide it’s not for them to find out sooner than later, then we can focus our effects best on those that want it.
What criteria should a founder of an early-stage startup consider when choosing an accelerator programme? Should they apply to as many as possible to see which they get accepted on?
We’re actually hyper focused on Leicester and Leicestershire as that’s where the funding dictates we have to work. However, I usually advise people who I’ve met in Loughborough that are working in areas like food science or AI to think broader, they should ask themselves, is there a new accelerator that works exclusively with startups in their specific sector?
Sector specialists are going to have a deeper pool of experts and mentors that could get into the weeds with some of them in the way we can’t, so it’s about finding the best fit, especially when more niche. Although we’ve got mentors and advisors to draw insight, when you have sector specific programs you’re more likely to attract a pool of much more talented subject matter experts to learn and benefit from.
“It’s not about the number of programmes you apply to, it’s about finding the best fit”
Do you think accelerators are a valuable use of founders’ time? If so, what are the major benefits of being part of an accelerator?
You really get what you put in. So if you turn up, you’re engaged, your camera is on if it’s a virtual thing, and you’re asking questions – for sure it’s a valuable use of founders’ time.
The benefits of an accelerator are not just the workshops or the knowledge transfer, I think it’s also the peer support. For example, on our accelerator – and most of them are the same – we have a weekly roundtable and there is a document which everyone uses, with a progress tracker. So, we record their feedback but each week, we also set them a smart object. So there’s the accountability piece which is really important. And then of course there are the mentors, subject-matter experts, and advisors that we can connect the founders with.
“It’s the accountability piece which is really important”
We don’t take equity, but we are funded, so everything is free to the founder. Obviously, the commercial ones which charge a fee or require you to give away some equity in exchange for investment will have deeper resources. By the virtue of private investors putting money into an accelerator, they’re often going to have a much bigger vested interest, and will want to play some sort of active role as you’d expect given the scale of investment.
It goes back to the question of which programme is right for me? Do you go for a sector-specific one, or do you go for a free one, like ours, and don’t give away equity?
“What are you prepared to give away? You need to go ‘shopping’ and see what is on the pros and cons lists for each type of programme to find the right fit”
Tell us about a startup that really benefited after going through the accelerator programme? Does one particular example come to mind?
There are several. With Leicester Startups, we’ve had three that went through the process and pitched successfully during their demo days. We always have investors in the crowd and on the panel, so it’s the perfect acid test of the program to see how many result in private investment.
One great example is when two people joined working on their separate companies. One decided that he wasn’t really going anywhere, and he decided to kill it. But whilst he was going through that process, the other person, who had a slightly more advanced stage startup, and was working in a similar-sort of industry – so a long-story short, they joined forces and we are now helping them on their journey towards their first raise.
“That’s a great example of someone failing fast, realising their startup wasn’t right, then meeting a co-founder at the accelerator. They now seem to be jamming really well together”
What are the common challenges most founders of start-ups face once onboarded? How do they need the most support?
Aside from the practicalities of finding the time, some people are doing this as a side-hustle, so they have existing work commitments, which is a challenge. It fits well for a founder working on it full-time though. They come in with hundreds of questions – and that’s the time for them to take a deep breath. Because as they get through with the accelerator, some of these questions are going to be answered, along with gaining lots of valuable experience from us in the process.
A lot of people think investment is also the only route, especially if they are developers or engineers and they can build their own working prototype, but our advice is bootstrap for as long as you can!
We challenge them to show they have got some sort of traction, found some market fit and ideally customers. Then if you want investment, you’re in a much better position, because you can demonstrate a real and not assumed number of sales or users.
“They come in with hundreds of questions and that’s the time for them to take a deep breath. We help to answer them”
The other thing, which we see during customer development sessions, is getting rid of your assumptions – or helping them validate their assumptions. So particularly customer development. We guide them to avoid telling potential users of your product or service straight away, try to find out how they are solving the problem at the moment. This is crucial as we don’t want to take away their perspective by trying to sell to them.
Key points Sam, totally agree. So onto our favourite topic… fundraising. This is obviously a major and important topic for everyone you work with. Do you think the anticipation of access to funding is a big aspect why the majority of the founders you’ve met apply to get onto an accelerator?
Yes, exactly that. So much so that we’ve created an investor club in Leicester. We do this because our accelerators don’t come with funding or take equity. So we’ve bolted this on. We try to bring investors into the network and make those connections.
Some accelerators can offer funding and some don’t. The ones that don’t however still often have very good networks, so it opens up good opportunities to fundraising – something that shouldn’t be overlooked – that network effect is highly valuable at an early stage.
“I think investors are going to be paying a lot more attention to what you are actually delivering now, rather than what do you think you are going to be delivering”
Super insights Sam. This leads us onto the broader question of can more be done for early stage founders? What’s missing from the current setup?
When we deliver accelerators, we have to go high-level with general principles, and we can’t get into the weeds of things. Obviously everyone who is raising funds, needs to go granular.
Although we can connect founders to investors – it’s not always clear what those specific investors want and need to make decisions. For example you might get great advice from one investor, and then get contradicted from another. Do you go top-down or bottom-up? Each is unique, so it’s hard for us to prepare every founder for every investor as the differences are so broad.
“Providing more knowledge about the funding landscape is needed, as FundingHero is doing. This is only going to help founders to succeed.”
Thanks Sam, glad you see our mission can help to plug that gap! When do you think a resource like FundingHero can help founders the most? Do you think it’s before, during or after an accelerator programme?
Great question, I’d love to test that! If someone is really serious about raising investment, and they can’t bootstrap, then they should do it earlier. If someone is still thinking about what their Minimum Viable Product will look like, and their route to market, then it’s not necessarily a bad thing if it comes a bit later. But if everyone was to learn about it as early as possible, it’s probably the best way so you are prepared either way and avoid most of the early mistakes.
Absolutely, it’s those early mistakes which are most expensive and take up the most time, so learning the rules of the game at the earliest stage is key.
Right, so we know VC is the sexy money founders see to really propel them. How many of the startups you’ve seen actually go on to get VC funded?
We tend to work with earlier or early-stage (pre-seed and seed, family & friends and angel rounds) if I was to hazard a guess it would be 1 or 2% – but it’s more a reflection of who we are working with.
There is a big funding gap though, particularly outside of London. There isn’t as much investment in the Midlands and other regions as there should be. There needs to be some work done to get a balanced distribution of funds as there is a huge concentration of VCs in and around London. It’s something constantly called for to try and spread it around the regions.
It’s always said that people can just travel to London, but that’s not the only answer. We can do better around that.
And finally, we’d love to hear your thoughts about the current fundraising landscape? There’s a lot of talk about the difficulty of getting funded in the media at the moment. How do you think it’s going to go in the next 6-12 months and where should founders be focusing their time and effort?
I think it is going to get way more challenging to fundraise. The pandemic was obviously a very strange time for the world and there was a lot of investment pouring into startups. Perhaps as a consequence of more people starting startups, more money came in and there was sort of a bubble. And then you think of the macro-economic outlook then it’s not looking great for around a couple of years.
“Do your best to get your startup out into the world with customers and evidence. It’s all about building stronger businesses. It instills the right discipline from the start and you will focus more on doing the right things.”
So I think investors are going to be very focused on ensuring that the majority of the fair portion of their money really does go to ensuring that the startups continue to grow and innovate but show evidence of something viable.
Alongside this and going back to the bootstrap point earlier, then how long can you stretch your own resources if possible? Maybe try a family and friends round and prove some real market validation first.
So if you can get customers, you can show you are growing month on month and at a good percentage you’ll be in a strong place. It’s then going to be easier to convince investors you can hit your projections and they look more realistic. Otherwise it’s just trying to get investment on an idea, with little proven.
Ultimately, founders should do their best to get their startup out into the world with customers and evidence to an investor. It’s all about building stronger businesses. If money is a bit harder to come by, then it’s not necessarily a bad thing – because it means it instills the right discipline from the start and they will focus more on the right things.
If you’re based in Leicester or Leicestershire, check out https://www.leicesterstartups.com/
And if you have a company that’s growing, and you are interested in scaling up, then visit Innovate UK.
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