I met with Ferdinand Mühlhäuser (FM), the Lead Director Germany at Founder Institute Berlin (FI Berlin) in the end of November 2020. Online. Via our laptop screens. We spoke about the unusual year 2020 and the impact the new normality has had on the FI Berlin; the value-added of the accelerators and the landscape of startup support organisations.
The number of incubators and accelerators is growing exponentially and a lot of them are now also working with startups across borders and sectors. Is the landscape already too crowded and difficult to orient and how do you see it evolving?
“In Berlin there is some pressure by the state run accelerators, who could be complementary to, for example, FI, but sometimes seem competitive,” replies FM.
The corporate accelerators need to define really well, where and how they can help. If they are too focused in their area and that is not really fitting to the startup, it could be a waste of time. However, with good fit, the focus can be very beneficial. Risk imposed by the strategic nature of the corporate accelerator remains though. FM elaborates: „You may be forced into one bucket and cannot come out of that.”
What makes a successful incubator or accelerator? Funds usually invest and can calculate returns, but let us say a program that does not involve equity – what should be measured and what should be considered a success?
FM answers: “Even if the founders do not complete the program, they have learned a lot and can benefit from that during their entire life – whether they go back to being employed or found another company. The knowledge and the network they gain from one accelerator program can be extreme.” There are examples of founders in FI Berlin portfolio who did not continue with the startup that was founded with FI but they founded another one later and that became successful. For example, tandem.io.
FI kind of accelerator offers learning and network. It is hard to measure knowledge advance after the program. FM explains: “Learning is immense, but also different from participant to participant. Some have previous knowledge in business and programming and some not. And not only the knowledge advances dramatically but the relatable network grows very fast as well.”
What will be visible to the outside world is the success of the startup and possible exits. However, that cannot be the basis for comparison of different accelerators, because of the different startup stages they act in. FM adds: “Obviously everyone wants to see big exits and big names as a result of participating in the accelerator. But that’s very much comparing apples with pears.”
“So when the Techstars takes in a batch, they have screened a hundred actual startups that have run for 1-3 years and have had to show the product-market fit already. They are a bit like the first VC. So every startup has been already vetted to be successful. What they add as an accelerator is obviously scaling and support, but they know form the beginning that those are meaningful startups. That is completely different from the FI,” FM continues. The founders that come to FI Berlin have either only an idea or an Alpha version of a product. FI supports the founders in converting their ideas into products and in creating a company. “We prepare the company to go for product-market fit after completing the program.”
What are the main support structures you are using? Do you think an accelerators’ network or a support group is necessary?
FI Berlin runs differently than most other accelerators and incubators. Deal flow is the only topic the FI and the other accelerators have in common and where exchange would be meaningful, in order to support the startup in entering follow on programs after completing an FI batch.
Main exchange though takes place between the FI program directors from various countries and cities. „We have, of course contacts with the other accelerators. I have also supported some as a mentor, like several programs within the Berliner Startup Stipendium. There are 15 programs, incl. Imagine2030 and Reaktor, all supported by the state and the EU.”
Ferdinand believes that for some of the state run or corporate accelerators, a support network more grounded in the startup ecosystem would be meaningful and would help improving the program.
Final words for the startups and the accelerators?
“Advice for startups: go out early and exchange with potential customers and partners. Do not work on your product at home too long, rather get as much feedback as possible from early on,” shares FM. According to him, feedback and support from the network is in the beginning more important than money. “Everyone is entering the startup world with dollar signs in the eyes wanting to get funding from day one.” However, the startups should instead work on understanding their vision and where to start and build their network for reaching the right people to help with getting funding. “If you find the right thing to do, know how to do it and have the right network to start, money will come.”
FM advice for accelerators is for each to find a reason they exist through defining the benefit they bring and clearly define the startup stage they support. “Money does not cure the deficiencies, if there is no inner reason for an accelerator to exist,“ explains FM, “Some of the accelerators should better be converted into acting as business angels or as early stage VC. Not every company needs their own accelerator, Founder Institute and others can support with fostering innovation and mentoring on behalf of corporates and SMEs.”
Thank you, Ferdinand, for taking this time for our insightful discussion. For any founder reading – if you need help with structuring your ideas into a meaningful product and establishing your company around it, the Founder Institute Berlin (https://fi.co/s/berlin) is the right place to look for the answers.