How accelerators like Techstars and 500 Startups are helping entrepreneurs build a network and pivot to survive the pandemic and recession
- Accelerators like Techstars Boston, which ran a virtual demo day for startups to connect with investors in April, are pivoting to help emerging businesses weather the storm.
- Meanwhile, founders involved in accelerators have had to either double down on their business strategies as demand has spiked as a result of the pandemic or improvise to keep customers coming in.
- Founders and VCs are staying connected while self-quarantining at home through accelerators like Techstars and 500 Startups and via video calls and Slack channels.
- "Some of the best companies were created in downturns," Techstars and Foundry Group founder Brad Feld said during the Techstars Boston event. "Economic stress causes unexpected opportunities, but there will always be smart people looking for work."
- Visit Business Insider's homepage for more stories.
As 10 startups in Techstars Boston's accelerator program prepared to pitch their businesses during a virtual demo day this past April, managing director Clement Cazalot pumped up the Zoom call by playing the popular Black Eyed Peas song, "Let's Get It Started."
It was the largest attended Techstars demo day event yet, and its first held virtually during the pandemic. There was also a surprise guest: rapper and "Law & Order: SVU" actor Ice-T.
"I wanna give a warm welcome to all the startups in the Techstars Boston class," he said in a recorded Cameo video. "2020 rhymes with money. Lets get it. Peace."
Over the past three months, startup founders have been forced to reckon with looming issues rooted in the COVID-19 pandemic and resulting recession — and accelerators are pivoting to help them out.
"Companies that came out of the global economic crisis in 2008 benefited from the pandemonium," Techstars and Foundry Group founder Brad Feld said to the startups during the virtual event. "So in this post-COVID-19 world, whatever that means, there will be foundational changes and the opportunities that emerge will be substantial, but hardship and stress will be seen in process."
Accelerator programs — programs that mentor founders, plant seed investments, and help grow the business — are helping startups navigate that stress. Some are employing short-term strategies to survive week by week, while others devise new long-term plans.
As one of the largest accelerator programs in the world, Techstars has a valuable network, with over 50 programs from Singapore to London to Boston. It brings on over 500 companies in different industries, from technology to healthcare, all receiving equity investments.
"Everyone is still learning this version of reality we're living in," Aaron Blumenthal, head of 500 Startups, another accelerator holding online demo days and encouraging virtual networking between startups and potential future investors, told Business Insider. The connections accelerators like 500 Startups are making are valuable and could lead to more financing.
"Young companies need to establish financing quickly," added David Cohen, cofounder of Techstars. "Once they have the capital to get through a situation like COVID-19 is when they can have immediate optionality." Once enrolled in an accelerator, like Techstars or 500 Startups, startups also actively seek out future investors, whether a sole angel investor or a firm, in order to prepare for growth.
In the first quarter of 2020, accelerator and incubator programs invested $110.29 million in private startups among 1,287 deals, according to data Business Insider pulled from Pitchbook. $41.62 million has been invested so far by accelerators in the second quarter of 2020. Given the initial strike of COVID-19 occuring in the midst of Q1, those numbers may decline in the months ahead.
Business Insider spoke with founders who participated in accelerators about what they learned through the experiences that's helping them weather uncertain times.
A spike in demand means it's time to rethink bringing a product to market
During the Boston virtual demo day, each startup founder went through pitching each of their business models and detailing why their company matters in 2020 to angel investors and VCs on the call. Some were more relevant to the coronavirus pandemic than others, like Statera's clinician compensation tracking application.
"Financial stress is a big driver for physician burnout even before COVID-19, now of course physicians are more burnt out," said Statera Founder Amy Jackson, who had to expedite the launch of the platform when many physicians started getting sick as a result of treating patients with COVID-19.
"Our mission is even more urgent than it was a month ago," Jackson added. "There's a huge need for physicians to feel financially stable and to address any concerns to rebuild trust and confidence in a stable environment." Statera's targeted healthcare users are in anything but a stable environment, with many working long shifts in hospitals and doctors offices in order to treat those with COVID-19.
Amy Molk, founder and CEO of educational technology startup Beanstalk, said the company has dramatically ramped up its service. In just three weeks, while in the Techstars Boulder 2020 cohort, Beanstalk went from 150 to 7,000 users as kids were suddenly forced to do school from home. Both Statera and Beanstalk recognized their relevance during a pandemic and sped up launching their platforms to seize a valuable opportunity, under guidance from Techstars and their mentor network. And they're not the only companies that have seen a dramatic shift in the market.
Other startups have to put their main expertise on the backburner and improvise
"If we stayed in the tampon business, we would've gone out of business," said Claire Coder, founder and CEO of Aunt Flow, a 2018 Techstars NYC alum. Aunt Flow provided menstrual products for schools and offices, but once these places closed due to the coronavirus, it pivoted to manufacturing FDA-certified medical masks. As many entrepreneurs have discovered, flexibility is just as important to growth as market demand.
When Geospiza graduated from Techstars in 2018, the company analyzed data to visualize risks surrounding climate change. But since the pandemic started, orders have been scarce.
"When COVID-19 became intense in China, we had internal discussions on what our next steps were," said Sarah Hamma, Geospiza's director of product management. She explained how the company's background in emergency management expertise better positioned them to help existing clients.
"The staff was not thinking we would be where we are today, but with our knowledge we still had companies and organizations reaching out to ask, ''Can you help us out more?'" Hamma said.
Geospiza now focuses 90% of its efforts on addressing situations involving the COVID-19 pandemic, since they were already working in an adjacent sector with management of emergencies. It's uncertain when they will switch back to covering climate change.
"We're a little worried about what that means long term, but we're taking note and previewing what disruption climate risk will have on our society," Hamma said. Luckily, the company already completed its Techstars accelerator while also receiving a $1 million equity round May 2019 from Techstars and other investors.
Mastering a relevant virtual pitch and online networking is a must for everyone
Cazalot emphasized to the virtual demo day attendees "one ask, one intro," meaning all the angel investors and venture capitalists present were challenged to help startups network and connect within the industry.
Connections are encouraged more than ever when face-to-face encounters, events, and deals won't take place in the foreseeable future.
500 Startups has implemented Slack communications with startups, mentors, and investors across the globe to further elevate networking within its groups.
According to Cohen, 80 companies in Techstars numerous accelerator programs are already relevant to COVID-19 and pivoting their business models to address the situation.
"Some of the best companies were created in downturns," Feld said during the Techstars event. "Economic stress causes unexpected opportunities, but there will always be smart people looking for work."
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