Y Combinator’s acceptance rate has long been rumored to be around 1.5%. At Accelerating Asia, we also accept 1.5% of the startups that apply to us every year as well, and follow up with additional investment into the top performers.
In this kind of ultra-selective environment, it’s important for founders to not only consider who their investors are, but who their peers will be. It’s like being at a top university. There, students learn as much from their peers as their professors. In much the same way, a founder will learn as much from their fellow entrepreneurs as the Accelerating Asia team. This is known as the “cohort effect” and we’ve noticed it in every batch of our early stage VC accelerator, which has run six times and is going onto its seventh.
Some investors do acknowledge the importance of the cohort effect. Many of them will try to create synergies between the startups in their portfolio. But there’s a right way to do cross-pollination, and the wrong way. The issue with our startup ecosystem is that most investors are forcing synergies between their funded startups in a way that is counterproductive, which makes sense: Investors are generally skilled at picking and funding the right startups, but will likely have no background in facilitating collaboration.
As investors, we need to make a conscious decision to improve in this area. Done properly, these synergies can be high leverage, helping our startups grow significantly faster. Here are some of the best practices I’ve learned from our efforts to encourage collaboration across our cohorts.
This idea may seem obvious, but the opposite often occurs. At some funds, startups have been strong-armed into using the solutions of other startups. This pressure does a disservice to both ventures: The client ends up with a less than ideal solution, and the vendor wastes valuable resources on a company not in its true market.
While investors can and should encourage startups to use one another’s products, founders should be freely able to choose when to do so. Such freedom ensures that any support is really in the best interests of both organizations.
Tony Hsieh, the late, great Zappos CEO and founder, purposely made only one entryway into and out of their offices. This design was strategic: Hsieh wanted to create “collisions” between employees, spurring the random interactions that could lead to better insights or collaborations.
This idea applies as much to startups as it does to employees. If investors want their startup founders to collaborate with one another, they should provide a hub for them to do so. This could take the form of a shared workspace or regular event (in the new normal, this can even be entirely online, such as through virtual coworking or a Zoom get-together). Through these exchanges, founders can find ways to work with one another in a pressure-free environment.
Founders may be so focused on scaling their startup that they neglect opportunities right in front of them. That’s why it’s crucial to spotlight entrepreneurs who have struck winning partnerships with other founders in their cohort. These stories will serve as inspiration for others to successfully collaborate within the group.
These are of course just a few of the best practices we have discovered when it comes to cross-pollination. What’s important is that there be a defined strategy in place. Having one will help founders find winning ways to work with one another, and in turn, yield even better results for the portfolio and all its investors.
As with the above analysis on cross-pollination, Accelerating Asia takes self-examination seriously: We want to gain every possible edge when it comes to building startups and producing winners for our investors.
If you’re an investor in Asia Pacific - an angel investor, a family office, an impact investor, or institutional investor - please consider co-investing in one of our startups or investing into our latest fund.
Accelerating Asia invests in startups with scalable technology solutions and revenue generating business models that combine purpose with profit.
In making an investment decision, investors must rely on their own examination of startups and the terms of the investment including the merits and risks involved. Prospective investors should not construe this content as legal, tax, investment, financial or accounting advice.