Building Startup Accelerators with Sam Kirschner
Background
Sam Kirschner is an Operations Fellow at Gigascale Capital. Sam has a blend of operations, data, and venture capital expertise. Throughout his career, he has worked on four startup accelerators. Most recently, he was a Visiting Partner at The House Fund, where he ran their AI Accelerator in partnership with OpenAI, Microsoft, and Databricks.
I talked with Sam about what framework he uses when advising venture capital firms considering launching an accelerator, when to raise a pre-seed or seed round vs. join an accelerator, which accelerators he would bet on over the next decade, and more.
Interview Transcription
Edited lightly for clarity
Kieran: Thanks, Sam, for joining me today. To kick us off, do you want to introduce yourself?
Sam: I’m Sam Kirschner. I’m an Operations Fellow at Gigascale Capital, a climate tech fund. I have a long background in venture capital. I like to say I have a blend of operations and data combined with venture capital expertise. I like to blend all of that with my love of people and being able to support founders to create the things of their dreams.
Kieran: Can you give a quick overview of your work with startup accelerators: Free Ventures, Village Global Accelerator, ODX by On Deck, AI Accelerator at The House Fund
Sam: My interest in startups started back in college. I learned that you could be an entrepreneur and not have a boss. I loved that idea. That was what initially got me excited. I was interested in nonprofits early on, too. I realized the best way to create nonprofits is to have a good for-profit and use the proceeds to start your nonprofit. So, playing the Bill Gates playbook. That’s what got me down the startup path. At Berkeley, I started learning more about startups and the ecosystem. We realized there was a big hole. It was hard to know where to go to start companies. There were tons of students who had brilliant ideas or projects, but they didn’t know how to make it into a company. That process of, is this a good idea, is this a thing we can commercialize, how do we get our first users, how do we get funding? All of those things were just so murky and hard to understand. We realized there was an opportunity to create an accelerator for the campus. So, let people apply with their different ideas and projects, vet who we thought had the most viable startup ideas, and help them get to the next stage. For the campus, that was getting them into YC, getting them initial external funding from investors, or validating whether they could even have customers. That was the birth of Free Ventures, which was the first accelerator that I worked on. You have spoken to someone else who is currently running Free Ventures. It’s almost exactly ten years since we started it. Companies have gone on to get into YC and be backed by Founders Fund, KPCB, Spark, Version One, and many others. The alums from that program have gone on to crush it, too. They’ve started companies backed by Sam Altman and gone on to do cool things. A big learning there was it wasn’t just about the students in the accelerator. It’s also about the students running it. That program was very successful and helped me get my feet wet with startups. After that, I was a data scientist for three years. I wanted to get a better sense of what it was like to operate. At the same time, one of my friends, Jeremy Fiance, was starting The House Fund. I started Free Ventures with him. The House Fund was partly validated by building out Free Ventures and seeing the demand for capital on campus and the opportunity there. So, I helped nights and weekends there. I ended up going back full-time to help him with fund two after being a data scientist for a few years. That’s when I went all in on venture capital. I was with The House Fund for two years, helping them do fund two and building out a lot of the infrastructure as an operations team member. From there, I went to Village Global. I got to meet the team at Village, including Erik Torenberg, who we got to work with at On Deck. They were running an accelerator, so that was the second accelerator I worked on. It was two years, and we made about 120 investments over the lifespan of the Village Global Accelerator. It worked phenomenally. I still think it’s a great model for working with companies. It was remote, which was unique in 2019 when it was pre-pandemic. We were working with companies all over the world. We were more international than most accelerator programs. We were industry agnostic and worked with a lot of angel investors and advisors to come in and help 1:1 with the companies. It helps us scale from an operational perspective and bring in deep expertise per company. That was a great program. Anne Dwane was the mastermind behind that and my manager at Village. The companies from that have continued to go on and do phenomenal things. We had Enveda Biosciences, Meroxa, Settle, and Overflow. We backed a bunch of great companies. The list goes on. I can keep naming great companies. That really became ODX, where I got to meet you. We saw the validation for a program like this at Village and the ability to scale it up. When I started at Village, On Deck was three people. By the time I left Village, On Deck was 250 people and had scaled phenomenally. So, we wound it down at Village and brought it over to On Deck. I think of it almost like an acquisition. We took a lot of the learnings and moved it to On Deck, and we ran it out of On Deck with a much larger infrastructure, team, and capital set. We ran ODX for about a year. We invested in 160 companies. Because of market conditions, we decided not to continue it. I can go more in-depth, but you know that part intimately. We left there about a year ago. This past summer, I helped with the fourth accelerator that I worked on, which was The House Fund’s accelerator. I was a Visiting Partner there, helping them run a program focused on AI founders. I almost struggle to call it an accelerator. It was three or four companies that we worked with during the summer. We had three companies in-person with us in Berkeley and one company that was more remote. It almost felt more like an incubation, honestly, like we were working so deeply with these companies. That was a very long-winded answer to your question.
Kieran: No, I think your overview was great. It shows the range of programs that you’ve developed over the years. In this conversation, we’re going to cover two topics. The first part will be questions about trying to unpack more of your knowledge and learnings around building startup accelerators. The second is around advising founders on how to think about which startup accelerators they should apply to and attend.
– questions about building startup accelerators –
Kieran: When building a startup accelerator, what are the primary teams and their responsibilities?
Sam: The teams closely align with the function of the program as a whole because they’re executing the day-to-day. When I think about these programs, at a high level, there are two parts: the program and the funnel. So, you have an investment team reviewing applications and processing people through that pipeline. All the way from the application coming in to making that investment. What I think On Deck, Village, and some of the best-in-class programs do is actually go outbound. It’s not just about people doing applications. They’ll go out and try to find founders and convince them to join the program. Some of the best founders who go through these accelerator programs don’t think about doing it but get sold into doing it. So, I would say half of our companies at Village didn’t even fill out an application. We found them through some other means. That investment team is very critical in terms of being able to make success. One of the things I always say about accelerator programs is the program itself is so much easier to run if you get great companies, right? So, ensuring your companies are aligned with the program and what it will offer is really important. If someone needs help day-to-day, building out one component of their business, and your program doesn’t support them in that, then that’s going to be a mismatch, and that person is going to take up a lot of your team’s time. But, if you pre-vet these companies, and not only make sure they’re good investments but the things they need are things you can provide, then that makes the best investment. So, that’s the investment side. There’s also the program. Within the program, there are a bunch of subteams. Application infrastructure, building out automations that can help scale the rest of the team, the investment team, and the program itself. You have the person running the program. That’s what I’ve done historically, who is coordinating between all the teams to make sure everything gets done. You have marketing, sometimes part of the investing team, sometimes not, to fill the top of the funnel. You have the day-to-day program coordination, which can be an operations associate or somebody. Then, there’s fundraising. Sometimes, the investors will flip and become the fundraising coaches or work with companies 1:1 throughout the program, which is the most common thing because it’s nice when the person vetting and selling them, also works with them so you can build that relationship rather than hand it off. That’s the high level of how I think about it.
Kieran: What elements make for a good program? What dynamics are you trying to create within the cohort?
Sam: A big differentiator for these programs is the community, cohort, vintage, or whatever you want to call it. That community element is really valuable. I feel founders learn more from each other than from other people or advisors often times. That founder camaraderie is a tremendous value of these programs. A successful program, in my mind, is one in which the program’s founders continue to meet with each other, are friends, and support each other throughout many more years of their founder journey. I’ve seen that in all of the programs that I ran. I think there is also a level of depth with help in terms of how specific the help is. I think these sector-focused programs, like The House Fund’s AI Accelerator, Neo’s AI program, and Sarah Guo’s Conviction, are really interesting. Andreessen has also done an excellent job of trying to create some of this more content-specific programming. I also think that’s true for the community side. Having a community of people building in a similar space around you can be really helpful for recruiting, customers, and all kinds of different facets of the business. Those are the two that I think the most about. Check size, investment terms, previous investments, the size of the alumni base, and some of these things can matter, too. But, I think it comes down to what’s the community going to be around you, what’s the quality of those people, and do you really love the partners and think you’re going to get value out of the program itself.
Kieran: Thinking long-term about how startup accelerators win. What variables do you have to control for?
Sam: I think the game is changing a lot, right? YC has always been the top. They were the first ones to build an accelerator, period. Reputation matters a lot. We have up-and-coming accelerators that I think are becoming the best in class, like PearX and Neo’s accelerator program. Both are phenomenal. But, it comes down to the reputation. What have been the founders that have gone through that program and the success metrics around it? A great question that founders can ask is, what percentage of your companies have fundraised after this? Not every program orients towards fundraising as a metric coming out of it. Still, I think understanding the reputation and the outcome metrics are really important. Differentiating in terms of your value add is valuable. In terms of the investment terms, I think what’s interesting about someone like Conviction and Sarah Guo is they’ve been thoughtful about how much they are investing, the terms on that, and being really friendly there to start building relationships and helping more people. So, I think that’s an interesting one. I think that’s something where YC has become weaker. I think the $500,000 deal is not as good for founders as it might seem on the surface because when you have uncapped notes of that size, you’re incentivized to raise at a much higher cap later. A lot of VCs don’t want to palette that in the same way that they did historically. So, the risk you’re forcing your future investors to take on is high, or you’re forcing your founders to take on more dilution. I think the investment terms are becoming more and more important. Previously, it was easy to match YC, but I think that’s not necessarily a good thing to do right now.
Kieran: In recent years, several notable VCs, including Sequoia and Greylock, have created startup accelerators. What framework would you use to help a venture capital firm decide if they should launch a startup accelerator?
Sam: I think for most funds, it’s not a good thing to do. It’s operationally intensive. A lot of the ones that have popped up in recent years, Andreessen, Sequoia, and Greylock, are huge funds with lots of money they can throw at programs like this. It’s hard to work with some of these funds because there’s also signaling risk. I think the fund should be asking itself, will I create signaling risk within the portfolio of investments that I make at an accelerator stage? If you’re a multi-stage fund that has a billion dollars under management and needs to own 20% of these companies. You’re not going to do that via an accelerator, right? Which means you have to heavy up for a follow on round, and you’re not going to do that for every company, right? Because you would just do that upfront. You’re not going to guarantee that you’re going to try to lead their seed or series A. So, I think it creates many challenges in terms of that structure. So, I’d really be asking yourself, is this the best thing for all the companies in the program? Am I going to create negative signaling risk across our portfolio of accelerator investments if we don’t do follow on? And then really ask yourself, what’s the value? Is it that you’re trying to see more companies early, which I think is what these multi-stage funds are trying to do. Is that the best thing for the founder? Do you want to put the amount of energy that it takes into building a program like this? It’s a huge amount of work to build the brand. Sequoia Arc has done great, but even Andreessen, it’s kind of confusing what some of these programs are, right? Like I don’t even fully know why someone would go to Andreessen, and I try to follow this market closely. Greylock, I’ve lightly heard about it, but it almost sounds like they’re incubating things. I know they incubated Tome and some of these businesses. So, is it an incubation? Is it just a beacon to get application data? What are these people doing to try to differentiate themselves? Most of the time, it doesn’t make sense unless you want to go all in on the accelerator model or you’re all in on early stage and willing to do high volume there, which was kind of our play at Village.
Kieran: Yeah, I haven’t heard much about some of these programs. I’ve only seen two companies publicly announced from a16z START. I haven’t heard any details about the programming, and I don’t even know if it’s still running.
Sam: A lot of the times, it’s tiny checks. What I know about a16z START is it’s almost like YC’s Startup School, where it’s a $50,000 or $100,000 check. So, the deal terms are flexible. It’s confusing why someone would go to a16z for that program, what they do, and how it’s valuable. But, I think they could get better over time, and it could become more of a beacon, but it feels more like an experiment than a really cognizant choice to make a program like this good.
Kieran: What are your thoughts on remote vs in-person startup accelerators?
Sam: I think there’s a lot of value to remote. Some people have families, people in other countries with VISA issues, and their teams in other places. I think there’s a lot of value in having these international programs that allow people to be remote. That said, the value of being in person is insane. Neo has a really interesting program where they’ll do one month, and they’ll help cover costs to come and stay. They usually do it in some remote location. It was in Oregon before, and they’re going to do it in Copper in Colorado in the future. I love that model. Do an intensive period together. For On Deck, we did a retreat or a kickoff, and that’s one way to do that. But I think you need to do some in-person component, even if you have it remote, where you get everyone to come in person and then let people go back. So when we did our kickoffs at Village, we had people flying in from Nigeria, India, etc., to join us for our kickoff for three days. A lot of them would stay a little bit longer to spend more time with the program and Silicon Valley, then go back home. I think that’s valuable. I think you get a lot of the value of the in-person from that intensive week. So, I think you got to do some amount of in-person right now. People are craving it. It creates a lot more loyalty in the community amongst the founders themselves and with the team that’s running it, the fund. So, I’m very much for remote, though. I think it opens up the world of possibility to a larger set. In the economy right now, it’s hard to do international, but I do still think there are pockets where it’s a really good place to be investing.
Kieran: We’ve mentioned 10-15 startup accelerators already. The market is crowded. If you had to start one from scratch, how would you position it?
Sam: At the end of the day, the biggest value is just helping founders get to the next stage. If you can become value-aligned regarding how much you want to own in the company, the entry price you’re getting for that company, and what the founders need for the next stage. Help them do those things and help them fundraise. I always loved Village’s angel accelerator. I think that was an excellent model. I’ve thought about whether that would continue to be a good model. I think it’s hard right now with the ecosystem and not as many active angels. But think about how you bring in experienced operators to work side by side with these founders to try to advantage them. I think there’s an opportunity to be what YC was at the beginning effectively. Be hands-on, smaller group, deeply help people network within a trusted group of VCs, and be a true light post there. Be very thoughtful about the founders that you back and the quality of those companies.
– questions around advising founders on startup accelerators –
Kieran: How should startups think about attending a startup accelerator vs. raising a pre-seed or seed from VCs? When should a startup consider one route over the other?
Sam: Part of the value of an accelerator is it just forces you to kickstart your company. There’s a lot of people dabbling on the side with an idea, apply to YC or one of these programs, they get in, and they’re like, I’m going to do it and take the dive. If you’re kind of on the sidelines and trying to get validation on an idea, it’s great just to be able to apply to an accelerator. I’m very pro having a bunch of accelerators. The number of accelerators has exploded, and I think that’s good. I want to see accelerators that are first money into some of these companies. I think a16z and some of these are making more obvious bets, right? Whereas I want to see people who are taking less obvious bets and creating space for founders to start a company where they necessarily weren’t sure they were ready yet and forcing them to take the jump. So, I think for accelerators, do you see value in it? Do you think it’s going to really help you get there? Is it going to be a good brand that you’re proud of? Do you like the people? There are more niche accelerators where the people are just great, and you want to work with them. So, think about the people and what the long-term looks like. Talk to alumni and try to understand what it looks like for them to graduate. Both on-book and off-book references. And then the deal terms. How much is this company going to own if you do YC and you raise at a lower valuation? They could own 10% of your company, depending on how the uncapped note converts. So, how much are youwilling to give up to have them be a part of what you’re doing is important. I think founders in the early stages don’t think enough about dilution and how much they’re taking on. It changes per sector. In some sectors, you just need to take on more dilution to get some of these things off the ground realistically. In climate tech, where I’m working now, I think you need to take on more dilution because it’s super intensive in terms of costs and R&D upfront. If you can go the pre-seed route, you’ll save on dilution. Maybe do a party round and get a bunch of angels. That could be a great route, too. I think you have to be really proactive about trying to engage the people around you. But a lot of people don’t lead pre-seeds. There’s a smaller amount of funds that will lead pre-seed rounds versus a seed. So, the amount of help you’re going to get is lower. But if you’re confident and you’re one of these founders who can run through walls, then that’s amazing. I think that a lot of VCs want to find founders who are just running through walls. That’s super important, and I think the pace of learning is valuable. But I’ve worked with many founders via accelerators where it wasn’t obvious that they would be a stellar founder, and it took them iteration, time, and learning to get to the point where they became one of these unstoppable founders. There were signs that they would become that, but I’ve seen people with those same signs not figure it out, right. So, I really think of accelerators as betting on people before that potential is obvious. So, if you feel you can go out and raise a pre-seed, go for it. Go try. I think that’s a good route. If I had to coach someone who is a stellar repeat founder on what to do, don’t do an accelerator if you don’t need it. But if you think that’s what you need, don’t be shy about going and doing one.
Kieran: When should a startup go to an industry-specific accelerator like The Mint (fintech) vs. an industry-agnostic like YC?
Sam: I don’t know why you wouldn’t go to an industry-specific one if there’s one that fits in that’s high quality. Let’s say you’re doing food tech, and the only food tech accelerators that are great are really niche and not widely known. I’d be like eh, don’t do it. Maybe you should still go to YC or one of these better programs if you can get into it. I would not do one of the industry-specific ones if it wasn’t a high-brand one. Now, if you can do one of these programs like The House Fund’s AI Accelerator or working with Conviction, I would for sure do that over a YC because it’s going to be so much more tailored to you. The community, the investors you’re working with, their network of investors, and the whole thing will be more tailored to you and focused in. I really think that’s the future. The future is more of these vertical-focused programs that are also high quality and with really good investors. Sheel Mohnot and his fintech accelerator, The Mint, is amazing. If you can work with Sheel, go work with Sheel. I don’t know why you would be in fintech and not work with him or take YC over Sheel. I would encourage founders to take Sheel over YC every day because his depth of experience is so much stronger, even though Stripe came out of YC. I think the reason to go to more of a generalist program is your customer set is more generalized. I think that the biggest selling point for YC, in my mind, is that you can sell into their community. But they’re also so big at this point that there’s so much noise. It’s not like Stripe is working with every one of the 2,000 companies that’s in YC. Maybe they’re trying to sell them in as customers, but they can’t be customers themselves of all those companies. It’s really hard. The bigger the communities get, the more unmanageable they are. I’m sure you have seen it at On Deck, right? So, I think that if you can do one of these boutique programs with a high-value investor like Sarah Guo, Jeremy Fiance, or Sheel Mohnot, that’s what you should be doing.
Kieran: What are some clauses that founders should be aware of in startup accelerator contracts? Is there anything they should watch out for?
Sam: There are two. Fees are one right. Some of these programs invest $200,000 but charge you $50,000 for the program. It’s a little shady. The way I would think about that is they are just making a $150,000 investment. You should be thinking about what the valuation of that is and how market it is. So, I’m not saying those are all bad, but I do think you need to really try and deeply understand the mechanics of what that looks like with respect to other programs and offers out there. The other component is essentially what it’s going to look like when this converts at a priced round. This is not just for accelerators but for every founder. One of the biggest things with founders that I see is shock when they realize how much dilution they’re going to take on by the time they’re doing a priced round at seed or series A. They realize, holy s***, I thought I had 50% of this company, and I have 30 or 25 after you have to give a pool to employees and all these things. You step back and realize you own so little of this business. I think every founder needs to be super hardcore about understanding how much dilution they’re taking on and the pre-money and the post-money. Even for YC, at what point does that convert? At what point do they get their 7%? How do the mechanics of it really work? This is counterintuitive, but many founders want to be cheap and are trying to find ways to save money. Don’t cheap out on legal costs. It’s one of the few things that I think you need to work with a world-class council on this. I’ve seen so many founders get screwed over by working with a council that doesn’t work with startups or doesn’t work with the really good ones. There are four or five firms out there that I think you should work with: Goodwin, Cooley, etc. It’s these lawyers who essentially have an incredible brand. Get a deal with them. Have them defer $20,000 worth of fees or something. Figure out what other founders have gotten in terms of an agreement and try to get that from them. You need a lawyer to review that contract with you and flag anything that doesn’t look market because they’ve seen hundreds of these. They will be able to tell you what’s market or not.
Kieran: Which startup accelerators do you think will perform the best over the next decade?
Sam: If I had my money to invest in accelerators right now, I would put money into Neo. Ali is amazing. I know him personally and have been tracking him for a while. He’s incredibly thoughtful in terms of how he’s built and run the team there. I’ve come up against him again and again in deals. The founders he’s getting are really good. I think he has been very thoughtful about his approach, and I’m just very impressed with the companies he’s getting. I would take Neo over YC any day. I would probably put money into Sarah Guo’s accelerator, Conviction. She is world-class and an absolute beast. AI is very interesting in terms of a category. Sheel at Better Tomorrow Ventures. His fintech accelerator, The Mint, is very good, and he has a thoughtful approach to fintech. I also love that he has an international footprint. He’s also agnostic around pre-seed and seed regarding his investments. So, I would definitely back Sheel. And I would probably throw a chip into YC because it’s just a damn good index. I would not coach most founders to go to them, but they continue to win so many good deals that I see. The deal terms they get, the breadth of investments that they have, they have winners coming out of every one of those batches. They’re going to have winners that continue to be huge. The amount of momentum they have is really impressive, and I think Gary is a phenomenal leader. I’m excited to see what he does with YC. I think he’s already been doing some really exciting and good stuff for them. So, the phenomenal thing about YC is most people could probably not name a single partner who’s doing day-to-day deals on their team. That’s a feature, not a bug. The fact that they are just so well known for their brand and their outcomes. It doesn’t matter what partners they have. They’re going to be good, and you’re going to get value out of that program. A lot of people crap on YC, investors have problems with them, and even I wouldn’t probably encourage every founder that I meet to go to them, but they are a good program at the end of the day. They’ve done a good job. They’re good to their people. They are super high integrity. There is a reason why people want to beat them because they’re the best. They’re really formidable, and they’ve done a really good job of setting the tone of how VCs should work with founders. YC is super founder-friendly, and I think they’re really thoughtful about how they approach the community. I’m glad that they exist because they’re such a mainstay and really set the tone for our ecosystem.
