When a startup wants to go international, there are different ways forward. While more mature startups with high revenues and a well-known product usually open sales offices or subsidiaries, this is not an option for early-stage startups with less resources. Can joining an accelerator in a foreign market be a viable alternative as an early-stage go-to-market strategy?
To answer this question, Hanna Börgmann from our GISEP (German Israeli Startup Exchange Program) sat down with Mickey Balter, CEO of the Israeli Startup Oriient, and Eric Weber, Founder and Managing Director of the Leipzig-based Spinlab Accelerator.
Hanna: Mickey, could you briefly tell us about Oriient?
Mickey: Yes, I would love to. Oriient operates an Indoor GPS service which doesn’t require any hardware installation – no beacons and no WiFi. Our service enables mobile apps to offer indoor navigation in any building, anywhere, with just a software plug-in. Basically, you have to imagine Google Maps extending into the building.
Hanna: Why did you choose to try your luck in the German market?
Mickey: After considering several markets, we identified a possible need in the retail vertical. As an Israel-based startup, it was clear that the local market does not represent the worldwide landscape. So, we decided to seek validation and exposure in the European market. The choice for Germany was a result of the opportunity presented by METRO/Techstars accelerator.
Hanna: … so the accelerator as a means to penetrate the market in your case.
Eric, you are founder and Managing Director of the Leipzig based SpinLab – The HHL Accelerator. The Israeli ecosystem is very strong, and holds many opportunities for founders, also in terms of financing. Why should Israeli founders still consider accelerators as a go-to-market strategy, rather than collecting money at home and selling abroad?
Eric: In my opinion this is not an either/or choice. Even for funded Israeli startups some accelerator programs still make a lot of sense. Often these programs focus on market entry especially on the German and Western European market, which is very important Israeli founders. Getting trusted contacts makes a huge difference, especially in the more conservative German market where trust and reliability are of great importance.
Mickey: I completely agree. In addition, accelerators can help getting validation for the market need and the use-cases. After being accepted and moving to Germany we were able to make progress very fast and also secure first customers and opportunities all over Europe.
Hanna: Let’s dive a bit deeper into Oriient’s experience with METRO accelerator, Mickey. What is the specific value of joining a big corporate accelerator in your view?
Mickey: Joining METRO accelerator provided a unique opportunity to interact with such a huge organization. I think that without the framework of the accelerator getting the same traction would have taken many months, not weeks. Another advantage of the corporate accelerators is unique access and visibility from the key decision makers. The accelerator has dedicated people whose job is to help the companies navigate the organization and understand the perspective of the other side. This was a key contributor to our successful experience.
Eric: That is true. However, this special access to a big corporate is at the same time a limitation. As opposed to deep access into one big organization, independent accelerators such as SpinLab or startupbootcamp Berlin, who work with several partners, can provide broader networks. Thus, a startup needs to ask itself, what it is that they need: deep insights into one specific company, for instance to realize a first deeply-integrated pilot, or a broader contact base to integrate and sell a more or less market-ready product to several corporates.
Hanna: Thanks for pointing that out. What do you think startups should look out for more generally when choosing a suitable accelerator?
Eric: First, it is important to note that standard conditions often involve the accelerator taking equity shares, which can lead to down rounds for funded startups – especially since valuations tend to be slightly higher in Israel than in Germany. It is essential to carefully look at the deal details, especially any right of the accelerator to influence future financial transactions, such as first options and rights of first refusal. Also, the language of the program as well as the everyday communication must be in English.
Mickey: Yes, it is definitely crucial that startups do their homework beforehand. The application process and the interaction with the accelerator prior to being accepted are key to understanding if the product is right for the sponsoring corporate. If it is not, or if it will take too much time, joining can create more harm than benefit.
Eric: Indeed, what can be worse than loosing 3 to 6 months abroad, if it does not make a real impact? To prevent this from happening, I also advice to carefully check the track record of the accelerator, as out of more than 100 accelerators in Germany, the quality definitely deviates.
Hanna: Mickey, did you encounter any pleasant or unpleasant surprises after joining? Something that you did not expect before-hand?
Mickey: Definitely the cross-pollination from the other companies in the accelerator. While I kind of expected a solo experience before, I experienced the accelerator as a really fertile ground for exchanging ideas, and learning from each other through observations and sharing experiences.
Hanna: Thank you both for the interesting insights. If done right, it seems that accelerators are indeed a great option for early-stage startups to penetrate foreign markets.
The German Israeli Startup Exchange Program (GISEP) was initiated by the German Startups Association in 2016, and is supported by the Federal Ministry for Economic Affairs and Energy. Check out the website here.
INSIDE ist das Magazin des Bundesverbandes Deutsche Startups e.V. (Startup-Verband). Der Startup-Verband ist Repräsentant und Stimme der Startups in Deutschland und engagiert sich für gründerfreundliche Rahmenbedingungen. Im Dialog mit Entscheidungsträgern in der Politik erarbeitet er Vorschläge, die eine Kultur der Selbstständigkeit fördern und die Hürden für Unternehmensgründungen senken. Der Startup-Verband wirbt für innovatives Unternehmertum und trägt die Startup-Mentalität in die Gesellschaft. Als Netzwerk verbindet er Gründer, Startups und deren Freunde miteinander.