This week, Newchip Accelerator has become bankrupt. For the past 9 months, I have served as a mentor for two startups that were part of Newchip. While there was much said about the sales tactics and questionable warrants at Newchip, I got a number of questions about the mentorship experience. Thus, here are my thoughts about it.
How did I end up with Newchip?
During the early years of the pandemic, I had a couple of start-ups pitch me that Graduated from NewChip. All the pitches were outside of NewChip and for seed rounds. The founding teams were relatively positive about their experience with the accelerator. Additionally, the terms for each of them differed significantly from each other. One didn’t have to pay an upfront fee, and their warrant only allowed NewChip to invest $250.000 at the same terms as the lead investor. The others paid around $2.000 and $6.000, but neither had warrants attached.
At some point, NewChip asked whether I wanted to mentor some of their start-ups. I pushed it off initially due to time limitations. Later I talked to someone in my network, who was a mentor, and he was relatively happy with the process and the network aspect. Thus, I decided to send in my application.
Where mentors paid for their time?
In theory, we would have gotten equity in NewChips parent company if they had succeeded. Even then, it would have been more of a token amount.
How much time did mentors dedicate to their startups?
There seemed to be a large difference between the mentors and startups. For one of my startups, I spend around 5 hours a month. For the other one, the time was closer to the advertised 2h a month. Around 2 hours was in line with my experience as a mentee beforehand. Thus, I felt the time was appropriate.
How was the experience as a mentor?
I had a relatively good experience with the two start-ups I mentored. Both were very responsive, and we looked into multiple decisions and issues the founder faced. Working with them has helped me grow, and I hope it has also been valuable for them.
The other significant benefit for me was the opportunity to network with the other mentors, especially the investors.
Was NewChips training worth the fees?
From what I have seen as a mentor, the program was rudimentary. It didn’t consider the differences in expectations investors had at different levels. For example, the cap tables the founders had to fill out were more in line with what you see at a series B or later, not in a seed round. Likewise, it wasn’t clear that financial projections in a seed round aren’t about accurate numbers but about ensuring the founders considered multiple angles and eventualities.
Would you be more critical of pay-to-play and warrants after NewChip?
In retrospect, it is easy to say that it was questionable.
Yet, my interactions before signing up made it seem the offerings were tailored to the start-ups. Mentors and start-ups had a satisfactory experience with the program.
The lesson might be more about survivor bias. The start-ups I spoke with successfully made it through, and the mentors actively advertised their experience. Maybe, next time I take the time to get a bigger picture.