Welcome to the Thunder Founder Newsletter Issue #24!

The collapse of the Newchip accelerator is the latest big fall in the VC world. We've welcomed over 400+ Newchip-impacted founders in the last 2 weeks. We've since received many emails asking to explain what happened and how to look for an accelerator program or raise capital. In this week's newsletter, we want to focus on what happened at Newchip, what founders can learn, and what to look for from an accelerator.

How Newchip Accelerator Crumbled: A Warning for Startups

Newchip Accelerator was a self-proclaimed #1 online accelerator program with global reach, $1M+ funding, and 1,000+ graduates. It promised to provide equity-free programs, remote access, mentorship, and community and funding opportunities for scalable startups. However, in May 2023, the accelerator revealed that it was closing down its operations due to financial and legal troubles. What caused Newchip's collapse, and what can other startups learn from its failure?

The Rise of Newchip Accelerator

Newchip Accelerator was founded in 2017 by Ryan Rafols and Travis Brodeen, two serial entrepreneurs who wanted to democratize access to capital and education for founders worldwide. They launched their first cohort in 2019 with 100 startups from 16 countries and raised $2M in seed funding from angel investors and venture capitalists.

The accelerator offered three programs: the Ignite Incubator for idea-stage ventures, the Series Seed Accelerator for traction-stage ventures, and the Series A Growth to Exit Program for scale-stage ventures. Each program lasted for six weeks and provided online training, mastermind sessions, mentorship, community access, discounts and credits, fund access, and a guaranteed term sheet.

Newchip Accelerator claimed to have a portfolio of over 1,000 companies from over 100 countries, with a total funding of over $1B and a portfolio valuation of over $10B. Some of its notable alumni include Sleep Easy, an AI-powered sleep-tracker app that raised $460K, and E-Commerce Platform, an e-commerce platform that generated over $2.7M in sales. If these numbers sound fishy, it's because they are.

The Fall of Newchip Accelerator

Newchip Accelerator was facing serious challenges that eventually led to its downfall. According to an article in Entrepreneur's Handbook, some of the problems that plagued Newchip Accelerator were:

• Lack of transparency and accountability: Many founders complained that Newchip Accelerator did not deliver on its promises of funding, mentorship, and support. Some claimed that they never received any feedback or guidance from the mentors or the team. Others said that they were misled about the terms and conditions of the program and the fund.
• Poor quality and value of the program: Many founders also criticized the quality and value of the program content and curriculum. In general, the founders thought the program was too generic and did not address their specific needs or challenges and that the program was too short and superficial and did not provide enough depth or detail. Often the program was described as outdated and irrelevant and did not reflect the current market trends or best practices.
• Unethical and unprofessional behavior: Some founders also accused Newchip Accelerator of unethical and unprofessional behavior, stating that they were harassed or bullied by the mentors or the team. Others said that they were ignored or ghosted by the team after completing the program or requesting funding. In contrast, others said that they were threatened or sued by Newchip Accelerator for speaking out or leaving negative reviews.

These problems eventually caught up with Newchip Accelerator this month, when it announced that it was shutting down its operations due to financial and legal troubles. According to a statement by Rafols, Newchip Accelerator could not secure additional funding from investors. He also said that Newchip Accelerator faced multiple lawsuits from disgruntled founders, mentors, and partners who claimed breach of contract, fraud, and defamation.

The Lessons for Startups

The collapse of Newchip Accelerator is a warning for startups who are looking for accelerator programs to join or invest in. Here are some lessons that startups can learn from this case:

• Do your due diligence: Before joining or investing in any accelerator program, do your research and verify their claims and credentials. Check their portfolio, track record, testimonials, reviews, and ratings. Ask for referrals and references from past or current participants. Look for red flags such as hidden fees, equity demands, unrealistic guarantees, or negative feedback.
• Know your goals and expectations: Before joining or investing in any accelerator program, know your goals and expectations and communicate them clearly with the program team. Make sure that the program aligns with your vision, mission, values, and stage of development. Make sure that you understand the terms and conditions of the program and the fund. Make sure that you have a clear roadmap and milestones to measure your progress and success.
• Seek value and quality: Before joining or investing in any accelerator program, seek value and quality over quantity and hype. Look for programs that offer tailored content, curriculum, and mentorship that address your specific needs and challenges. Look for programs that offer deep insights, feedback, and guidance that help you grow and improve your venture. Look for programs that offer relevant connections, opportunities, and resources that help you achieve your goals.

Newchip Accelerator may have been one of the most hyped online accelerator programs in the world at one point, but it failed to live up to its potential due to its shortcomings. Startups who are looking for accelerator programs should learn from their mistakes and avoid falling into similar traps. 

If you want a longer article about choosing the right accelerator, check out our blog post here. Choosing an Accelerator Post

If you're looking for some one-on-one coaching to help navigate your current situation, you can book a time with our Managing Director, Jason Kirby, for a one-hour paid coaching session. You can expect to get tailored feedback directly from Jason and know the exact next steps to set your company up for success moving forward. You'll get the feedback you wish you got from VCs. Book a Paid Coaching Session

What the Experts Have to Say

The Rise and Fall of Newchip Accelerator

An overview of the different reasons Newchip collapsed and problems within the organization. Read More

Searching For The Right Startup Accelerator?

A list by Forbes for 8 different items to look for when choosing an accelerator. Read More

How to Choose a Startup Accelerator

A good overview of items to think about when applying for accelerators and which ones to choose. Read More

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Written by Jason Kirby - https://www.linkedin.com/in/jasonrkirby
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