Should You Join a Startup Accelerator?

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Should You Join a Startup Accelerator?

There are hundreds of accelerators, but do they actually help?

Should You Join a Startup Accelerator?
Y-Combinator. Photo by Kevin Hale. CC 2.0 License from Wikipedia.

There are hundreds of accelerators claiming to help startups get off the ground. Should you join one?

If you’re looking for a simple yes or no answer, sorry, I don’t have a simple answer. Whether an accelerator will be beneficial for you depends on you and your startup and the particular accelerator.

Having mentored at nearly a dozen different accelerators, I’d love to say they’re all worthwhile. Unfortunately, it’s not that simple.

Some accelerators are useful for connecting to investors, others are stronger at providing mentorship, while some are focused on a particular industry. And some, unfortunately, are a waste of time and money.

What is An Accelerator?

A startup accelerator is a program designed to assist startups get off the ground. Most claim to offer an educational program, mentoring, pitch deck review, and connections to investors. The programs vary in length from a few weeks to 3–6 months or even a full year.

Most accelerators (though not all) operate on a cohort system where a group of startups join the program together, progress through a series of classes with speakers and weekly assignments, and “graduate” at a demo day where the startups pitch to investors.

The biggest ones like Y-Combinator are for-profit investment vehicles, typically investing in the startups and taking a substantial equity stake. Others are non-profits, often tied to a university or industry association and providing their services at no cost.

Most (though not all) focus on early-stage startups, from ideation through seed raise. Most (though not all) have a similar curriculum that teaches founders how to build a startup, addressing issues such as corporate formation, product-market fit, go-to-market strategy, and fundraising.

With such a wide variety of programs for different needs, it’s hard to say categorically whether any particular one is useful. In most cases, it depends on whether the accelerator is a good match for the startup’s needs and development stage. But some are better than others.

Will You Meet Investors?

Unfortunately, most founders join accelerators with only one goal in mind: to meet investors and get funding. Most leave disappointed.

Big investors may come to demo day to check out the cohort, and a young associate at the VC fund might even be sent to mentor. But big investors usually don’t write checks before Series A.

It can’t hurt to meet the VC funds early and discuss what milestones they require before investing, and whether they invest in your sector at all. But that’s hardly a reason to spend 3 months in an accelerator when you can easily reach out them directly.

Angel investors and small funds also participate in accelerators and can provide more useful guidance to early-stage startups. But the same people who actively mentor at accelerators are usually happy to talk to you directly.

If the accelerator is free, it can’t hurt to join and gain warm introductions. But with a few exceptions, it’s rarely worth giving up 6% of equity just to meet investors who will tell you you’re too early for them to invest now.

Will You Learn Anything Useful?

Most accelerators teach a similar curriculum built around the business model canvas. Most focus on building venture startup, which means shooting for the moon. If you aren’t aiming to become a unicorn and your strategy is not “go big or go home”, their advice can set you in the wrong direction with a business plan that doesn’t match the product.

Further, Y-Combinator makes all their lectures available for free in their Startup School which is free and open to anyone. And there’s no shortage of books and YouTube lectures covering everything an accelerator teaches.

Even my articles here on Medium and my blog will teach you everything a typical accelerator will charge you 6% of your equity or tens of thousands of dollars in tuition. Medium only charges $5/month.

Will you learn something at an accelerator? Yes. But nothing you can’t learn on your own for free with a little effort.

Will You Get Great Mentors?

Every accelerator touts its list of famous mentors to be your personal advisor. Your mentor give you perfect advice, introduce you to customers, connect you to investors, and lead you to startup nirvana. Will any of that actually happen? It depends on the program and the mentor.

If you get assigned as my mentee, you’re in luck. I take my mentoring responsibilities seriously and do what I can to help you.

Still, I’m not the Senior VP of Tesla, founder of Stripe, or partner at Kholsa Ventures the accelerator featured on its website. How much time do you think those people spend answering basic questions from random startups? I guarantee it’s not much.

Even if you get a diligent mentor like me, how much I can help you depends on what you’re building. If your product is a new networking technology or a deeptech solution for energy sustainability, I’ll be a great advisor. If you’re in consumer packaged goods, I’ll do what I can to help, but to be honest, I know less than you.

Will you get matched to the right mentors for your industry and stage? Depends on how much effort the organizers put into matching and the luck of the draw.

If you get assigned a mentor who isn’t a great fit, or doesn’t have time to work with you, ask to be assigned another mentor. Don’t worry about hurting a mentor’s feelings. If it isn’t a good fit, we’ll be relieved, too.

Don’t be shy about reaching out to any mentor in the program you think can help you— I’ve had the most useful mentoring relationships with founders I met at a weekly meeting or program social event and discovered we were a better match than the team and mentor we’d been assigned.

So…Are Accelerators Worthwhile?

With what I’ve written so far, you’d expect me to say that accelerators are rarely worth the cost. But in fact, I think accelerators can be very useful and I frequently recommend them to founders. But they’re only worthwhile if they’re a good match for your particular startup.

Of the general accelerators, Y Combinator is the biggest and best known. If you’re accepted into YC, join. Will you learn anything you couldn’t pick up on your own? No. Will you find mentors you wouldn’t find at other accelerators? Probably not. Will you be introduced to investors ready to write checks? Hell yes!

If you join Y Combinator, your funding troubles are over. At demo days, random investors will beg you to take their money, even bidding up your valuation. (Don’t increase your valuation. Here’s why too high a valuation can be a trap.)

Being a YC alum opens doors with investors, with customers, and with potential hires. The company will get written up in the press. Industry analysts will follow the company.

So apply to YC and hope you get in. No other accelerator has nearly the same cache. They take a huge chunk of equity, but it’s worth it.

Cash Investment

Some accelerators offer anywhere from $10,000 to $150,000 for some percentage of equity. If you’re already at a seed round or beyond, this is rarely a good investment. At the earliest stages, though, this cash can be crucial in getting the company started.

Beware, though, that the actual cash you receive may be far less than advertised. After offering you a $150K investment, they may take $100K back as “tuition”, netting you only $50K which won’t go very far if you have to live in San Francisco for the duration of the program.

Other Benefits

Many accelerators offer a slate of benefits: cloud credits from AWS, Google, and Azure, discounted legal fees from startup attorneys, free access to a variety of developer and marketing tools. Most are short-term offers to get you hooked, but they can be worthwhile anyway.

Some accelerators provide free co-working space. Having a physical office where the team can collaborate can be valuable, especially at the earliest stages. Hardtech accelerators that offer lab space or access to expensive equipment can be especially valuable.

Cohort as Support Group

What I like best about accelerators is the camaraderie and collaboration that develops between the startups in the cohort.

Being a founder is a lonely, stressful job that even your spouse can’t understand. Having other people around you experiencing the same challenges not only provides the perfect support group, but gives you a group of people you can reach out to for all kinds of problems from finding a good graphics designer to deciding what investors to pitch.

Industry Expertise

Other than YC, I usually recommend startups join industry-specific accelerators. In CleanTech, for example, there are programs like CleanTech Open and VentureWell’s climatech program. In my experience, the more targeted the accelerator to a particular industry, the more useful it can be.

  • Program leaders have strong connection to major players in the industry and can make valuable introductions.
  • The curriculum is tailored to your unique space, providing information you won’t find elsewhere.
  • Other companies in the cohort are facing the same challenges and frequently have complimentary products for collaboration.
  • Mentors are industry experts who can provide useful guidance or even become a pilot customer.
  • The VCs who attend demo day are focused on investments in your sector.

Making sustainable fabrics? There’s Fashion For Good. There are accelerators for every specialty from LegalTech to FinTech to SpaceTech. Look for an accelerator that matches for your specific target market.

Finding the Right Accelerator

Before joining any program, do your own due diligence. They interviewed you; you should interview them, too.

Talk to the program leads — will you enjoy working with them? Do you even get to speak with them or does everything go through junior assistants? Do they seem helpful or are they aloof and arrogant?

Ask around the startup community to find out the accelerator’s reputation.

Connect with founders from previous cohorts and ask them what they got out the program and whether they’d recommend it.

Reach out to the mentors and see if they’re really engaged with the startups or just window dressing.

Ask the VCs whether they actively invest in companies they meet through the accelerator or only attend the demo day out of obligation.

If you go to the wrong accelerator, you’ll be wasting a founder’s most precious resource — time. But the right accelerator can make a huge difference in your success. And if you get really lucky, you might even get to work with me.

Go to Publisher:

Entrepreneur's Handbook – Medium


Author: DC Palter