ou’ve got the great idea, you’ve assembled your team and you’ve built an MVP. Now what?
Founders transitioning out of the early formation stages and into the next stage of the start-up lifecycle–aka the validation stage–often lack the wisdom to know how they should proceed in scaling their startup.
Enter startup accelerators. Designed to grant new companies access to just these things.
These fixed-term programs, often three to six (or even sometimes 12), months in length, offer startups with promising MVPs and founding teams many of the ingredients they need to scale successfully - mentorship, education, networking and capital.
SeedDB, a prominent, though not complete, accelerator database that examines 190 programs world-wide and the roughly 8200 companies that have passed through these them between 2006, in and around the time Y Combinator and TechStars launched their first programs, to 2019, reports a total of nearly $89 billion in collective investments, and 1300 exits valued at nearly $26 billion in total.
Accelerators are predominantly focused on helping teams, validate their business models, attract additional resources such as investments or loans for equity, and connect with the right investors.
What you actually get out of the accelerator experience, however, depends entirely on what you’re willing to put in.
Participating in these programs will require that you commit your time and energy to the seminars and events offered by the accelerator. This could mean relocating your team, and perhaps even foregoing some equity if you are granted funding.
As such, before committing, it’s super important to consider the level of engagement required, and whether your start-up is ready and able to take on the hard work that lies ahead.
While it can be a grueling process, the benefits can also be invaluable. Whether you’re looking to reduce time-to-market, refine your pitch, or meet investors, accelerators are designed to help you do so.
In fact, according to one study, startups that graduated from accelerator programs have approximately 26% higher chance of surviving their first two years, and 23% better odds at remaining operational after 5 years as compared to other new businesses in the US.
In addition to the legacy programs that stand behind companies with valuations in the hundreds of millions of dollars (and sometimes billions), namely Y Combinator, 500 Startups, Techstars, and AngelPad, there are reportedly hundreds (in not thousands) of similar programs around the world that tap into their regional networks and offer unique advantages to their participants, says the International Business Innovation Association.
That being said, not all programs are created equal. While you may be familiar with success stories like AirBnB, DoorDash, Stripe, and CoinBase, to name a few, not every company that passes through these programs see the same positive impact on their valuation.
Choosing the right program for your company, however, can improve your likelihood of success.
Finding the Right Accelerator Program
So how should you choose the best one for you? Start by asking yourself the following three questions:
- Is my startup ready for an accelerator?
- What about this accelerator makes it uniquely equipped to help my startup succeed?
- What are my company’s biggest needs and how can this accelerator’s resources help me address them?
With that in mind, here are some things to look out for.
Is the timing right for your Startup?
While an accelerator is a great next step it is not always the right one. If you have distinct, unanswered questions and curiosities that only experts can answer, then it may be time to join an accelerator.
However, if you are having trouble articulating the challenges your startup is facing, are not ready to pitch to investors, or perhaps lack the experience that would allow you to leverage the network that is being made available to you, take a step back and think about waiting it out.
On the other hand, time-to-market may be critical for your startup. If your solution has shown initial user growth and a promising path to revenue (or is perhaps generating revenue already), an accelerator is a great way to rapidly test and validate your business model.
While post-revenue startups will also have to consider how they’ll manage their other operational priorities, in either case, a little external validation at this stage may be just the thing to, well, accelerate your startup.
You should also consider the accelerator itself, and the features that set it apart from others.
The Equity-Capital Tradeoff
Without a doubt, scaling will require capital, and unless the program offers grant funding, it’ll come at a cost–typically 5–7% equity. If you are considering accelerators that ask for a greater percentage you need to establish whether it is worth diluting your equity this early on.
Your decision should factor in the program’s portfolio and funding success, as well as what you anticipate to get out of the experience (see below). Many accelerators communicate their results, including the number of companies they’ve accelerated, the total funding raised by their startups, the total value of their exits. You can find these figures on comprehensive databases like Seed-DB and CrunchBase.
The Accelerator’s Location
Where you choose to accelerate your business can certainly influence your startup’s future. Given that your location can influence the new talent you can target, the initial customers you attract, investors and other entrepreneurs that you’d have access to, it is a great opportunity to intentionally and strategically lay roots in a particular region.
As we slowly transition back to in-person programming, it’s important to keep in mind the associated costs of attending an offline program, if not nearby, for you and your team. For online experiences, consider what it is you’re hoping to get from the program and whether you’ll be able to effectively leverage the virtual format.
A Focused or General program?
There are now different types of accelerators, bootcamps, and even in-house programs at corporations Google and Microsoft, that focus primarily on vertical markets or horizontal technologies. Industry-specific or “vertical” accelerators accept companies with a diversity of products and services in the same market.
Groupings can be both broad–think Fintech, edtech, energy, health, media, real estate–or quite niche, catering to companies in cybersecurity, marketing tech, retail and food tech, for example.
Alternatively, “horizontal” accelerators focus on particular products or services that span different market niches, such as enterprise, internet, mobile, SaaS, hardware, cloud, and IoT.
These programs can offer an optimized ecosystem with greater access to customers, a network of mentors with industry experience, and strong ties to theme-aligned investors–benefits that rival, if not outshine, the advantages of attending a more prestigious, but general program.
When deciding between a vertical, horizontal or general program, consider, first and foremost, the kind of community and network the candidate programs can offer and how your startup would fit in that environment. Reviewing recent cohort class profiles and statistics is a great way to assess this.
Success Rates and Reputation
On that note, how successful are the accelerator’s past participants today? Given that acceptance can be highly competitive, acceptance into an accelerator can often serve as a seal of approval in the entrepreneurial community. This external validation can be instrumental in attracting the most attention from investors, clients and new hires alike. It also usually means great exposure and free PR on demo days and in the accelerator’s own media and promotions (win-win).
To investors, these programs are often seen as a source of qualified deal flow given the amount of work that goes into the selection process and into validating high-potential business ideas. This is especially true when it comes to the most well-regarded programs. However, don’t fall into the prestige trap. These benefits shouldn’t outweigh your startup’s specific needs where a program might otherwise be a poor fit.
Who Will Your Mentors Be?
While last on the list, this is one of the most important factors in your decision–it might even be the only one that really matters. Programs will often round up a diverse group of entrepreneurs and significant non-founder startup members, market strategists, C-suite professionals, investors, and alumni, all of whom will have relevant experience with funding, marketing, design, accounting and intellectual property.
While they have generously made themselves available to you, the mentor network is not there to pick apart your strategy, financial plans and market for you. Being prepared to interface with business experts and investors will allow you to make the most of the indispensable knowledge and wisdom these professionals have to offer. This is after all what you will be exchanging equity for.
Comb through the list of the mentors you will have access to, and determine whether their experiences, expertise and connections are well-suited to your startup’s needs. What does your company need help with right now?
Customer development. If your main interests are in deepening your existing customer profiles, identifying new potential consumers for your product or service, or perhaps pivoting into a fiscally viable market, you should surround yourself with product development-centered strategists. You might also be interested in an impact-focused accelerator with the capacity to connect you directly to your end users.
Traction. Companies whose business models are centered around massive user acquisition have very different needs than those built around a handful of high-impact, high-dollar clients. There are accelerators that are tailored to companies sitting on both ends of this spectrum.
Startups looking to develop strong user acquisition strategies should identify accelerators and mentors that have a track record of building well-marketed companies with sustainable growth strategies. Businesses on the other end should look for mentors with B2B or B2C experience like RevUp (RI) and Acceleprise (CA) to name just a few.
Adoption. Maybe you’re one of the few startups the potential to disrupt their target market. If so, you should be looking to lean on mentors who have experience with disruptive tech and technology adoption. While most accelerator programs claim to be on the hunt for “game-changers” and “disruptors”, consider whether they have the resources and network to help catapult you through the adoption lifecycle.
While the funding, mentorship, and networking opportunities can significantly increase the likelihood of your startup’s success, joining an accelerator is a significant business decision and should be treated as such.
Take the time to carefully evaluate the unique offerings and networks that different programs will grant access to as choosing the right accelerator, for the right reasons, can make all the difference in your startup’s journey.
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