Startup accelerators are an essential part of the startup ecosystem, offering founders access to early-stage capital, mentorship, and resources. As someone who once underestimated their importance, I now recognize that these programs can deliver far more than just expensive dollars. Let’s explore the real value of accelerators and what founders should look for when considering joining one.
In my last venture-backed company, we were invited to apply to several accelerators, including Y Combinator, whom we already had personal relationships with. This did not guarantee acceptance, but certainly improved our chances. However, my perception back then was that these accelerators were just a source of expensive capital and marginal help with fundraising. Given that I was confident in my fundraising skills, I dismissed the idea and knew we could raise capital on our own.
After spending time with many founders who have gone through accelerator programs and received a ton of value out from them, I have a much greater appreciation for what they can do for an early-stage startup.
Although there’s no one-size-fits-all approach, accelerators usually ask for equity in exchange for their support and seed capital. Sometimes they invest a small amount in order to get a relatively large equity compensation, and other times will invest zero capital but still receive equity for the support they give you. Founders should also be aware that deals change with the market. Prior to 2014, YC would typically get 7% equity in return for a $17,000 seed investment. Now YC now invests $125,000 on a post-money SAFE.
You can think about that as valuing a company at just under $1.8 million, which isa relatively low valuation and can be considered expensive. But would you give away 7% of your company in order to go through the program that created gargantuan winners like Reddit, Airbnb, Dropbox, etc.? If not, there’s someone itching for the chance- YC’s already received a record 44,000 applications this year.
Founders should view accelerators as a temporary supplement/expansion of their team and advisor network during the program. This is crucial, especially for inexperienced founders, as many companies that join accelerators consist of just a couple co-founders and nothing else. Having the structure of an accelerator program to navigate the challenges of building a startup is invaluable.
Both knowing what to do and actually holding yourself accountable for getting things done is difficult for solo founders or founding teams that have never done this before. These founders are often guessing at what to should do next and have little to no guidance around best practices. The moment you find some kind of advice or direction or strategic imperative, you are the only ones pushing yourself to execute- which can be effective for some teams but usually hard to sustain when you don't have anyone else to answer to.
Effective accelerators provide guidance, support, and an additional layer of accountability, along with the cumulative benefits of being in a high-output environment around other startups.
When considering which accelerator program to join, founders should:
Joining a reputable accelerator program can bring several benefits:
Like any support you can get- in fundraising or otherwise- you get the most out of these opportunities by putting in more effort. Spend time with mentors in and outside of the program, be prepared for any meetings where you’ll be receiving feedback, and explicitly ask for help from the people who are there to help you. Being comfortable with asking for help is a skill that overly self-reliant founders need to learn and improve on.
Accelerator programs can be incredibly beneficial for founders, particularly those who are new to the startup scene. However, like any opportunity, they come with potential pitfalls that founders should be aware of. Here are a few red flags to watch out for:
Joining an accelerator is a significant commitment, and it's essential to do your due diligence before making a decision.
To stand out during the application process, demonstrate that you are a fast learner, have an action-oriented mindset, and can work effectively without letting ego get in the way. Showcasing your accomplishments or past projects that prove your abilities can help convince accelerators that you have potential.
Accelerators offer much more than just capital. They provide essential resources, mentorship, networking opportunities, and support that can be invaluable to early-stage founders. By considering these factors and carefully evaluating potential accelerators, founders can find the right partners to help them navigate the challenging path of building a successful startup.