BY LUCA MASTROROCCOI,
Startup accelerators, also known as seed accelerators, are a great way for your startup to gain traction, access capital and customers.
These fixed-term, cohort-based programs generally include seed investment, connections, mentorship, educational programs, and culminate in a public pitch event or demo day. With over 1,000 startup accelerators worldwide to choose from, it’s important to take a targeted approach and look into what really matters for your startup growth.
If you choose the right startup accelerator, you’ll undoubtedly experience incremental growth over time and your business will benefit exponentially. However, due to the growing number of options (e.g., industry-specific, corporate, equity-free, etc.) you need to correctly evaluate all of the available options. Too many founders have been burnt by bad decisions decisions and delay or even miss out on their startup dreams.
Should we join a startup accelerator?
Why do you want to join a startup accelerator? There can be several reasons, but you need to know what really matters to you. When you know the underlying reasons it will define your priorities and choice. Ask yourself:
- Do we solely want access to potential startup capital?
- Do we need access to the VC community?
- Will we receive introductions to potential customers?
- How does the startup community interact with a specific accelerator we are interested in joining?
When you choose an accelerator consider the feasibility of a long-term partnership and what it means for your startup.
If you want to identify and choose the right program, it’s a good idea to conduct research. The most important part of this process is to understand the nature of the partnership (and with whom you enter into it). Have you thought about interviewing leaders that oversee accelerators? Do accelerator partners have relevant experience as entrepreneurs?
Once you join a startup accelerator, the program can last for 3 to 6 months. Meanwhile, accelerator partners will be involved in every step of your startup. Evaluate how they plan to make you spend your time and ensure your core values and vision align. If you’re not careful, an accelerator can actually have a deceleration effect on company growth.
Location, location, location
The number one rule in real estate is that homes can experience large increases or decreases in value due to nothing other than their location. This is where we get the phrase, “location, location, location.”
The same is true for startup accelerators. Make a list of potential accelerators based on your real business needs and potential value for all parties. With the same logic, consider the location of the startup accelerator and it’s potential to limit your business or expand it.
When my co-founder and I decided to join a program, we focused solely on the money (dumb move). That decision translated into our company having access to a growing market, but it didn’t fit our primary needs for growth.
It’s all about fit
Are you looking for an accelerator that is focused on a specific industry? Perhaps you need a program that offers investment above and beyond the pre-seed stage.
Evaluate the type of mentors they attract. Conduct alumni research and evaluate the vision and mission of each accelerator that makes your short list. It’s crucial to consider these variables, since they will impact the program structure and overall value.
Due to the high number of startup accelerators available worldwide, it is inevitable that not every program will live up to its hype. As a rule of thumb, if an accelerator showcases an incredibly high number of mentors on their website, learn more about the frequency and availability of mentorship sessions.
Keep an open mind when assessing mentors. A mentor you might overlook could actually be useful in key decision-making for your startup growth. Choosing the wrong mentor can waste valuable time and potentially lead you down the wrong path.
Look beyond money
If you plant to join a startup accelerator, consider the investment terms.
For example, 500 Startups investments are structured as a convertible security with special rights for follow-on investment or additional equity. “Companies receive an investment of $150,000 for around 6% of their company (subject to dilution at the time of conversion of our convertible security).” Startup lawyer, Ryan Roberts notes, “now, it’s somewhat common to see startups hop from accelerator to accelerator or even have a small seed round prior to joining an accelerator.”
Some accelerators offer equity-free/no money programs, which at first might not seem like a good deal. However, they may offer some great perks and services that could help your startup in the long run.
Check survival rates
Although not all startup accelerators can brag about successful exits, check the survival rate. How many program “graduates” are still in business and how are they doing?
Consider if there was any type of follow-up investment? Did the number of employees grow since they “graduated”? All of these extra questions will help you get a full picture of the program’s potential.
As a startup founder you don’t need to join an accelerator. These programs are not for everyone. Consider if it is the right step for you and your team. Focus, do your homework and find the right partnership that delivers on a number of deciding factors.