Is a Startup Accelerator Right for You?

Uncle Sam - I want youIt seems like everywhere you look now there is some form of startup program advertising their method of helping entrepreneurs increase their odds of success.  From incubators and accelerators to boot camps and co-working spaces, each has a different collection of benefits and associated costs.  But how should you go about deciding if they are right for you and your particular venture?  And if the answer is “yes”, how do you go about comparing them?  Let’s explore further.

In this article I use the terms “accelerator” and “program” to cover the broader market space of startup assistance programs mentioned above.  The truth is there is enough overlap of service offerings and benefits between all of them that I’m thinking one day we will look back and marvel at the debates we had over calling something an “incubator” versus an “accelerator”.  And for full disclosure, at the time of this writing I am the managing director of a very active startup accelerator (specifically, Capital Factory in Austin, Texas).  And to demonstrate my point, Capital Factory is also a co-working space, event space and venture fund.

So how about deciding if a startup accelerator is right for you?  Start by matching your biggest areas of need with the service offerings and benefits of the accelerators being evaluated.  My recommended checklist follows, in no particular order of priority because everyone’s situation is different.  This first checklist can be used both to help decide if there are merits to participating in an accelerator as well as later comparing different programs you are considering.  The second checklist is mostly for comparing programs.

Funding

All startups need funding and accelerator programs can be a good way to get started.  Some come with guaranteed funding just for being accepted while others unlock funding once certain criteria are met.  Just make sure to understand the key terms associated with the funding, including valuation and various preemptive rights (ie – pro rata, anti-dilution, etc) because money comes in different shades of green.  I find that a lot of startups only focus on the amount of money.

Additionally, does the accelerator have other ways of helping you raise money?  If they offer any guaranteed funding just for acceptance, surely it’s not enough to fuel your company to profitability.  Ask about regular visits from active investors and VCs, demo day pitching events, roadshows to places with a concentration of investors, an AngelList syndicate or other similar fundraising assistance and activities.

My final comment about funding actually relates more to education and advising but in the context of fundraising it becomes uniquely important.  Will the accelerator teach you the basic mechanics of fundraising, how to assemble a pitch deck, how to evaluate a term sheet, how to find investors and later negotiate with them, etc, etc?  All are critical to securing proper funding throughout your company’s evolution.

For more information about fundraising, check out my articles in that category here or watch my full compilation video titled “The Art & Science of Fundraising“.

A Place to Work

What startup doesn’t want to get out of their home basement or coffee shop and have a real office to work from?  This is especially true as you hire your first employees and want to have a place you can all gather to exploit various synergies.  Many accelerators offer a place to work for some period of time.  Check it out and evaluate it for the various things that are important to you.  Here are some things to consider for your checklist:

  • Rent commitment (amount and duration)
  • Open format or walled offices?
  • Overall “vibe” of the space (ie – collaborative and hip versus quiet and serious)
  • Meeting rooms and phone booths
  • Kitchen, food, coffee, beer, etc
  • Various shared services (ie – mail, reception, administrative)
  • Events and activities

Advising

Accelerators are magnets for successful entrepreneurs and seasoned executives that want to give back via advising.  If you and your co-founders are in need of casual mentors or formal advisors find out if the accelerator has such a component to their program and if access is included with your program participation or membership.  Then do a brief background check on the advisors to understand their past successes and areas of expertise.

For more information about advisors, read my 3-part series here (selecting, compensating, maximizing value) 

Education

Similar to the adage, “Give a man a fish and you feed him for a day.  Teach a man to fish and you feed him for a lifetime.”, many startup accelerators have a formal education component.  Find out what classes are taught, who teaches them and what the format is (recorded videos, lectures, workshops or a combination).  How does that match with your needs?  When answering this question, don’t just think about you but also think about your co-founders and first employees.  Each likely has a different set of educational needs.

Check out my Startup Advice Video Library

Networking

In your very early days, networking is critical to your success.  This includes networking with other startups that are going through a similar situation as you, business partners that might be able to help you in some way, prospective employees, investors, and the list goes on.  Most accelerators are part of an ecosystem that leverages networking as an added value for all parties involved.

Recruiting

Finding the right talent when you need it and with minimal effort can be a huge value.  Some accelerators have on-staff recruiters while others conduct regular recruiting events or related activities that foster access to needed talent.  If this is important to you, investigate the details.

Budget Stretching (aka – free stuff)

One of the most precious resources a startup has is cash.  Stretching your budget will become an obsession, if it isn’t already.  Most accelerators have access to free or discounted services and offerings.  Find out if the kinds of things you’re paying for or have in your forecasted budget are available cheaper (or free) via an accelerator.

Publicity

When you’re just starting out, you can yell at the top of your lungs and almost nobody will hear you.  An accelerator can help amplify your exposure via PR and other forms of publicity like social media, blog articles, relationships with local or national reporters and the like.  If this is important to you, evaluate the publicity successes other startups have had with the programs you are considering.

OTHER FACTORS TO CONSIDER WHEN COMPARING PROGRAMS

Cost to Participate

This is something that varies greatly from program to program.  Most accelerators ask for equity while co-working spaces ask for cash (rent payment).  You will even come across programs that don’t carry a direct cost because they are funded some other way (government grants, etc).  In either case, make sure to understand the cost and any associated terms or special rights that are also granted for program participation.

Program Duration

How long does the regimented part of the program last and are any benefits still available after that?

Stage of Company

Many programs are optimized for pre-launch startups either still in the early idea formation stage or actively building their minimum viable product (MVP) while others are ideal for startups that already have a product and paying customers.

Areas of Focus

With so many accelerator and similar programs available, many have specialized in some way.  You’ll find ones that focus on a particular industry segment (ie – health care, education, retail, etc) and others that focus on a particular product category (ie – hardware, IoT, mobile gaming, consumer packaged goods, etc).

Level of Structure

Programs up to 3 months in length are usually fairly structured with program participants following a regimented itinerary.  Longer duration programs often have a bigger mix of optional offerings and activities, leaving it up to the startups to engage the things that provide the most benefit.

Program Reputation

The stronger the reputation, the more it will positively reflect on you when you are fundraising.  This is especially the case for highly competitive programs that accept fewer than 3% of their applicants.  Also realize that some accelerators might have a very strong reputation but not in your area of focus (industry or product offering).

Program Track Record

This probably goes hand-in-hand with Program Reputation but I mention it separately to make sure you evaluate the specific success other startups like yours have had after completing an accelerator program you are considering.

Acceptance Process and Criteria

Many accelerators operate only once or twice per year while others have monthly/quarterly application cycles.  Make sure to evaluate the timing, process and criteria for acceptance.

Summary

Hopefully your perspective has been broadened quite a bit by this article.  I have seen numerous experienced entrepreneurs with successful prior exits decide to join an accelerator or similar program.  I think it’s for two reasons.  First, most successful entrepreneurs realize they still have a lot to learn and can benefit from all sorts of help.  And second, there are so many different sizes, shapes and flavors of programs that almost every startup should be able to find one that can help increase the odds of success.

Wait, there’s much more!!!

If you enjoyed this article, you’ll love what I cover in my video library called Founders Academy, which includes all of the key concepts and insights to help you dramatically increase your odds of success using topic-specific streaming video modules.  Click Here to Learn More

“Founders Academy is a must!  Gordon unlocked new value in concepts I thought I was already familiar with.” (startup founder)

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Author: Gordon Daugherty

Over the past 15 years Gordon has seen nearly 1,000 startup pitches, advised more than 200 entrepreneurs and been involved with raising over $45M in growth and venture capital. Throughout his 28 year career in high tech, serving twice as President and three times as CMO, Gordon has both an IPO and a $200M acquisition exit under his belt. Now his emphasis is purely focused on helping startups and early stage tech companies. Through his Shockwave Innovations advisory practice and as Managing Director for Austin’s Capital Factory startup accelerator, Gordon is an active angel investor, VC and startup advisor.