10 Must-Knows About Joining a Startup Accelerator
Accelerators are now an integral part of the startup ecosystem. For some, especially first-time founders, it is sort of becoming a checkbox item: go through an accelerator. Serial entrepreneurs, as a rule, would say they don't need to, because they already know what to do.
Some people say that accelerators are only good for the companies that haven't yet raised financing. They argue that if the company has raised capital, then it's too far along for an accelerator and wouldn't benefit from it.
My take is different: None of the above is universally true. We have plenty of successes at Techstars (where I'm a managing director) with companies who raised funding, and plenty of serial entrepreneurs who have gone through the program. Increasingly, we see later-stage companies that already achieved product market fit really accelerate by going through Techstars.
Here is a breakdown of why you would join an accelerator, along with some tips.
1. You are looking for mentorship and feedback.
Quality mentorship is the secret sauce behind a great accelerator. Matching you with a network of top entrepreneurs, executives and investors who share their experience, provide feedback and guidance can really accelerate your business.
Most often, the focus is the business itself: Is this the right product for the market? How do you achieve growth? What is the revenue model? Is this a big business? Is this business venture fundable?
You need to want to be mentored and seek the feedback. If you don't think other people can add value or give you good feedback, then accelerators are not a fit for you.
2. You believe that your idea is an actual business.
You believe you have a good idea, and potentially a great business and you want to accelerate the discovery of whether this is true or not. You will do that by with a ton of testing, getting customer feedback, talking to mentors and accelerator staff, and most important, by setting goals and aggressively measuring progress.
You will do all of this with the goal to find product market fit, and then step on the gas to get growth and prepare business for financing. That is, you compress what normally happens over much longer periods of time down to days and weeks. You essentially force yourself and your company through the process.
3. You are looking for business acceleration.
If you already have traction and early product market fit, you may benefit from business acceleration. By leveraging an accelerator's network, you are taking a shortcut through the lengthy business development process and rapidly accelerating your business. If your product is great, you can turn introductions into customers and quickly grow your revenue in a matter of weeks and months, which normally would take months and years.
4. You are preparing for financing.
Whether you are first-time founder or a veteran, raising money is never easy. A good accelerator could prepare you for financing, not just by introducing you to investors, that's the easy part, but by actually working with you to help ensure that you have an interesting, healthy and defensible business.
You will work through the questions the investors would ask: What is the value here? Who are the customers? What is your traction and growth like? What's competition like? What is the market opportunity? What are the costs and revenue projections? What's the hiring plan? What does this business look like at scale? All of these and many more questions get worked through to prepare you for funding.
5. You click with the managing director and accelerator crew.
Do you like the managing director and accelerator staff? If not, how are you going to spend more than three months together?
Every venture capitalist would tell you how important the match between the CEO and VC is, because they get to work together in the boardroom for years. Now, let's do the math. If you do a board meeting every six weeks for five years, that's 43 days of half-day meetings. Assume you spend another 43 days together over five years (that's a big over-estimate). That's still less than the time you would spend with the managing director and staff at an accelerator.
Make sure you know and like the people you will work with.
6. You are clear on the value.
Just like not all universities, high schools and kindergartens are the same, no two accelerators are alike. How different are they? Do your homework and find out.
The last thing you want is to go in thinking you are going to get something and then come out without it. Be direct and specific -- whatever you are looking for, ask during the interview process. Would I get X out of your accelerator?
Remember, any interview is a two-way street. If the accelerator is not willing to answer your questions during the interview process, it's probably not a great accelerator for you.
7. You understand the offer terms.
The transactional part of going to accelerator is really important too. What are the terms? What do you get, and what do you give up? How much money are you getting? Is it equity or debt? What percentage of your company are you giving up? Is it common stock or preferred? What rights will preferred stock have?
If the accelerator does not take any equity, it's fine, but it does create a looser relationship. On the other hand, some accelerators ask for too much equity, and that makes it harder to further finance the business. Some accelerators have aggressive preferred stock asks, including senior class of stock and control terms. That's not really market, but you might decide that you are OK with that.
The key point is to understand what you are getting and what you are giving up.
8. You enjoy intense environment and competition.
Accelerator environments are typically really intense. At least at Techstars, the companies really Do More Faster, and it is amazing how much they accomplish in a short period of time. If the accelerator is laid back, well, then it's not likely to accelerate your company. Figure this out before you join. You want a super intense, fast-paced environment that will leapfrog your company.
And you have to want to go through this experience with other startups. You will learn a ton from each other and also naturally compete.
Who made the biggest progress this week? Who landed the biggest client? Who has the most users? Who has the best pitch?
Accelerators are a great naturally competitive environment, and a place to make friends and business partners for life. Nothing else bonds founders like going through an accelerator together.
9. Alumni say it is awesome.
Do your homework. Talk to the alumni. Did they enjoy the experience? If all of them say yes, ask what did they get out of it? Why did they think it was valuable for their businesses?
If most alumni said it wasn't a great experience, save yourself time and find a better accelerator.
10. Some of the reasons to not join an accelerator.
- You are looking for immediate funding. Better accelerators give you around $100,000, and while not a meaningless amount of money by any means, should not be the sole reason for going to accelerator. It is like taking a job you don't love just to get paid -- it's fine to do it, but likely won't make you happy.
- You are looking to get into any accelerator. It is a bad idea for all the reasons we talked about above. Any accelerator won't help you accelerate the business. Be deliberate, know why, do not settle.
- You are looking for co-founders. Accelerators aren't really the place for this. It is very likely that you would be wasting the opportunity unless you have the right team already in place. Of course, things happen, teams fall apart, and then you deal with it, but it's different from deliberately going to accelerator to just find a co-founder.
- You are looking for free space and beer. Again, this is not a great idea (although I hear you on free beer). You won't be maximizing the value of the program without having a specific set of goals and objectives.
I hope this helps. If you have specific questions about your company and whether you would benefit from an accelerator, feel free to leave a comment or email me at firstname.lastname@example.org.
Alex Iskold is the managing director of Techstars in New York City. Previously Iskold was founder/CEO of GetGlue (acquired by i.tv), founder/CEO of Information Laboratory (acquired by IBM) and chief architect at DataSynapse (acquired by TIBCO). An engineer by training, Iskold has deep passion and appreciation for startups, digital products and elegant code. He likes running, yoga, complex systems, Murakami books and red wine -- not necessarily in that order and not necessarily all together. He actively blogs about startups and venture capital at http://alexiskold.net.