Over the past few years, awareness of startup accelerator programs like Y-Combinator and 500 Startups among others has skyrocketed. Typically, startup accelerators periodically select a batch of companies, usually in the same early stages of their lifecycle.
In return for a small portion of equity, they offer advice, investor connections and mentorship. Programs can culminate in events much like debutante balls called a “demo day” where the startups have a chance to pitch to many investors at the same time.
Despite the trend, many early-stage entrepreneurs remained misinformed about the benefits of going through accelerators. Here’s are key insights about what can be helpful (and not so helpful) about such accelerators.
Not all startup accelerators are created equal
There has been a huge proliferation of accelerators across the world including Africa, over the past few years. This phenomenon brings advantages to the tech community; accelerators often inject a renewed sense of excitement into local startup scenes. However, the sad truth is that very few accelerators are actually worth participating in. Most accelerators have pretty weak relationships with investors. When the time comes for their demo day, there won’t be enough legitimate investors in attendance, and this will make it difficult for participating startups to jumpstart their fundraising process.
An additional issue arises due to the newness of many accelerators. For accelerators that have only been around for a couple of years (or even less), this doesn’t provide enough of a gestation period for the program’s reputation to fully flourish. That means it’s nearly impossible for them to have a proven track record of producing several startups that have gone on to become massive successes. This causes investors to be extra cautious about investing in their companies.
Accelerators are most helpful during fundraising season.
An accelerator’s impact on your business increases dramatically around the time when you start to think about fundraising for your startup.
Why? The simple answer is that most accelerators are structured to culminate in that massive demo day where their companies can pitch to many investors simultaneously. This represents a golden opportunity to jumpstart a seed funding round, but its benefit is lost on companies that do not care to raise funds.
The best accelerators have deep relationships with a wide network of investors. By plugging into one of those networks, your company can benefit from exposure to a range of investors it otherwise would not have.
Accelerators can have a negative impact on your company.
As with most business decisions, there’s usually an upside and a downside to evaluate. Participating in an accelerator program can potentially have its downsides, too, such as: Many (not all) accelerators offer unhelpful distractions. This can include requiring participation in multiple daily social events and forcing startups to meet with dozens of tangentially relevant “mentors” and “friends of the program.” While on the surface this seems really great, there is a diminishing utility to these types of meetings and conversations. While you’re hustling to make sales, engineer your product, pitch investors and generally save your startup from extinction by the time demo day comes along, it can be a big time sink to deal with these types of mentor meetings and events.
Accelerators help you benchmark your company against other startups
At the pre-seed stage, building a company can be a very insular existence. It’s difficult to get a perspective on whether or not you’re growing fast enough and approaching problems in the right way.
For Kinnek, one of the most helpful aspects of participating in Angelpad was the ability to compare ourselves to other startups at similar stages of evolution. We got some idea of where we needed to improve and where we outperformed relative to similar startups.
There was also a healthy amount of social pressure within the accelerator. No one wanted their startup to be the one that pitched poorly on demo day, got the fewest investor meetings or was acquiring the least number of users. That provided a nice amount of pressure to hold our feet on the gas pedal, something that’s difficult to maintain when you’re working by yourselves.
Accelerators can plug you into an awesome network of founders and ex-founders.
Participating in an accelerator (and the ensuing fundraising process) is an intense experience, but it helps forge strong bonds between cohort members. From hiring strategies to revamping sales processes to finding new office space; the AngelPad network is a huge source of advice and support. Friends who’ve participated in other accelerator programs have grown similar friendships and networks.
So, should you and your startup join an accelerator?
Ultimately, participating in an accelerator can be helpful to your startup. Make sure you’re extremely selective with which program you choose and try to time your participation in such a way that fundraising starts immediately after the program ends. A great accelerator can absolutely be a once-in-a-lifetime opportunity to kick your company into a higher gear. Don’t expect the accelerator to be a silver bullet that automatically catapults you to fame, fortune and fundraising glory though. Remember that it’s just an opportunity, not a guarantee. The onus is still on you to make it worth your while.
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