Depending on where you are in the lifecycle of your startup, you may be thinking about reaching out to accelerators to take your business to the next level. There’s no such thing as a free lunch, and the same idea applies to the world of accelerators. Before we take a deep dive into the pros, cons, and questions to ask yourself to determine whether accelerators are the right fit for you, let’s begin with a working definition.
Accelerators are organizations that work with startups for a short and specific amount of time to rapidly develop and grow their business in preparation for larger investment after they have completed their cycle. Timeframes for accelerators can vary between three to four months, and can sometimes include a specific amount of capital in addition to workspace and access to mentors -- in exchange for equity. The terms can range from three percent and range up to 8 percent depending on the terms the accelerator sets.
With an idea of what you will be getting into, let’s break it down with some questions to ask yourself to gauge if you are ready and if it is even a good fit for what you have planned for your business.
Questions to Ask:
1. Mentors & Networks: Do the entrepreneurs and specialists in the accelerator have experience and networks that are beneficial to your company?
a.) Pedigree and notoriety can be helpful to get your name on blogs and other media outlets, but none of that will matter if you do not meet the right mentors and connect with the people that will help your startup gain more traction, scale, and ultimately raise the capital your business needs to move forward.
2.Strategy & Curriculum: Do you have the time to commit, and is the programming you are committing to compatible for your business? Also, are you and your team coachable?
a.) Accelerators help startups grow rapidly because they understand what needs to happen and how. If you are admitted into an accelerator, be prepared to spend at least 5-15 hours a week meeting with people, and completing accelerator-specific milestones to stay in the program. If your team cannot afford to expend this kind of time, an accelerator may not be the right choice for you. Additionally, be honest with yourself and your teammates and decide whether you can take direction and guidance with an open mind or prefer to do things your way. If you are not coachable and don’t want to be coached, this is not the right path for you.
3. Timing: Is this the right time? What kind of traction do you already have that an accelerator can help grow?
a.) If you are still at the MVP stage, still working on getting your first customers, or have not yet pitched to VCs, family offices, or angels, you probably aren’t ready for an accelerator. However, if you have proven yourself with your first few customers, and have generated momentum, this could be the time to explore an accelerator.
4. Research: Have you talked to alums of the accelerator to gather their insights?
a.) In this day and age, not knowing about something is often a choice since you have the option to at least reach out to people who may have the answers you are looking for. You may not get a response from every accelerator alum you reach out to, but someone will eventually have a conversation with you so you can learn about what worked for them, the challenges they faced, and what value they got from the program. You may find out after such a conversation that the accelerator you are considering is the wrong fit and the one down the street is more compatible with your end goal.
5.Scalability: Is your total addressable market enough to warrant a high-growth program that will be appealing to investors who want a sizeable return within a relatively short amount of time?
a.) Depending on the program you get into, the kinds of high-growth an accelerator is looking for will vary greatly. However, one universal question you will always be asked is about the market you are serving and what you are anticipating from a revenue standpoint. Investors, whether they are VCs or angels, want to make money from what they put in, so if you don’t think your startup can generate at least a 10x return or more on their investment based on your market, do your homework to see if the accelerator you are applying for will work for you.
Pros & Cons of Accelerators:
If you have asked yourself the five questions above and still want to pursue an accelerator, keep in mind these pros and cons as a final checklist before submitting that application.
-Advice and guidance from a network of mentors who have a vested interest in your startup’s success.
-Industry connections and introductions that are often exclusive or easily accessible from the accelerator’s extensive network.
-Expanded opportunity to access capital through channels such as VCs, angel groups, and other organizations by way of personal introductions from the accelerator.
-A structured and tailored plan coupled with resources and direction to take your startup to the next level and make it ready for investment by the time you complete the program.
-Depending on your work style, you may need to yield your vision and routine when joining a more structured program to achieve high-growth and speed.
-Working with mentors also requires a big time commitment. You will spend much of your week in meetings with mentors and attend events, while simultaneously completing milestones related to the accelerator and actively developing your business.
-Once you make a commitment, you will need to see it all the way through. To clarify, this means if a more enticing opportunity comes up halfway through your program, you will be unable to act on it until you complete what you have already agreed on.