Ready, Set, Accelerate!

W160223_HATHAWAY_NUMBEROF1Accelerators are now an integral part of the startup ecosystem. And especially for first-time founders, it is becoming a checkbox item: go through an accelerator. In the general sense, startup accelerators are fixed-term, cohort-based programs, that include mentorship and educational components and culminate in a demo day. And once you decide to join an accelerator, the decision of which accelerator to join is nearly impossible with dozens of new accelerators opening all the time. Let’s start with understanding the difference between accelerator and incubator.

What is a Startup Accelerator? It means physically locating your business in one co-working space with other startups. Your time in the space is typically limited to a 3-4 month period, basically intended to jump-start your business and then kick you out of the nest. The cash investment into your business from the accelerator itself is very minimal (usually, $20,000), but your time in the accelerator is supposed to largely improve your chances of raising venture capital from a third party after you graduate from the program. Mentorship could be coming from 100 entrepreneurs that are affiliated with the accelerator. Many of the mentors are proven CEOs, or investors looking for their next opportunity or simply helping the local startup community. Examples include Tech Stars and Y Combinator.

What is a Startup Incubator? It also means physically locating your business in one co-working space with many other startup companies. In many cases, the startups in these incubators can all be venture funded by the same investor group. You can stay in the space as long as you need to, or until your business has grown to the scale it needs to relocate to its own space. The mentorship is typically provided by proven entrepreneurial investors, and by shared learnings of your startup CEO peers. Examples include Lightbank and Sandbox Industries in Chicago.

What are the Advantages of these programs?
First of all, it is shared learnings and mentorship which help avoid typical startup pitfalls and speeding up the efforts. It is access to capital, either within an incubator or post an accelerator. Startups also get PR and exposure.

What are the Disadvantages?
Accelerator programs are usually intense and can be distracting, at times, with lots of related meetings and events with mentors and investors. This could get in the way of focusing on the startup itself. They can also be confusing since you are getting 10 different opinions from 10 different mentors, so you need a good “filter” on any advice.

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At some point, nearly every startup founder begins to wonder if they should join an accelerator. Here is a few thing to help determine if it is the right move and the right time.

You are looking for mentorship and feedback?
Every great accelerator has a high-quality mentorship group. Matching you with a network of top entrepreneurs, executives and investors who share their experience, provide feedback and guidance can really help accelerate the business.

Are you prepared to be ‘mentorable’?
For many startups, it is true that founders have fallen in love with the idea well before it has even seen the light of day and it can be really difficult to respond to constructive criticism, or even answer a particularly well-targeted question. The job of every founder should ideally be to listen to all advice and selectively incorporate it into your business. Are you prepared to receive constructive and well-intentioned feedback in a constructive way? Around 30% of startups that are rejected by an accelerator at the interview stage are rejected for this reason.

You are preparing for financing.
Raising money is never easy – and a good accelerator could prepare you for financing, not just by introducing you to investors, but by actually working with you to help ensure that you have an interesting, healthy and defensible business. You will work through the questions about value, customers, traction, competition, hiring plan, and much more.

You enjoy the intense environment and competition.
Accelerator environments are typically really intense – you have to accomplish a lot in a short period of time. 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. This will allow you to learn from each other and also naturally compete.Nothing else bonds founders like going through an accelerator together.

Go hard or go home.
The intense environment also means that you basically have to disappear for three months – if you are not ready for that, then you shouldn’t apply for the accelerator. If you’re not prepared to physically relocate to the city hosting the accelerator, then you shouldn’t apply for the accelerator.

Does the accelerator fit with your business?
You have to ask yourself what you hope to achieve by joining an accelerator and then come up with very specific answers about how joining a particular accelerator will help achieve that. It may be access to specific mentors that you can’t otherwise reach, access to specific alumni or even access to things like an API made available to participants of the program.

Is it the right time to join an accelerator?
This is the most difficult question to answer. Popular wisdom would say that most startups should consider joining an accelerator after they have got their core team in place and have a Minimum Viable Product, but before they have achieved product/market fit. On the other hand, Quora joined Y Combinator despite having already raised $161 million.

If you are still thinking if you want to join the accelerator, here are some reasons NOT to do it by Alex Iskold, Managing Director of Techstars in NYC:

– 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 the 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. 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 the 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.

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