I’ve helped run two accelerators in India and Silicon Valley. I also serve on the Investment Committee for an accelerator program based in the Middle East and I’m a mentor at an accelerator program in New York City. I’ve spent a considerable amount of time around accelerators and have seen the benefits and challenges that both founders as well as the program itself faces.
YCombinator, the preeminent accelerator, was founded in 2005. Since then we have seen hundreds, if not thousands of accelerator programs around the world pop up. Mostly emulating the YC model while employing some variations.
The idea of an accelerator is centered around providing entrepreneurs more than space and the occasional connection to a resource. They were designed to provide a curriculum based approach to getting ideas off the ground. The best accelerators, not only designed the best curriculums but they also brought in the best network of entrepreneurs, engineers, and investors from the ecosystem as mentors. Â
There are many great accelerator programs. It isn’t YC or bust. Each accelerator program has some focus that makes them better for certain type of companies. For example, there are accelerator programs that are vertically focused and will bring networks and mentors in that particular industry to help companies. There are some that focus on startups from a specific geography.
There are many accelerators that take equity for “helping†a startup and they *may* invest in some of the companies at the end of the program. I can’t talk about the quality of these accelerators but I will say that they may provide more value in less developed startup ecosystems than places like Silicon Valley, NYC, London, Tel Aviv, Singapore, Berlin, Bangalore, etc. I’m not a fan of the “you can give me equity at the beginning of the program and I may invest cash later if I think you’re worthyâ€-model. I think it creates too much signaling risk and also starves young startups of two very important things, cash and equity. If you’re confident in your process then, at least invest a small amount of money in the beginning and handle the post-program follow-on at a slightly higher valuation or cap than the beginning of the program. There’s still some signaling risk for the companies that don’t get a follow-on.
In certain parts of the world, like India, accelerators have gotten bad name and a lot of founders won’t even consider an accelerator as an option. In recent years, most accelerators in India have either shut down their cohort based programs or they’ve changed them in significant ways. However, one of the most renowned investors in the world just announced that they are starting an accelerator program in India – Sequoia’s Surge program! Accelerators can play a very important role in bringing in mentors and resources that founders can get help on scaling their technology, finding initial product market fit, determining pricing points for a product, determining and tracking KPIs better, etc. etc.
Founders should spend as much time as possible doing their due diligence on an accelerator as any other investor, (check out https://youtu.be/3oltOd5Mdjo for more tips on raising money for your startup).
Just like college or graduate school, people strive to get into the best programs in the world. Those that make it into the top universities, have a significant advantage over others because of the credibility and the network that the top tier university has given a student access to. It’s not that different for accelerators. The top accelerators will be the hardest to get into and they will add real value. Of course, the value an entrepreneur can get out of the program, really depends on the founder and how they use the resources provided to both extract value but also contribute significant value back to the network they’ve been privileged to become a part of.
If you’ve been a part of an accelerator, please share your experience in the comments.
Good morning Founders!
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