The startup world has its own jargon, and one of the terms often used is accelerator. As you can deduce from the name, the main idea of an accelerator is to accelerate — or increase the speed of — startup development. But startups are known for their speed, so why do they need to go even faster? Well, that’s the main difference between a traditional and a startup venture: a startup is built for quick scale, and before that happens it has to go through the so-called “valley of death” (pic. 1). If a startup stays in the valley for too long and runs out of money, it dies. That’s where accelerators come into play: they help the startups to run through the valley of death faster and start growing before they run out of cash.
I have been working in different types of accelerators for the past 6 years. I understand the value accelerators bring and why are they so attractive to entrepreneurs. Another thing I have seen — having read through hundreds of startup applications and organized 5 acceleration programs — is how little entrepreneurs actually understand what the accelerators are for and how to use them. In this article series, I would like to share some practical tips and advice for any entrepreneur out there pursuing an accelerator on what to do before, during, and after the program in order to get the biggest benefit for their ventures. Let’s start with the before.
Before the accelerator
There are two crucial questions that each entrepreneur should answer before applying to an accelerator:
Do you even need to?
If yes, which one?
To find the answers, go through the following process:
1. What are your goals?
Think of your goals. Do you want funding? Industry expertise and mentors? Access to customers? Enter a new market? A particular network or perk? Believe me, it will be a different accelerator for each of those goals. Make sure to prepare a clear list of your goals and expectations for the accelerator and get back to it often. Answering this question will also help you to understand whether you need an accelerator at all.
2. Reputation and history
You want to associate yourself with an accelerator with a good reputation and (relatively) long history if you want it supporting you after the program as well. Make sure to check how long has the accelerator been around. Let me tell you a sad truth: Because of a challenging business model, accelerators often run just for a couple of years. Maybe they’ve gotten a public grant (which usually lasts 1–2 years) or they just run out of money and have to close down, because the startups’ equity hasn’t given any return yet. If the accelerator’s been around for at least 3–4 years, then it’s more likely to continue operations.
Because of a challenging business model, accelerators often run just for a couple of years.
If the accelerator is brand new and just announced its first program, you may want to dig deep into the backgrounds of people and organizations behind the accelerator. Even if your goal was to get a quick buck, you still don’t want to end up with a program that will give you more problems than benefits.
3. Portfolio companies
Spend some time digging into the accelerator’s portfolio companies. You want to find those who have some similarities with you, e.g. in industry, business model, or customer base. Contact them and ask for feedback about their acceleration experience. Share with them your goals and expectations and ask their opinion whether those goals would match with the program.
Don’t forget to check with different companies on the timeline of the accelerator. Those who went through the accelerator a couple of years ago can tell you about the alumni benefits. However, if you want to know more about the program itself, ask the latest alumni. Good accelerators adapt and improve their programs all the time, so what the earlier alumni tell you about the program may not be true anymore.
Try to ask several alumni as some may have very different experiences.
Accelerators operate under three usual models. One, you pay for the program with your equity (a piece of your company). In this case, the accelerators often invest a small amount of money in you. The more they invest, the bigger the equity stake. Two, the programs are completely free, take no equity, and sometimes you even get a monetary grant. These are usually non-profits or publicly funded accelerators. Three, there is a price for a program, but no equity requirement.
Which one should you choose? You might think “Of course, the equity-free one, I don’t want to give away my shares.” However, there are pros and cons for each model. When an accelerator owns a part of your company, then it is directly interested in your success and commits to supporting you long-term. Equity-free accelerators often lack that after-program range of activities and community engagement. Remember also point #2: accelerators that do not make money themselves, do not stick around.
How many free events have you decided to skip at the last moment? What about events that you had to pay 500$ per ticket?
Having to give your equity or paying a price is also good for founder commitment. Just think — how many free events have you decided to skip at the last moment? Ah, why bother, they are free anyway, right? What about events that you had to pay 500$ per ticket? That’s what I mean.
5. Alumni programs
Make sure that the accelerator support doesn’t stop right after Demo Day. A good accelerator becomes your friend and supporter for a lifetime. Sharing contacts, accessing networks, connecting to other alumni companies, marketing, various perks, events, and discounts — that’s just a basic list of what an accelerator can offer you after the program. And don’t forget your connections to the other startups in your batch! They can provide you with peer support years after the program ends.
When deciding which accelerator to join, make sure to ask what after-program support they provide.
To apply or not to apply?
Ok, you’ve done the groundwork. You thought about your goals, you checked out the accelerators, you talked to alumni — and you ended up with a list of 1–5 accelerators you want to apply to. You are eager and excited, especially about this one accelerator “X” that you really want to be a part of. However, you notice that you do not match the requirements quite yet. They ask the applicants to have some paying customers, but you don’t have them yet. Should you skip it until next year when you are fully ready? My advice is no, don’t skip and apply anyway.
First, you will get familiar with the application process of this particular accelerator so you will be readier next time. Second, preparing answers to the application questions is a good business development process, especially in the early stages. You may think that you know all these things — market size, competition, team, etc. — but putting it on paper is another thing altogether. Third, if your application gets rejected, you can ask for feedback and you will know what to improve for the next time. Most of the accelerators (with some exceptions that receive thousands of applications) will gladly send you a short email or hop on a quick call to provide feedback.
And last, if you do listen to the feedback and develop your startup to reach the requirements, your progress will be visible when you apply for the second time (unless you feel lazy and just copy the previous application). There are human beings checking the applications, and if they remember you from the last time or compare the new application to the old one, they will be more likely to choose you as they see your progress and feel like they already know you. To be honest, I’ve done it myself.
Happy accelerator hunting! Next week, we’ll talk more about what to do during the program to make sure you get the most out of it.
Editors note: If you are looking for an accelerator, make sure to check out Kiuas, their application period is now open! If you’re not quite ready for an accelerator yet, see what AVP’s Impact Studio can offer you instead.