Are there real benefits to accelerators?

Yugene Lee Production Coordinator at TouchOfModern

August 11th, 2014

As I start my entrepreneurial journey, I’m exploring options and wondering about the real benefits of accelerators. None of them give a ton of money, so it doesn’t seem like that’s it. Mentors are great, but I can use FounderDating to find great advisors and now there are funding networks from Funders Club to Angellist. So, I’m curious what the real benefit of accelerators are? Would love to hear from people that have been through them, especially and those that opted not to.

John Sechrest

August 11th, 2014

Accelerators vary a great deal in their results. In Seattle, we have several. Techstars, 9 Mile Labs, Fledge, Founders Institute, Kick.

Some follow the Tech Stars model closely, others are further away.

When Accelerators work well, they have a few things in common:

1) They have deadlines to accomplish tasks, so you have a built in form of accountability with consequences.

2) They have mentors... But more importantly, they have mentors who are entrepreneurs who have succeeded, who have the capacity to invest in the company.

3) While YC is not a "resident" accelerator, Techstars is. As a resident accelerator, they have everyone co-located, so you get to watch the cohort teams in action. Nothing like peer learning from people on the same road and at the same stage as you.

4) Cohort members are typically wicked smart

5) The demo day at good accelerators attracts very interested investors,who are actively looking at your work.

6) There is a significant amount of expectation and feedback in good accelerators, and they hold you to the task of making progress.

7) They typically truely get the Lean Startup pathway, and help you understand it in practice, not just in theory.

8) It is not about the money that you get going in, but the funding you get leaving. If you don't get funded, then you have missed one of the great advantages of the accelerator model.

9) There is a wide cohort of other startups at your stage who you will gain deep relationships with, who will be able to help you along the way after you have left the accelerator.

10) If you have engaged the mentors well, they will be on your side long after you have left the program, and they will open doors, give you feedback and otherwise help you reach success.

If you don't have a good team or evidence of traction in the market , you are not likely to make much progress. The goal of the accelerator is to give evidence that the company has a team that can perform (on the business , not on the product) and evidence that the market cares that you perform. It brings a large number of eyes to your work, and if done right, creates significant amounts of social media and press for you.

Sandy Fischler Experiential Marketing Director | Event Producer | Event Management | Entrepreneur

August 12th, 2014

I'll chime in as a graduate of The Founder Institute.

First, there is a difference between an incubator and an accelerator. They do two different things and have two different approaches.

An incubator starts at day zero and works a potential founder through ideation, market validation, and the early stages of company formation. A good incubator is not necessarily going to graduate you with a winner idea and a company headed for a billion dollar acquisition. What a good incubator SHOULD do is teach you the basics of how to take any idea and run a business model on it to determine whether there's a business case to pursue it. At the incubator stage it's about the founder, not the idea.

An accelerator is focused on teams and ideas. Most accelerators have a fund of some kind behind them and offer seed money to get a team ramped up fast. They expect you to come in with a validated idea, a team, and usually a technical co-founder.

To borrow from someone at Founder Institute: an incubator is mining for diamonds, an accelerator is making jewelry.

I really can't say enough about how great my experience was. Sure there were things I disagreed with in terms of how they operated, but the mentors were top notch and I left with the knowledge that even if my first idea fails, there's another under every other rock and I know how to evaluate a business model and chart a course of action on it.

That's the upside. On the downside:

As others mentioned, there is certainly a predatory element. Everyone would like to get in at the ground floor of the next big thing. Angel investors troll their local incubators and accelerators looking for opportunities and sharp founders at the early stages. There is a constant pressure to build "big" and avoid lifestyle businesses that aren't positioned for massive exits. They ruthlessly prune out ideas and founders that aren't going to make what they believe to be "the cut". My experience was that mentors fall into one of two camps: those who genuinely love to teach and love the energy of early stage companies and those who are strictly looking for investment opportunities. Know that every move you make in any startup program is being watched by those on the lookout for stars.

The work is hard. Brutally fricken hard. That's intentional because starting a company is hard, bringing a product to market is hard, sticking with it through obstacle after obstacle is hard. It's a little bit like entrepreneur survivor - making it to graduation is pretty good indicator that you're going to keep at it no matter how hard it gets.

The biggest downside I found was the attempt (by pretty much the entire startup ecosystem) to template founding a company. You get inundated with "10 Traits Every Great Founder Has" and other garbage because somebody somewhere decided that just because Mark Zuckerberg has traits A, B, and C then every founder needs those traits.

This isn't a template, you can't mint little entrepreneurs and check off the boxes to found a great company. If that worked then incubators and accelerators would be churning out millionaires by the truckload and they aren't. My path up the mountain is different from your path up the mountain because we have different skill sets and different core competencies. There aren't only 10 traits, there isn't only 1 path, there isn't a formula where you mix ambitious entrepreneur with new idea and suddenly Google is whipping out their checkbook.

TL/DR version: I'm pro incubator/accelerator. Just know who you are dealing with and understand that they have their own financial stake in your success and they'll try to push you into their formula, which may or may not work for who you are and what your skill set is. The exposure the mentors is invaluable and being able to list yourself as a graduate of any program grants you a certain level of instant credibility as a founder.

Robert Clegg

August 11th, 2014

Hi Yugene. I noticed you were a Michigan Grad. Have you checked out Bizdom run by Dan Gilbert there in Detroit and now Cleveland? I actually just got accepted to the Summer 2014 cohort starting on the 18th this month. Happy to let you know how it goes if you'd like to keep in touch. Sports is a key draw for Bizdom since Gilbert owns the Cavaliers. I already feel a synergy with cohort companies and can see us helping each other not to mention other network companies I've already seen in the "family".

I'm looking add people in the area for the 3-6 month sprint if you are interested.

Best,

-Robert

Luis Berga Co-Founder at Music Meets Video

August 11th, 2014

I'm currently going through the Techstars program in Austin as an Associate and I'd be happy to talk to you more about my experience, having a pretty unique perspective since I'm not on one the startups selected. You can send me a PM if you'd like to discuss offline.

I can only speak for Techstars, but the network of mentors, advisors, and investors they connect the companies with is pretty incredible and I have seen firsthand how the process has made the founders much better entrepreneurs.

Anonymous

August 11th, 2014

The mentors, (hopefully) the network, and sometimes, free things :) . Otherwise, I have mixed feelings about accelerators, but I'd rather leave that for another time.

- Jonathan

Jeff Axup Sr. Manager, Palo Alto UX Design Research Group at Bosch

August 11th, 2014

I've applied to a number of them, and been through a couple of them, and know people running/starting them so here's my take on it.

Despite the rhetoric, incubators and accelerators are typically very similar. Perhaps accelerators are slightly later stage. Owners of "accelerators" can get pretty sensitive about the topic. (I will just use the term 'incubator' from here on out.)
Any incubator that doesn't have a fund it controls, is to be treated with skepticism. Anyone can promise "we'll hook you up with investors". That is very different than being the investor and putting your money in. Going through an incubator that funds you (at the beginning) for 200k is almost never a mistake.
Some incubators are a bit predatory. Offer a little advice, offer some cramped free office space, get a piece of a lot of new emerging companies at once - great business plan!
Incubators make more sense if you are younger and have less knowledge about doing a startup.
Something like 70% of startups coming out of incubator programs don't get funded apparently.
Most incubators are understaffed and will be dealing with a bunch of unstable companies. That means you will have to be the squeaky wheel. Figure out what things you actually need done for you, and then ask for those on a weekly basis until you get them accomplished, otherwise there's a good chance you'll "graduate" with them still on the to-do list.
Some incubators have MBAs running them that will give you a mini-MBA lesson in exchange for equity. Some people seem to want that.
The quality and applicability of advice varies greatly depending on the incubator and the connections they have.
Interview the incubator founders. Find out how the depth and breadth of knowledge is for your technology area. Sometimes the hype is bigger than reality.
The higher quality incubators definitely connect you with resources/advice you wouldn't have been able to get otherwise.
You probably don't need to go through an incubator to produce a successful startup, but it can provide some moral support, particularly if it's your first time around the block.
DEFINITELY talk to a graduate of the previous cohort/batch before you accept an offer at one. You will learn what it's like on the inside.
Also, be sure to read all the terms (equity, payments, etc) and details like class time and having to move China/Texas/San Jose for 4-5 months. Some programs just won't work for your needs.
That said, almost all of these programs are over-subscribed and will be difficult to get into. It seems there are way more startups than people to fund them and they all think incubators will get them further ahead.

HoYin Cheung

August 11th, 2014

I am 70% of the way into Founders Institute and accelerators are not for everyone. If you have the items that people say they like, or you don't value those items as much, then you may not need an accelerator. Here are my thoughts:

Startups are hard, you need to be connected to as many resources as you can get, especially if you are in a location that does not have any
Startups can be lonely, talking with other entrepreneurs (either in your class or mentors) gives you perspective and motivation. Also they give way better feedback on everything (pitching, marketing) and you may not have to exhaust your friend's time and owe favors
The people in my class are smart, ambitious and very motivated. This also supplies motivation and camaraderie just as John Sechrest mentioned
Gets you connected into the startup community good for partnerships, looking for team members (which is really hard for situation), lawyers, warm intros to investors (good for immediate or future funding), basically anything startup related
If you have no practical Lean Startup experience, a pretty good place to learn and ask more situational questions
Provides structure to learning about startups. You can get this out of a book and talking to people, but for me hearing a talk from someone, and then immediately applying it to your own startup through their homework was a great learning process for me. This depends on your style.
Founders Institute teaches you best practices/techniques in just being an entrepreneur in general. Some people may agree or disagree with some of the things they teach, but for someone who doesn't know anything it is a good rough guideline that can be adpated to your style. For example, they make us send weekly update emails on progress to a list that can nurture customers, investors, and potential co-founders
Shows commitment, builds your rep, and a little degree of PR
In terms of accelerator mentors and getting advice from them, I find that a hit or miss. Some people will like you/your idea some people won't, but that is startups in general. Finding right advisors can be as hard as finding the right co-founder. But the key thing about an accelerator is that it gives you access and a warm intro that you may not have before

Louis Monoyudis Chief Operating Officer at Outer Places

August 11th, 2014

My feeling is that accelerators are great for some, not necessary for others. If you are a freshly minted grad looking to get into the world of start-ups, then an accelerator can be valuable to stress test and hone your idea, introduce you to others at your stage and take you through the beginnings of proof of concept and fundraising. But you definitely do not need an accelerator to learn any of those skills or get that experience.

Joe Monastiero CEO, Founder nFlate

August 12th, 2014

Long and detailed thread. I agree with a lot of what John and Jeff had to say, I'll just add a few pennies in. The more experienced you are, the less value you receive (and, as a corollary, the less interest you receive, interestingly enough). Unless you have the ability to bootstrap what some friendly mentors (profs, parents, etc) absolutely consider a killer idea, then the incubators/accelerators make sense (subject to the above comments - research, success rate, gut feelings about mgmt, etc).

An alternative is to find 1 or 2 previously successful business partners (if you have an idea that is meritorious and they do not). Same is true if you can find 2-3 great mentors, including at least 1 with great fundraising success.

Keep in mind that in today's environment, no one gets (much) money without a completed product and minor traction. So $10k-$50k is material pre-product.

As stated above, do your homework. And do not give and i/a any equity if they do not have a fund or offer you cash. Plenty of free and better equity-based advice right here.

Joe

Robert H Lee

August 11th, 2014

If you research their track record, only a handful have done well. All the usual suspects. Among new ones, I think Highway 1 offers exceptional advantages, but I am skeptical of most of them.

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