Accelerators are considered catalysts of success in the startup world. In reality, most startups fail.
In an article in Medium, startup finance expert Bharat Anant explains that “a startup’s failure risk decreases as it grows. Accordingly, ‘total risk of failure’ on a startup investment is truly the compounded risk contained within every future round as well as the current round’s risk.”
Is it still worth joining an accelerator knowing this?
Like most questions in the startup world, the answer is usually: it depends. We hated this answer as much as you probably do, so we sought out a whole bunch of online opinions from credible startup resources and analyzed them to put the question to rest.
We started our research with a targeted Google search for articles on startup accelerators. Before analyzing any opinion, we carefully verified every author for credibility. Most articles in our research were created by startup publications, accelerators (a bit biased, we know), and investors.
In the end, we found 20 credible resources with a total of 115 varied opinions.
Here’s where they netted out:
Overall, the data leaned towards ‘yes,’ but there are caveats. To break things down, we segmented these 115 opinions into two major categories:
What to consider BEFORE joining an accelerator:
What are the outcomes AFTER joining an accelerator:
Much like fundraising, founders need to do their own due diligence to make sure they are joining an accelerator that’s compatible with their startup and team.
Let’s dig deeper.
First, startups need to consider if the accelerator they’re thinking of applying to is the right fit for their startup. Seeking an industry-specific accelerator is a wise choice, but also consider your startup’s stage, product, model, and more. No one wants to waste their valuable time on an incompatible accelerator. Seeking a compatible accelerator ranked first in our study with 28% opinions.
The resources recommend the following:
“[Accelerators] can be very useful, and I frequently recommend them to founders. But they’re only worthwhile if they’re a good match for your particular startup”.— DC Palter, Entrepreneur and Angel investor
Some founders perceive an accelerator as a one-way ticket to success. As mentioned earlier, this isn’t necessarily true. Managing expectations of what an accelerator will provide ranked second in this category with 22% of mentions. We believe that experts want founders to have realistic expectations to avoid disappointment down the road.
Here are some suggestions from experts:
“When deciding whether or not to enter an incubator or accelerator program, I suggest you consider two main issues: what stage you’re at and how you want to build your company.”— Business Collective
An accelerator isn’t just a weekend fling. On average, an engagement would last around 3-6 months. Apart from one-on-one mentoring, founders also have to attend multiple events. They are also expected to be proactive in order to make the best of the experience. As a result, founders may find themselves spread thin between accelerator engagements and startup operations. This is a huge disadvantage of accelerators that our resources emphasized. It ranked third with a total of 20% of all mentioned opinions.
Our research recommended the following:
"Nevertheless, participating in an accelerator program is a huge commitment. If you are looking for a business fund to mitigate your initial cash flow issue when getting your business started, you should consider looking for bank loans, equity crowdfunding (ECF), peer-to-peer financing (P2P), or angel investors with low touchpoints and commitment requirements.”— Foundingbird
Earlier, we discussed that founders must set expectations when considering an accelerator. Part of this is setting short-term and long-term goals to ensure founders don’t waste their time. This sub-category garnered 17% of mentions, ranking fourth. Our resources advised founders to set KPIs and milestones so they can measure the impact of the program.
Experts suggested the following:
”Your priorities will define whether you need a startup accelerator program or not. For instance, if you are confident about your networking and fundraising skills, then probably an accelerator program isn’t required. Otherwise, it is an option you can explore.”— Arkenea Software
Most accelerators pride themselves on their bench of high-profile, successful mentors. However, in recent years, many more accelerators have launched, and the quality of each could potentially be hit or miss. With that in mind, founders need to dig deeper into the accelerator’s mentors, their portfolio, and achievements. In short, founders should interview the accelerator as much as the accelerator would interview them. This sub-category ranked last with 13% of mentions.
Questions that our resources mentioned included:
“What are your goals? Entering a new market? Find new customers? Increase tractions and revenues? Getting access to industry experts and mentors? Finding a proper niche? Answering these questions will not only help you in your decision-making but also make you understand whether you need an accelerator or not.”— Turbine Business Incubator
Founders that spend time researching and carefully selecting the right accelerator program for their startup are setting themselves up for a wide range of potential benefits. Not only can an accelerator provide valuable mentorship, guidance, and resources, but it can also help startups to build valuable connections and gain access to a wider network of investors and potential partners. Additionally, participating in an accelerator program can help startups to refine their business models, product offerings, and overall strategies, potentially leading to higher growth and more sustainable success in the long run.
Let’s discuss these outcomes.
A 3-6 month accelerator program can have varied results and business impacts. However, founders can use it to learn from bright minds and experts in various fields. Accelerators can be a highly-motivating environment where like-minded innovators surround founders. This category had 34% of mentions, and gaining access to insider perspectives and strategic advice ranked as the most mentioned outcome.
Under this category, resources suggested:
This could be a pro or a con. Most accelerators take payment in the form of equity. This may turn off some founders who don’t want to dilute their cap table and ownership. However, in exchange for equity, accelerators help the startup gain momentum. While giving away equity is a “cashless” way of getting things started, that doesn’t mean it’s free. This category earned 29% of mentions, as most resources advised startups only to join accelerators if they’re willing to give away some equity.
Experts in the field suggest considering:
For many founders, finding and connecting with investors and capital sources is the number one barrier to growing their startup. One of the huge benefits of joining an accelerator can be fast access to a wide network of investors and capital solutions. Many of our resources claimed that accelerators were only effective when the startup was raising funds. Why? Because investors usually show up for ‘demo days,’ where founders get to pitch their startups in rapid succession. Apart from this, founders can also forge relationships that will bring them closer to investors. This category also landed 29% of expert opinion mentions.
Here are some considerations from our resources:
Accelerators give founders inside access to the world of startups. It’s an opportunity to forge meaningful relationships within the industry. Accelerators also have regular events, conventions, workshops, and more. These social gatherings allow founders to connect and their esteemed speakers or guests. This category gained 26% of mentions.
Our research suggests considering the following:
Magdalena Kala from Bain Capital Private Equity once tweeted that venture capital firms operate mainly on rumors and the fear of missing out (FOMO). Therefore, your reputation is just as important as your startup's progress. Joining an accelerator can provide opportunities and strengthen your startup's credibility, which can be crucial when seeking funding. Financing a startup is a serious matter, given that high failure rate we mentioned earlier. This category was mentioned in 16% of opinions.
Here are more expert factors:
Accelerators can offer a lot of benefits to your startup. Accelerator programs often have a network of experienced mentors who can guide and advise everything from product development to fundraising. Additionally, accelerators provide startups with funding, which can help them get off the ground and grow quickly. Accelerators also offer opportunities to network with other entrepreneurs and potential investors, which can be invaluable for building relationships in the industry.
While accelerators offer many benefits, they also come with their own set of challenges. One of the biggest downsides is the pressure to perform. Accelerators typically have a set timeline and expectations for what startups should achieve during the program. This can be stressful for founders already under much pressure to succeed. Additionally, accelerators often take equity in exchange for funding and mentorship, which can be a significant cost for startups in the long run. Accelerators are also time-consuming. Founders are expected to be proactive but can also be disruptive in the team’s personal and professional life. Lastly, It’s also important to note that accelerators don’t accept everyone. Y Combinator, for instance, has a 2% acceptance rate.
“Accelerators can provide startups with much-needed resources like access to capital, mentorship, and networking opportunities.”— Hubspot for Startups
“Getting into an accelerator is by no means a clear indication of success. It often is the first important stepping stone toward building a successful business.”— Shourjya Sanyal, Think Biosolution CEO
Joining an accelerator can be a great way to grow your startup quickly, but as mentioned, it’s an advantage not a necessity. Founders should always consider the stage of their startup and the accelerator’s compatibility. Before deciding to join an accelerator, it’s important to weigh the pros and cons and determine if it’s the right fit for your startup. By considering the benefits and drawbacks of accelerator programs and asking yourself the right questions, you can make an informed decision that will set your startup up for success.
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