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6 questions to ask when considering a startup accelerator

(BUSINESS FINANCE) Accelerators can help change startups from unknowns to leaders in the industry, but does your startup need one? And if so, which one?

accelerator pitch

When I’m advising startups, I often hear the question: “which accelerator is the best fit for me?” (Besides the obvious YC or Techstars.)

First off, I’ll ask if your company would benefit from an accelerator, or if you need to pursue something for early early stage companies before you achieve more market validation, like an incubator. (Side note: If you’re curious about incubators, here is a comparison of the two.)

If you’re new to these terms, here’s a brief recap on startup accelerators:

Startup accelerators are for companies with established co-founders and market validation – companies can be anywhere from pre-revenue/self-funded, or even have raised at least $1M.

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Most programs can last anywhere from 10 weeks to 3-4 months. With many top accelerators like YC and Techstars, you’ll be expected to move to the city where it’s hosted and spend 40+ hours a week minimum in their dedicated coworking space, and several accelerators will often offer housing stipends to make the move easier. These programs typically conclude with a demo day to pitch your product to a variety of community leaders, angel, and institutional investors.

If your product has achieved market validation and is in a place where you’re ready to scale, congrats!

Before you commit to an accelerator, ask yourself and the program these six questions:

1. What kind of mentorship is available?

By and large, one of the most valuable portions of an accelerator is the networking with peers and mentors. Ask what kind of mentors are available to you as a part of a program, and ask their specific involvement and the opportunities to connect. These mentors will be crucial in guiding your company’s growth. Even if they aren’t in the same industry or have solved a similar problem that your company is trying to achieve, their advice and connections could prove to be invaluable.

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2. What are the perks?

You’re giving up a lot of equity to be in a program, but it doesn’t come without its perks. Many programs offer not only a cash investment or stipend for housing or other growth costs, but programs like Techstars offer free services such as web hosting costs (an upwards of ~250k), legal and accounting services, and other credits and perks that can be worth 6-7 figures. Make sure you know what you’re getting before you say yes to a program.

3. Do I want an industry-specific or industry-agnostic program?

This one is important and is directly related to #2. If your company sells CPG products, web hosting credits may not be valuable to your business, but a CPG-specific accelerator like SKU or The Brandery with direct connections to Sephora, Target, and Whole Foods may make more sense.

4. How much equity am I willing to give up?

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Try not to make this a guessing game and make as many data-driven decisions on this as you can. Create a revenue and valuation model and see how much your company would benefit from the networking, fundraising opportunities, and perks offered, and see what the ROI would potentially be.

5. What are the funding and exit numbers?

This is an objective way to view the success of an accelerator: # of funding raised and exits. Of course, younger accelerators will have smaller numbers, but it’s worth looking to see if a company has raised $ after. Seed-DB is a great resource to view these numbers for hundreds of accelerators globally.

6. What do alumni think?

All accelerators are going to tout the transformative experience that is their program, and program mentors will likely have a similar narrative.

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The best resource to learn the real experience of an accelerator: ask its alumni, and they’ll give you the truth. Make sure to survey both recent and more experienced alumni, as they’ll be able to speak to both the short term and long term benefits.

Personal experience: the night before I was set to hear from an accelerator on my application status, two alumni stressed to me that the time and equity investment wasn’t worth it. I consider this providence!

Finally, two items to note:

Choosing an accelerator is all about finding the right fit between you and the organization. Sadly, not all accelerators are created equal, and try to view a potential relationship with an accelerator as an investor relationship, or better yet, dating. There’s a reason the phrase “no money is better than bad money” is prevalent in the startup community.

Make sure to do your due diligence and ask the right questions to make sure a specific program is worth the investment of time, energy, and equity.

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And sometimes? That may not mean an accelerator is a right fit right now or at any point, and that’s okay.

This editorial first appeared here in November 2019.

Elise Graham Kennedy is a business writer at The American Genius and is an Austin-based digital strategist. She's a seasoned entrepreneur, started and sold two companies, and was on a TV show for her app. You can usually find her watching The Office on her couch with her dog and husband.

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