Are tech startup accelerator programmes relevant?
In 2015 one-third of ventures raising Series A in the U.S. had graduated from an accelerator. Within the last five years, angel and VC funding have flooded startups with high-level video, podcasts, and blog content that is freely available for everybody to use.
Are startup accelerators still relevant?
Even more importantly, which criteria to use for selecting the right accelerator for your tech startup or deciding whether to apply to any at all?
Post summary:
What is a startup accelerator programme?
How to select the right accelerator for your startup?
Tips for selecting accelerators who can remove your roadblocks
“The majority of accelerators are not good for companies and will fail.”
David Tisch, former partner of TechStars
The boom of startup accelerators started around 2005 and has supported over 7000 startups – including Dropbox, SendGrid and AirBnB – within hundreds of programmes worldwide.
By 2015, these startups had already raised over $30B in capital, and a third of ventures raising Series A in the U.S. had graduated from an accelerator.
With such a boom, the quality of accelerators has become under scrutiny, and startups and investors alike have started to ask whether accelerators are a fad or a real thing.
Fortunately, there are several independent research studies to prove that accelerators deliver value. But it might not be the value that you think it is.
What is a Startup Accelerator Programme?
A Startup Accelerator Programme is where early-stage startups can receive the necessary education, mentoring, funding, and prime access to networks to help them develop as quickly as possible.
Startup Accelerator programmes are typically cohort-based and have a fixed period of 3-6 months. In turn, they usually take some equity from companies they have accepted onto their programmes.
Although accelerators are often grouped with incubators, angel investors, seed-stage venture capitalists, and co-working spaces, these are distinct.
Angel and venture funding has become more available for early-stage startups over the last ten years. There are plenty of free high-level online courses about building startups, such as Steve Blank’s “How to Build a Startup”, Y Combinators Startup School or Techstars Entrepreneurship Toolkit.
Is there still room or need for startup accelerators?
Research demonstrates that suitable accelerators offer substantial learning benefits early in a venture’s life. They provide broad, intense, paced consultancy, benefiting first-time and more seasoned entrepreneurs. Learning is more critical than an accelerator's selection, signalling effects, or reputation.
Fast learning is nice, but what does it actually mean? Why should a founder consider a startup accelerator?
Five ways accelerators can help remove startup roadblocks
There are five ways that accelerators can forge a path to success for newer companies and help them overcome their business challenges.
1. Favourable ecosystem that facilitates growth
A startup accelerator offers an invaluable environment that fosters growth, including mentorship, technology, funding, legal support, and access to the best talent in skills and business development.
In such a favourable ecosystem, a startup can benefit from the insight of its mentors, who advise how to avoid making the same mistake they did when starting their businesses.
2. Minimising startup risks
An accelerator programme will amend its structure according to the startup to identify the inherent risks to its business growth, whether in sales, marketing, recruitment, funding, product development, or even the competition.
By curtailing risk, accelerators minimise the impact on faster growth and accelerate a path to success.
3. Vital access to investors and customers/clients
At the onset of a company's journey, the road to finding both investors and customers is the bumpiest. Finding alternative sources of investment and the first customers is critical. Accelerators can offer invaluable networks to their startup portfolio.
Not only do startups understand their customer needs better, but they can also forge contacts with investors to count on when they require further funding support.
4. Working alongside similar like-minded entrepreneurs
The accelerator organises meaningful community support through co-working with other entrepreneurs. For budding new entrepreneurs, this platform provides them to discuss experiences, ideas, and concerns with other fellow entrepreneurs.
The accelerator also provides events to discover and learn from other company builders and aids in recruiting future team members.
5. Access to a global network
Most, if not all, startups seek to go global.
An accelerator can leverage its wider community of connections worldwide and seek out local experience, expertise and strategic market support in the form of financial and human capital, not to mention networking opportunities.
A genuinely successful accelerator will empower its portfolio to enter the global business world well-connected.
Doing your homework on startup accelerators
There is now an almost incalculable number of programmes, seminars, trips, boot camps, hackathons, and coworking retreats designed to help entrepreneurs to grow their business idea in exchange for a fee.
Yet despite the apparent success of accelerators, including YC and TechStars, different accelerators provide very different results.
From a startup viewpoint, how many service providers successfully graduate real, revenue-generating businesses has become increasingly uncertain. Doing your homework has become paramount.
David Tisch, a co-founder of TechStars, criticises accelerators, who make doing homework more difficult for startups. His one criterion for selecting a good accelerator is a willingness to publish their results.
Another factor to consider is the companies in the accelerator and how they are selected. In a large batch-based approach, the danger is that an accelerator needs to commit more time to each startup in a batch.
Accelerators, who are more selective and select fewer startups, should be preferred. Look for ones that usually select up to five startups for a cohort to ensure we can provide truly tailored support.
You should look over the startups in previous rounds of an accelerator:
Are any of the startups in the field you are in?
What can you learn from their websites?
Are they mentioned in the news?
Did they receive any funding?
Has the business become profitable?
In addition to funding, what else do the company founders benefit from?
The third criterion could be the duration of the programme. Most startup accelerator programmes support companies for three to six months.
Now, this may seem an adequate length of time, yet those months go very fast. Very few accelerator programmes offer a year, but if you can find one, then consider it seriously…
The reason for a 12-month programme is that building startups are freaking hard.
Within three months, you can get some first feedback from customers and put together a convincing story for early-stage investors. Still, building an organisation to deliver superior global value is not enough.
With Alpine House, we take a deep commitment to become an additional co-founder and jointly take your new venture to the next level.
The fourth criterion is success in making next-round introductions.
Most accelerators use demo days for that purpose. In reality, only Y Combinator has a good track record during demo days investments are made.
For most accelerators, demo days are more for general marketing, as real deals are closed through active personal selling (cold-calling) to investors. Typically, warm intros to investors work much better than cold-calling. Meaning that you should validate which next investors an accelerator has successfully made warm intros to.
Lastly, always carefully examine the team, the mentors, and the companies they have built.
Unless you are convinced that these people can help you and your business grow, you’d better search elsewhere.
Another crucial question from accelerators is the time commitment of mentors: how much time are mentors expected to commit to the programme?
To summarise, an accelerator should offer the following:
you a tailored programme for success
billion-dollar mentoring
opportunities to work in a global market
substantial funding investment
provide access to the best marketing, sales, onboarding, HR, and investor talent
A reputable startup accelerator programme is highly relevant – finding one that demonstrates excellence amongst the hundreds that lack evidence to build companies is like a needle in a haystack.