Guest post by Kira M. Newman
With over 100 startup accelerators active today, going through an accelerator can seem like a rite of passage. It’s what startups do – the logical step between Startup Weekend and a round of funding. But an accelerator is actually a substantial commitment. You give up around 7 percent equity in your startup. You might have to move to a different city. And you’re agreeing to work late hours for a few months straight. As long as you’re doing all this, you might as well pick the best program for you.
Before you take the plunge into an accelerator, here are five questions to ask yourself:
1. What’s their track record?
The best accelerators have mentors with real entrepreneurial experience, connections to VCs who might fund your company, and a large network of startups that can try your product and offer advice.
For example, Y Combinator works with the Start Fund to offer a $150,000 convertible debt note. TechStars graduates are all offered a $100,000 convertible note. And graduates of Chicago’s Excelerate Labs get a $50,000 convertible note from New World Ventures. Meanwhile, Y Combinator boasts an alumni of over 460 startups, TechStars has 126, and 500 Startups has over 90.
For more comparisons, check out Tech Cocktail’s Top 15 USA Startup Accelerators in 2012. This is an independently researched ranking that compares accelerators based on their startups’ funding and exits, their reputation with VCs, their alumni network, and their terms (equity taken and funding provided).
2. How much hands-on mentorship do you want?
Some accelerator programs have lots of scheduled programs, mentor sessions, and group activities, and others are more open. In Tech Cocktail’s survey of over 75 startups, TechStars was rated highly hands-on (9.5 on a scale of 10), while 500 Startups and Y Combinator were rated less hands-on, respectively. For example, Robert Leshner of Safe Shepherd enjoyed the more autonomous experience at 500 Startups. “They have sessions a couple times a week where they bring in an expert to speak to you, but at the end of the day they’re not telling you what or how you should be building your business. They leave that decision to the entrepreneur,” he says. Accelerators that offer office space tend to be more hands-on, as do accelerators with smaller batches of startups. TechStars caps at 12 startups per batch and typically has a 10-to-1 mentor-to-startup ratio. On the other extreme, Y Combinator can host over 60 startups at a time.
3. Can you handle the heat?
Going through an accelerator in Silicon Valley will introduce you to the eye-opening, exciting, fast-paced vibe of the world’s hottest startup community. Entrepreneurs outside the Valley often complain of small startup scenes and fewer, or more conservative, investors. But the excitement of Silicon Valley comes at a price: you’ll be competing with tons of other startups for VC attention, networking opportunities, and customers. And some entrepreneurs enjoy the smaller, tight-knit communities outside the Valley, where they can stand out better, get meetings more easily, and generally be a “big fish in a small pond.” “The myth that you have to be in Silicon Valley to be successful is idiotic,” says David Cohen, the founder and CEO of TechStars.
4. Is your startup special?
Another trend among accelerators is the creation of industry-specific programs:
-Education: Imagine K12 (Palo Alto)
-Energy/clean tech: SURGE Accelerator (Houston), Greenstart (San Francisco)
-Enterprise/B2B: Acceleprise (Washington, DC), Tech Wildcatters (Dallas), TechStars Cloud (San Antonio)
-Financial services: FinTech Innovation Lab (New York City)
-Government/civics: Code for America (San Francisco)
-Health: Blueprint Health (New York City), Healthbox (Chicago and Boston), Rock Health (San Francisco and Cambridge)
-Social Good: Impact Engine (Chicago), Fledge (Seattle)
Some accelerators don’t focus on an industry, but rather a skill: The Brandery<> focuses on branding, and Kicklabs helps later-stage startups – who may have already gone through another accelerator – get contracts with brands, agencies, and partners. Meanwhile, Women Innovate Mobile and Springboard look for startups with female founders, and the NewME Accelerator wants to help minority founders. And Y Combinator even accepts applications from entrepreneurs without ideas
5. Have you considered other options?
If you’re unsure about the full accelerator experience, you have other options. Incubators like 1871 (Chicago), Catapult Chicago, and Surf Incubator (Seattle) can provide office space, a collaborative environment, and some mentorship, but without the funding. If you want funding without giving up equity, competitions like the Chicago Lean Startup Challenge and MassChallenge might be a good fit – just remember that you could walk away with nothing. And if advice or mentorship is your main goal, consider looking into Science Inc., a technology studio run by former MySpace CEO Michael Jones, or the VegasTechFund, a community-oriented investment fund.
These five questions should help ensure that you don’t find yourself exhausted and regretful beneath the bright lights of the demo day stage.