Some people say that accelerators are only good for the companies that didn’t yet raise financing. They argue that if the company has raised capital, then it's too far along for an accelerator and wouldn’t benefit from it.
My take is different — none of the above is universally true. We have plenty of successes at Techstars with companies who raised funding, and plenty of serial entrepreneurs who have gone through the program. Increasingly, we see later stage companies that already achieved product market fit really accelerate by going through Techstars.
Here is a break down of why you would join an accelerator (factoring in that I am a Managing Director at Techstars):
1. You are looking for mentorship & feedback
Quality mentorship is a secret sauce behind a great accelerator. Matching you with a network of top entrepreneurs, executives and investors who share their experience, provide feedback, and guidance can really accelerate your business.
Most often, the focus is the business itself — Is this the right product for the market? How to achieve growth? What is the revenue model? Is this a big business? Is this business venture fundable?
You need to want to be mentored and seek the feedback. If you don’t think other people can add value or give you good feedback, then accelerators are probably not a fit for you.
2. You believe that your idea is an actual business
You believe you have a good idea, and potentially a great business and you want to accelerate the discovery of whether this is true or not. You will do that via a ton of testing, getting customer feedback, talking to mentors and accelerator staff, and most importantly by setting goals and aggressively measuring progress.
You will do all of this with the goal to find product market fit, and then step on the gas to get growth and prepare the business for financing. That is, you compress what normally happens over much longer periods of time down to days and weeks. You essentially force yourself and your company through the process and that is an awesome way to do it.
3. You are looking for business acceleration
If you already have traction and early product market fit, you may benefit from business acceleration. Techstars in particular, is known for its big, world-wide network that can connect your business with potential customers in a matter of hours.
By leveraging the network, you are short-cutting the lengthy business development process and rapidly accelerating your business. If your product is great, you can turn introductions into customers and quickly grow your revenue in a matter of weeks and months, while normally it would take months and years.
4. You are preparing for financing
Whether you are first-time founder or a veteran, raising money is never easy. A good accelerator would prepare you for financing, not just by introducing you to investors — thats the easy part, but by actually working with you to help ensure that you have interesting, healthy and defensible business.
You will work through the questions the investors would ask – What is the value here? Who are the customers? What is your traction and growth like? What’s competition like? What is the market opportunity? What are the costs and revenue projections? What’s the hiring plan? What does this business look like at scale? All of these and many more questions get worked through to prepare you for funding.
5. You clicked with the Managing Director & accelerator crew
Accelerators are people too! Do you like the Managing Director and accelerator staff? If not, how are you going to spend 3+ months together?
Every VC would tell you how important the match is between the CEO and VC. This is because they get to work together in the boardroom for years. Now let's do the math. If you do a board meeting every 6 weeks for 5 years, that's 43 days of half-day meetings. Assume you spend another 43 days together over 5 years (thats a big over-estimate, but that's fine). Thats 86 not even full days — still less than the time you would spend with the Managing Director and staff at an accelerator.
Make sure you know and like the people you will work with.
6. You are clear on the value
Just as not all universities, high-schools and kindergartens are the same, no two accelerators are alike. Not saying good or bad, just saying different. How different? Well that's the whole point — do your homework and find out.
The last thing you want is to go in thinking you are going to get something and then come out without it. Be direct and specific — whatever you are looking for, ask during the interview process, would I get X out of your accelerator?
Remember any interview is a two way street. And if the accelerator is not willing to answer your questions during the interview process — well, it's probably not a great accelerator for you.
7. You understand the offer terms
The transactional part of going through an accelerator is really important too. What are the terms? What do you get, and what do you give up. How much money are you getting? Is it equity or debt? What percentage of your company are you giving up? Is it common stock or preferred? What rights will preferred stock have?
If the accelerator does not take any equity, it's fine, but it does create a looser relationship. On the other hand, some accelerators ask for too much equity, and it then harder to further finance the business. Some accelerators have aggressive preferred stock asks, including senior class of stock and control terms. That’s not really market, but you might decide that you are okay with that. The key point is — understand what you are getting and what you are giving up.
8. You enjoy intense environment and coopetition
Accelerator environments are typically really intense. At least at Techstars, the companies really Do More Faster, and it is amazing how much they accomplish in a short period of time. If the accelerator is laid back, well, then its not likely to accelerate you. Figure this out before you join. You do want super intense, fast-paced environment that will leapfrog your company.
And you have to want to go through this experience with other startups. You learn a ton from each other and you also naturally compete. Whose made the biggest progress this week? Who landed the biggest client? Who has the most users? Who has the best pitch? It is a great natural competitive environment, but it is also the place to get friends and business partners for life. Nothing else bonds founders like going through an accelerator together.
9. Alumni say it is AWESOME
Do your homework. Talk to the alumni. Did they enjoy the experience? If all of them say yes, ask what did they get out of it? Why did they think it was valuable for their businesses?
If most alumni said it wasn’t a great experience, well, maybe you can then save yourself time, and find a better accelerator.
10. Some of the reasons not to join an Accelerator
You are looking for immediate funding. Better accelerators give you around $100K, and while not a meaningless amount of money by any means, should not be the sole reason for going to accelerator. It is like taking a job you don’t love just to get paid – it's fine to do it, but not likely to make you happy.
You are looking to get into any accelerator. It is a bad idea for all the reasons we talked about above. Any accelerator won’t help you accelerate the business. Be deliberate, know why, do not settle.
You are looking for co-founders. Not really the place for this. It is very likely that you would be wasting the opportunity unless you have the right team already in place. Of course things happen, teams fall apart, and then you deal with it, but its different from deliberately going to accelerator to just find a co-founder.
You are looking for free space and free beer. Again not a great idea (although I hear you on the free beer). You won’t be maximizing the value of the program without having a specific set of goals and objectives.
Hope this helps. If you have specific questions about your company and whether you would benefit from an accelerator feel free to leave a comment or email me at alex dot iskold at techstars dot com.
Want to apply to Techstars? Next deadline is March 20 for Atlanta, Chicago, London, Mobility (Detroit), New York City, and Retail (Target). Apply today!
This post was originally posted on Alex's blog here.