The pros and cons of startup accelerators – key things to consider

Key Takeaways

  • Startup accelerators can teach founders key business skills, boost product development and provide access to peers and mentors.
  • Not all accelerators are created equal; choose one that’s reputable, gives you access to a great network or specialises in your space.
  • Accelerators are not for every founder. Before committing, understand whether you are at the right stage to benefit fully.

Accelerators vs. incubators

The terms are sometimes used interchangeably, but there are well-agreed upon differences between accelerators and incubators.

Accelerators: Accelerators aim to do exactly that: accelerate your business growth. Applicants will be expected to have something more than an idea, be it a prototype or product. They provide intensive guidance, support and structure for a set period of time, most commonly three months. They’ll expose you to advice from a wide range of mentors. You’ll be building toward a “demo day” when you’ll present your idea to potential investors and other interested parties, including the press.

Incubators: Incubators tend to offer companies a longer-term home in exchange for a similar cut of equity. Applicants can be accepted with just a germ of an idea.

When considering an accelerator you need to ask yourself one key question: does the benefit merit the commitment of time, money and energy?

Accelerators typically give you access to mentoring, technology tools and workshops. But the flip side is that these are full-on programmes; with intensive weeks to focus on developing your solution. This means weeks where you have limited time to spend on hiring key staff, building your marketing plan or closing sales. And signing an accelerator agreement typically means giving up a considerable amount of equity off your company in exchange for a relatively small chunk of cash with advice.

Yet many founders who have gone through a top-tier accelerator believe it was the best thing that ever happened to their company. Mark Cummins, Co-Founder & CEO of Pointy says: “Seedcamp was a transformative moment both for the company and for me as an entrepreneur. Finding the right partner, in business as in life, is really make or break and Seedcamp was really the place where we learned how the startup world worked. Seedcamp also exposed us to an incredible network of people, including Spotify founder, Daniel Ek, and we couldn’t have picked a better partner for the journey from the beginning all the way to our exit to Google.”

Not all accelerators are alike, however. There are dozens of accelerator programs across the United Kingdom — hundreds globally — and they differ in approach, focus and cost, not to mention effectiveness. While top programs boast a large roster of well-known graduates, the number of successful exits and amounts raised drops off rapidly.

That’s why the real question your founding team should be asking is whether an accelerator is right for you given your size, circumstances and the challenges you face as a business. And you need to choose carefully so you don’t end up giving away your time and equity in exchange for off-the-shelf help.

Don’t miss an opportunity to develop company-building skills

Sonciary Honnoll, a cofounder of Promoboxx, which sells marketing technology connecting retailers and manufacturers, says going through Techstars proved effective in part because the opportunity to join the program came at the right time. “We were at the point where we had bootstrapped for a bit of time and weren’t sure how to get to that next level,” she says. She credits the program with helping to school her in what she lacked: the skills to build a successful company.

Now Honnoll advises every founder, especially first-time CEOs, to at least consider whether an accelerator makes sense for them. “It will help you drastically improve in a short amount of time your leadership skills and the fluency you need to build an early-stage company,” she says.

Membership has its privileges

Judging an accelerator’s potential value to a company means assessing the strength of its network.

“An accelerator can very quickly introduce you to a ton of people,” says serial entrepreneur Michael Wolfe. That’s especially useful if you are new to the industry. “By connecting you to a lot of advisors, you quickly become part of the culture and develop a network in a year that it would otherwise take ten years to create,” he adds. Membership in that network also gives you credibility, which will help with hiring and fundraising.

Choose an accelerator carefully

The key, Wolfe says, is getting into a quality accelerator. For example, Techstars, which is backed in part by SVB, Seedcamp and Rocketspace. “If you go with an accelerator that’s not as well known, or not as respected, the benefits are not as clear,” he says.

However, specialist incubators might make sense for your team if they focus on your specific vertical. For example, the Digital.Health.London Accelerator helps healthtech startups build relationships with NHS organisations.

Some of the country’s top universities are also creating well-regarded accelerators, including City, University of London’s City Launch Lab. So, too, are large corporations with clout in a given sector; for instance, BMW’s Innovation Lab supporting automotive tech startups. There are also some strong regional accelerators. For example, Entrepreneurial Spark has programmes in Edinburgh, London, Bristol, Ayrshire, Cardiff, Brighton, Birmingham, Cardiff and Newcastle.

“With all these different programs out there,” says Pejman Nozad of Pear Ventures, “my suggestion is to talk to founders that have gone through an accelerator to figure out if it’s a fit for you.” Look closely at its mentors and staff, “and see what value you might get out of those relationships.”

Build your network

An accelerator is a great way to connect with peers. Networking with founders who are going through the same challenges can be a rewarding experience. Leila Zegna, Partner at Kindred Capital says: “Sitting down with a fellow founder and being able to ask questions that may seem basic or uninformed will get you the richness of answers from someone who's recently been through the same process. Successful founders are often surprisingly keen to share how they did it.”

An accelerator can quickly introduce you to a wider network of people who can boost your chances of success. Lucy Stonehill, CEO of BridgeU says: “From when we joined Seedcamp in early 2014, we were inducted into a community of dynamic investors, supportive mentors and impressive peer entrepreneurs. We continue to benefit from Seedcamp's support and global network and take great pride in being a part of this very important community.”

When you should say no to an accelerator

Despite all these benefits, sometimes it’s best to say no to an accelerator. One factor might be the stage at which a company finds itself. You can be too early for an accelerator. “I wouldn’t say an accelerator is right for every company,” says Honnoll. “Generally, it’s better to have a product that’s got at least some traction.”

You can also be too late once you’ve raised venture money. And it’s possible that your founding team has a depth of knowledge and experience that would make an accelerator less valuable.

Additionally, accelerators often require that a company temporarily relocate, which can be disruptive. However, there are options to address this challenge. Techstars and Entrepreneurial Spark, for example, have started virtual programs.

Robert Sweeney, a repeat entrepreneur, applied to Y Combinator but after some reflection said no when he was invited for an interview. He explained his decision on Medium: His years building a VC-backed startup had been a “complete hell.” His new company was already profitable and growing fast, and he was working just 40 hours a week. “The truth is, bootstrapping is a better choice for most software engineers, especially if you are a first-time founder,” Sweeney wrote.

Venture capitalist Andrew Beebe of Obvious Ventures points out another risk: “Being part of a powerful accelerator can be a double-edged sword,” Beebe says. “If you don’t get funded in those first weeks after graduating, everyone does ask, ‘What’s wrong with that company?’”

Consider before committing

An accelerator can be a brilliant way to access support as well and build out a network that will help you scale. However, there will be an impact on your finances and your time. Before committing, it’s important to weigh up the pros and cons. Are you at the right stage to benefit from accelerator support? Are you willing to give up a piece of your company? And, how much will the support available benefit your individual journey? If you conclude that an accelerator is right for your businesses, you also need to find the right fit. The best approach is to talk to alumni and gain an understanding of the curriculum, the atmosphere and the experience of available mentors.

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