The tech startup accelerator industry is booming. Y Combinator implemented the first accelerator model in Cambridge more than a decade ago. Today, the industry consists of more than 400 accelerators around the globe, with Europe leading the pack.
An accelerator is a rapid-growth environment packed with resources designed to take startups from adolescence to adulthood. Typically, accelerator members have a minimum viable product in place and are given special access to mentors, advisors, and funding opportunities.
According to the Global Accelerator Report, more than 8,000 startups across five major regions — the United States and Canada, Latin America, Europe, the Middle East, and Asia and Oceania — raised a whopping $191 million via accelerator programs in 2015. With so much cash available, many founders are wondering if now is the right time to join an accelerator program.
Questions to Ask Before Joining an Accelerator
1. Is now the right time to join an accelerator?
Joining an accelerator is a huge commitment in terms of time and finances. Not only do most accelerator programs ask for equity in exchange for their support, but they also want a 110 percent commitment to the process (for six to nine months on average). Accelerators are for startups who have already achieved some amount of traction and who are not intimidated by the prospect of working in a fast-paced, intense environment.
For this reason, programs typically only admit startups who already have minimum viable products in place. Tech startups entering accelerator programs would also do well to already have key roles filled in design, data and distribution. If you’re still in the process of scouting core members, consider joining an incubator or coworking space instead.
2. Does the accelerator align with the goals + objectives of my startup?
When evaluating programs, it’s important to identify what you need help with right now. Are you looking for someone who can show you the ropes when it comes to raising capital? Do you need help commercializing a new technology? Do you want warm introductions to potential corporate partners?
A wide-variety of accelerators are available from general tech to niche specific. Additionally, different programs have slightly different ways of doing things and measurements for success. For example, while most accelerators prioritize the success of their tech startups, many for-profit accelerators give equal weight to the satisfaction of participating investors, sponsors, and other key stakeholders.
3. What is the return on investment?
Most accelerators ask for equity or debt in exchange for their services. Depending on the terms and life-cycle stage of your startup, this can be a really great deal or a really bad deal. Here are some important questions to ask in terms of accelerator financial agreements:
- What would you get, and what would you give up?
- What percentage of your company would you give up?
- Is it common stock or preferred?
- What rights will have preferred stock have?
4. How successful is the accelerator program?
Finally, every accelerator program should be judged on the success of its alumni: What kind of connections did the startups make as a result of the accelerator program? What did the startup achieve as a result of their participation in the accelerator program? Which milestones were reached?
Should You Join a Tech Accelerator?
If your startup has already achieved traction, assembled a core group of founders, and is committed to scaling fast, a tech accelerator is a great option so that you can access their global network to build global business. Alternatively, if you are starting; then accelerator is highly recommended as it would catapult your product definition, digital sales, positioning and funding; as it gives a solid sounding board during initial days.