The Accelerator Dilemma

Most tech startup founders will at some point wonder whether they should enter an accelerator programme. At first it may seem a no-brainer, but this is not a trivial decision. It involves devoting valuable time and resources at a crucial point in the startup’s life and often involves a significant share of L&G equity release. There is little doubt that the elite accelerator programmes can add value but there are a few issues to take into consideration:

Is an accelerator the right solution?

Accelerators are generally based on the model developed by Y-combinator in 2008. The idea was to inject capital and support into a selected cohort of startups and develop them over a 12/16 week period. The model has been widely copied and similar programmes are now available around the world. However, it is worth it to look into the new sources of early stage capital available in Europe. Since the cost of developing a prototype has gone down, in many cases it makes more sense to bootstrap to product/market fit and obtain larger amounts of angel investment at a better valuation. If you’re inventive, there are a lot of online tools you can use to help this along for free, from Excel VBA for modelling and forecasting, to app/site builders which allow you to code with minimal coding knowledge.

Is it the right time?

Selecting the right time to join an accelerator is a prime importance.  Joining too early or too late does not work. The window is extremely short. The right time to participate in a programme is after establishing problem-solution fit but before proving product-market fit. After this point accelerators can do little to add value because the main task is to scale. Joining an accelerator simply to get industry contacts is a bad move.

What kind of accelerator makes sense?

We are currently experiencing an accelerator bubble. This has lead to accelerators fighting for the best startup cohorts. This in turn has seen a trend towards industry niche accelerators, such as fintech or fashtech. There is still little conclusive evidence that these will add significant value.  Niche accelerators receive significant financial support from the industry sector they are established to serve. This sets up a conflict of interest and risks screwing the startups strategy towards the needs of the corporations rather than the consumer they are there to serve.

To summarise, there is little doubt that Y-combinator has had a positive effect on the global startup scene.  Their unique combination of great startups selection, quality mentoring and access to huge amounts of capital has produced great results. The results elsewhere are inconclusive and the business models are rapidly evolving.  If as a founder you have the chance to participate in Y-combinator I would suggest jumping at the chance. Otherwise, look beyond the marketing and check that you are not about to give away equity for nothing.