Accelerators are one of the first steps in the journey of many startups.
There are now hundreds of these cohort-based programs — which typically offer mentorship and support over a few weeks or months, plus potentially a cash injection — around the world. Without doubt the most famous accelerator in the world, the American Y Combinator, counts Stripe and Monzo among its alumni.
But are accelerators really a springboard to startup success? And how much capital do the founders give to join them? We heard from 137 founders in our recent anonymous community survey of startup accelerators. And their response was mixed.
While one first-time founder “wouldn’t have started my startup without going to an accelerator,” others criticized generic advice from bad mentors.
From networking and mentorship opportunities to investor exposure and stock inquiries, here’s what they had to say.
The majority of accelerators take more than 7% equity
Many accelerators take ownership of the companies they accept into their programs. 55% of respondents told us that an accelerator they were part of took a stake, and almost two-thirds of them felt the amount they took was fair.
A founder who gave 7-10% equity to participate in an accelerator said he thought it was “just because the accelerator I participated in took people in before the idea stage. – who probably wouldn’t have started a business otherwise. But it’s also difficult because once you work on a successful idea, there’s a lot to give.
Many founders also admitted that while the amount of equity many accelerators take might seem high at the time, the value they provide at such an early stage – like finding a co-founder and validating an idea – makes them interesting. .
But a number of founders have also told us that the fact that an accelerator owns so much of a startup from the start makes the company less attractive to future investors. “Equity should be contingent on successful investment,” one said. “Having a 4% to 7% ‘zombie’ shareholder can have a dramatic impact on cap tables.”
The main reason to join an accelerator: find funding
The most frequently cited reason founders joined an accelerator was to get funding easier, followed closely by networking.
For solo founders who joined in the search for a co-founder, accelerators were often the perfect place to find that special someone.
“Talent matching is a real game-changer, and there’s no way I would have found a co-founder of this caliber without an accelerator,” one said. Others have told us how difficult it is to find a suitable co-founder – who brings a complementary skill set and wants to build a business at the same time – outside of an accelerator. “It’s rare to be in a room of 60 people who are all in the same phase of life where they’re ready to start their own business and have startup ideas.”
Participating in an accelerator is like “networking on steroids,” said one founder, because everyone is so committed to building a startup.
But others felt networking was lacking when it came to potential investors, and of the 28% who didn’t find their accelerator useful, almost half said it was because they didn’t. had not obtained funding after the program.
“Most startup founders don’t need courses on how to find product-market fit — we can research that on YouTube,” one respondent told us. “What we need are investor presentations.”
“Any program that doesn’t give you really solid exposure to potential future investments is very rarely worth the effort,” said another. Some founders felt like the accelerator they attended didn’t provide this, with one saying the 15-minute calls they scheduled with investors were often with “disenchanted” VCs. .
Others felt they weren’t properly prepared to launch in the real world. “At the end of the accelerator, we went out to pitch and were getting rejections because we were trying to raise too much,” one said. “A lot of effort and time could have been saved if the accelerator had helped us prepare for the terrain from a practical point of view.”
But a number of founders said the accelerator they participated in gave them access to opportunities to scale up and accelerate the process. One described the accelerator he attended as a “fundraising boot camp” because it taught them the strategy they needed to prepare for a fundraiser from day one. until you get the money from the bank.
Founders complain about generic advice from bad mentors
Nearly half of respondents said they joined an accelerator to benefit from the expertise and experience of mentors. New founders said the support of their mentors was key in shaping minimum viable product (MVP) and go-to-market plans, and many tell us it helped them avoid a number of costly mistakes.
But founders weren’t positive across the board, and 71% of people who told us their accelerator wasn’t helpful said it was because their mentors didn’t have the right experience for them. help them.
For many, generic startup advice that was irrelevant to their particular industry was to blame. “The prospect of a generic course on scaling with an ‘expert mentor’ who doesn’t know our startup fills me with dread,” one said.
Others have found their program mentors to be companies with little or no startup experience. “It was like going back to school, only to find you know more than the teachers,” said one respondent.
Not enough financial support for founders from underrepresented backgrounds
Three-quarters of respondents told Sifted they think accelerators play a role in opening up startup funding to founders from underrepresented backgrounds — but the jury was out on whether s they were doing enough to involve these founders in the programs themselves.
Many felt there wasn’t enough financial support for founders from underrepresented backgrounds, telling us that participating in an accelerator is simply too risky for founders from underrepresented backgrounds who don’t have financial support network.
One respondent said that while the accelerator they attended had a wide range of people in the cohort, the vast majority came from comfortable socio-economic backgrounds. “More could be done to really help those who might need more security to work on building a startup. We were given far less than a living wage in London and expected to invest our own money in the business to get started and cover legal costs if we got funding.
Others told us that the accelerators they participated in only paid lip service to diversity and inclusion. “Our accelerator reached out to me and asked for help finding more female founders, but when I asked them what they had done so far, it was practically zero,” said one founder. “They don’t work with role models or public figures that women actually listen to or follow.”
But one respondent felt that the accelerator he participated in helped level the playing field. “As someone from a low socio-economic background, I had very limited options. started my startup without it.
The Vast Majority of Founders Would Recommend Accelerators to Others
The general feeling among the founders is that it is worth participating in the right accelerator, and 86% said they would recommend the experience to others.
One respondent told us that accelerators can be “great” if they focus on the industry or part of the business a founder is looking to grow, but cautioned against being drawn to a accelerator without having a clear idea of what you want to achieve outside of it. “Otherwise, you will end up resenting yourself almost immediately, because of the huge time requirements.”
For many first-time founders, accelerators have accelerated the learning curve, and one told us it “opened doors we didn’t know existed in the first place.”
Being surrounded by a group of other founders going through the same experience was another extremely valuable aspect for many. One respondent said the usefulness of the support from mentors and learning resources was limited, but the opportunity to network with peers to learn and exchange ideas made the experience worthwhile.
Want to be part of our next community journalism project? We want to know what you predict for European startups in 2023.
Kai Nicol-Schwarz is a journalist at Sifted. He covers health tech and community journalism, and tweets from @NicolSchwarzK.
#networking #steroids #Sifted #readers #share #startup #accelerator #experiences