Accelerators are one of the first stops on the road for many startups.
There are now hundreds of these cohort-based programs, typically providing mentoring and support for a few weeks or months, plus a potential cash injection, all over the world. Arguably the most famous accelerator in the world, the US Y Combinator, He counts Stripe and Monzo among his students.
But are accelerators really a springboard to startup success? And how much capital are the founders giving away to join them? We heard from 137 founders in our recent anonymous community survey on startup accelerators. And his response was mixed.
While one first-time founder “wouldn’t have launched my startup without participating in an accelerator,” others criticized generic advice from bad mentors.
From networking and mentoring opportunities to investor exposure and capital lawsuits, here’s what they had to say.
Most accelerators take more than 7% of the share capital
Many accelerators take ownership of the businesses they accept into their programs. 55% of respondents told us that an accelerator they were a part of took stock, and nearly two-thirds of them felt the amount they took was fair.
One founder who gave up 7-10% equity to participate in an accelerator said he thought it was “fair because the accelerator I participated in took people before the idea stage, who probably wouldn’t have started a company otherwise. But it’s also hard because once you’re working on an idea that has traction, there’s a lot to give away.”
Many founders also accepted that while the amount of capital many accelerators take may seem like a lot at the time, the value they provide at such an early stage, such as finding a co-founder and validating an idea, makes it worthwhile.
But several founders also told us that having an accelerator own such a large part of a startup from the start makes the company a less attractive proposition for future investors. “Equity must be contingent on a successful investment,” said one. “Having a 4% to 7% ‘zombie’ shareholder can have a dramatic impact on capitalization tables.”
The main reason to join an accelerator: to find financing
The most frequently cited reason founders joined an accelerator was to more easily obtain funding, followed closely by networking.
For independent founders who came together looking for a co-founder, accelerators used to be the perfect place to find that special someone.
“The talent match is a real game changer, and there would be no way I would have found a co-founder of this caliber without an accelerator,” said one. Others told us how difficult it was to find a suitable co-founder, who provides a complementary skill set and wants to start a business at the same time, outside of an accelerator. “It’s rare to be in a room with 60 people who are at the same stage in life where they’re ready to start their own business and have some ideas to start with.”
Participating in an accelerator is like “networking on steroids,” said one founder, because everyone is so invested in 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 helpful, nearly half said it was because they didn’t get funding after the show.
“Most startup founders don’t need classes on how to find product-market fit — We can look this up on YouTube,” one respondent told us. “What we do need are presentations for investors.”
“Any program that doesn’t give you really solid exposure to potential future investments is rarely worth your while,” said another. Some founders felt the accelerator they participated in did not provide this, with one saying the 15-minute calls they had scheduled with investors were often with “disenchanted” venture capitalists.
Others felt they weren’t properly prepared to launch in the real world. “At the end of the throttle we went out to pitch and were getting rejected because we were trying to get too high,” said one. “A lot of wasted time and effort could have been avoided if the accelerator had helped us prepare for launch in a practical sense.”
But several founders said the accelerator they participated in gave them access to opportunities to scale up and sped up the process. One described the accelerator they participated in as “fundraising boot camp” because it taught them the strategy they needed to prepare a fundraising round from day one to getting money in the bank.
Founders complain about generic advice from bad mentors
Nearly half of those surveyed said they joined an accelerator to take advantage of mentors’ experience and insights. First-time founders said support from their mentors played a key role in shaping MVP and go-to-market plans, and many told us it helped them avoid a number of costly mistakes.
But the 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 expertise to help them.
For many, generic startup advice that wasn’t relevant to their particular industry was to blame. “The prospect of a generic class on scaling with an ‘expert mentor’ who doesn’t know our startup fills me with dread,” said one.
Others found that the mentors in their program were companies with little or no startup experience. “It was like going back to school, only to find out that you know more than the teachers,” said one respondent.
Not enough financial support for founders from underrepresented backgrounds
Three-quarters of those surveyed told Sifted that they thought accelerators played a role in opening up startup funding to founders from underrepresented backgrounds, but the jury was out on whether they did enough to engage those founders in the accelerators themselves. programs.
Many thought there was not enough financial support for founders from underrepresented backgrounds and told us that participating in an accelerator is too risky for founders from underrepresented backgrounds who do not have a financial support network.
One respondent said that while the accelerator they participated in had a wide range of people in the cohort, the vast majority came from comfortable socioeconomic backgrounds. “More could be done to really help those who may need more security to work on starting a startup. We were given significantly less than London living wage and were expected to invest our own money in the business to get started and cover legal fees if we were to get financing.”
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’ve done so far, it was basically zero,” said one founder. “They’re not working 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 socioeconomic background, he had very limited options. I would not have started my startup without him.”
The vast majority of founders would recommend accelerators to others
The general feeling among the founders is that it is worth participating in the Correct accelerator, and 86% said they would recommend the experience to others.
One respondent told us that accelerators can be “brilliant” if they laser-focus on the industry or part of the business a founder is looking to build, but cautioned against being drawn into one without a clear idea of what you want to achieve. outside the. “Otherwise, he’s going to end up resentful almost immediately, because of the huge demands on his time.”
For many first-time founders, accelerators sped up the learning curve, with one telling us that it “opened doors we didn’t know existed in the first place.”
Being around a group of other founders who were going through the same experience was another very valuable aspect for many. One respondent said the usefulness of mentoring support and learning resources was limited, but the opportunity to network with peers to learn and share ideas made the experience worthwhile.
Do you want to be part of our next community journalism project? We want to know what you predict for the start-up of Europe in 2023.
Kai Nicol-Schwarz is a reporter at Sifted. He covers health tech and community journalism, and tweets from @NicolSchwarzK.