Startup accelerators sound fantastic, aren’t they? However, before joining one, entrepreneurs should remain aware of these six advantages and disadvantages.
In the last several years, the awareness of accelerators for startups such as AngelPad, Y-Combinator, and 500 Startups has risen dramatically. Typically, accelerators for startups choose a set of companies, often in the beginning stages of their development. They provide assistance, connections with investors, and mentoring in exchange for an amount of equity. The programs can culminate with occasions similar to debutante balls, also known as”demo days. “demo days” where the startups can simultaneously present their ideas to investors from all over the world.
It sounds fantastic, right? Yes, it can certainly be. Kinnek, our company Kinnek was part of the fifth cohort of AngelPad in San Francisco, and it was a significant change in our business. Kinnek was able to secure $33m over the following years, which is why we can have AngelPad in our credit for supporting us at a crucial moment in our company’s history.
Despite this trend, many entrepreneurs in the early stages were unaware of the benefits of applying to accelerators.
This is a simplified version of my most important ideas about these programs’ beneficial (and not useful) benefits.
Not all accelerators for startups are created in the same way.
Over the past few years, there has been a massive growth of accelerators throughout North America. This is a boon for the tech industry as accelerators can bring new enthusiasm into local startup communities. But the reality is that only a handful of accelerators are worthwhile. Many accelerators have very bad relations with investors. When it’s time to hold their demo day, there will not be enough genuine investors, making it hard for the participating startups to begin their fundraising efforts.
A different issue arises because of the relative newness of numerous accelerators. For accelerators that have just been operating for a couple of years (or maybe just a few years), it’s not enough time for the program’s reputation to flourish. This means that it’s almost impossible to establish an established track record of generating several companies that went to be huge successes. Investors should be extremely cautious about investing in their businesses.
Accelerators are extremely useful during the fundraising season.
Although this might differ from the party line used at the majority of accelerators, my own experience with accelerators shows that their impact on your business is much more remarkable when you begin thinking about raising funds for your Startup Accelerator.
Why? The most obvious answer is that most accelerators conclude with a huge demo day at which their businesses can pitch their products to numerous investors at once. This can be a fantastic opportunity to launch the process of a seed round. However, its value is missed by businesses that don’t care about raising funds.
The top accelerators have long-lasting connections to an extensive array of investors. By joining one of these networks, your business can gain exposure to a variety of investors that it would otherwise not be able to reach.
Accelerators could negatively impact your business.
Like all commercial decisions, there are always positive and negative to consider. In the case of accelerator programs, it may also have disadvantages, for example:
A lot of (not every) accelerators provide unhelpful distractions. It could be as simple as requiring the participation of multiple social gatherings and requiring startups to attend meetings with dozens of potentially relevant “mentors” and “friends of the program.” Although it may appear fantastic, conversations and meetings have an eroding value. As you are trying to sell, build your product, and pitch to investors to generally secure your business from demise at a point that the day demo comes around. You’re ready to demo. It could be quite a time-consuming task dealing with these kinds of mentor-related meetings and events.
In addition, there’s the apparent fact that accelerators are generally specifically designed to help startups raise money. If your business isn’t prepared to raise funds or is a business that isn’t going to need funds, you might become entangled in social pressure to make pitches to investors and attempt to raise funds in the wrong way at the inappropriate date. This could negatively affect the company’s mission and lead you in the wrong direction in the future.
A third point is that taking part in an accelerator can take some time from the life of your business. Accelerators typically last between 10 and 16 weeks. This can seem like a long time in the highly competitive Startup Accelerator world in which just a few hours can be the distinction between your business’s survival or demise. If you fail to get enough benefits from your time at Accelerator, your company can be at a significant loss in time. For startups in the early stages, this can be even more damaging than the financial loss.
Accelerators may provide positive signaling.
The degree you earn from a prestigious university such as one the University of Pennsylvania can provide employers with a sign that you’ve reached a minimum degree of intellect and excellence (despite the specific course of study or GPA).
Going through a prestigious accelerator can provide social proof for potential investors. It provides the rubber stamp to prospective investors, recruiters, and even clients that your business has passed the primary hurdles necessary to prove the concept and is at least a little bit of credibility.
However, don’t be too optimistic about the positive signals this can send. We’re not saying, for instance, that saying you participated in AngelPad will result in investors writing blank cheques at your door. The more likely scenario is getting your name in front of investors in more locations, and investors are more likely to engage with you. The rest is yours to do.
Accelerators allow you to benchmark your business against other companies.
In the early stages, the process of building a business can be an incredibly solitary existence. It’s tough to understand whether you’re growing quickly enough and tackling problems correctly.
For Kinnek, one of the more beneficial advantages of taking part with AngelPad was the opportunity to assess our performance against other Startup Accelerator in the same growth stage. We understood better what we needed to work on and where we performed better compared to other startups.
Also, there was a good amount of pressure from the social side of the Accelerator. Everyone wanted the company on the list of the ones to pitch poorly on demo day, had the smallest number of investor meetings, or was not gaining the most users. This gave us a lot of pressure to keep our feet to the pedal, which is difficult to maintain when working on your own in a coffee house.
Accelerators can connect you with an incredible community of founding partners and former founders.
Being part of an accelerator (and the subsequent fundraising process) is grueling. However, it can also help create strong bonds among the participants in the cohort. We remain great acquaintances with many of our friends from other AngelPad companies, which I’m incredibly grateful for.
We also frequently delve into the trust built up by the founder’s network to get assistance in managing our business. From hiring strategies, overhauling sales procedures, and finding office space that suits our needs, The AngelPad network is an enormous source of support and advice. People who have been part of similar accelerators have developed close friendships and networks.
Therefore, you should consider having your startup sign up for an accelerator.
Participating in an accelerator program can help your business. Be extremely careful when choosing which accelerator program to join. Make sure to schedule your participation in that the fundraising begins at the same time as the program is over. A successful accelerator can be a unique opportunity to propel your business to a higher level. Don’t expect it to be a magic bullet that instantly forces you to fame, fortune, and the glory of fundraising. Keep in mind that it’s a chance, not a guarantee. It’s still up to you to ensure it’s worth your time.
