It’s not news to startup founders: nine out of ten startups will fail and that number may be even higher in the tech sector. The fact is, some of the startups that don’t make it had great ideas, solutions, and passionate founding teams. So why do they fail anyway? In my experience, for the most part, it’s not a result of a cataclysmic event that is outside of their control – it’s far more likely to be a result of things like lack of funding, lack of research, being in the wrong market, bad partnerships or marketing, and generally not being an expert in what they do.
And that’s good news because those mistakes are avoidable. The problem is, particularly for early-stage companies, you need to learn fast and apply that learning to your business to attract investors and survive. Startup accelerator programs are a great way for startups to level up their business with access to mentors and potential investors with decades of experience, identify (and mitigate) major risks, and hone their pitch skills to be more attractive to angel investors like me. If you think you might be ready for a startup accelerator, here’s what you need to know.
Startup Accelerators: What They Are, What They’re Not, And What You Need To Know
1. Startup Accelerators Are Not Incubators
People often use these words interchangeably, but startup accelerators and startup incubators serve different purposes for startups. Startup accelerators offer a structured, intense, short-term (3-6 month) program that gets you ready to hit the market fast. They’re largely tech-focused and extremely competitive and are designed for startups that have a minimally viable product (MVP) and have done their legwork so that, after this intensive experience, they’ll be ready to attract investors.
Startup incubators are looser in their offerings and requirements and may benefit a younger startup that isn’t ready for an accelerator. Incubators are a collaborative environment for as-needed support, taking a more laid-back approach to providing resources like office space, and networking opportunities, and may even provide ad-hoc services like legal guidance and business services.
One more important distinction: accelerators often offer their services in exchange for a small amount of equity (usually less than 10%).
2. You Need To Be At The Right Stage
Startup accelerators are designed for companies who already have an MVP – an actual product or, at least, a prototype. You should also have already pitched, either through an angel investor, a family-and-friends round, or, possibly, a VC. You should also know your market and be able to show that your product or solution is scalable. Is your total addressable market there? Do you have traction? Accelerators are designed for high growth and to attract investors who will want to see a return pretty quickly, so it’s important to show you understand the market and the demand for your solution.
As an investor, seeing that you’ve participated in an accelerator is shorthand for knowing that you’ve got these minimum requirements in place.
3. You Have To Be Willing To Be Coached
You aren’t an expert – yet. You will be one day, maybe one day soon, but if you’re part of a high-quality accelerator, the mentorship and guidance you’re going to receive from the people in the room are invaluable. Those people are experts. So you need to be ready and willing to hear their feedback and put it into action fast. If you’re resistant to feedback or unwilling to make changes, this type of program isn’t for you. On the other hand, seeing that you’ve participated in a cohort can signal to an angel investor that you’re open to collaboration and change.
4. Startup Accelerators Are Highly Competitive
Startup accelerators only accept 1% – 3% into a cohort (the group of companies selected to participate in an accelerator) so, if you want to be considered, you better be ready. In many ways, an accelerator is an intensive program designed to bring all the hard work you’ve done together to hit the market. You don’t want to be learning a lot about your business – you want to be honing your skills and fine-tuning your pitch. The opportunity to participate in “demo day” – in front of potential investors and the press – is invaluable. This can set you up for your angel round, as investors may feel your participation in an accelerator is a sign that your company has been pre-vetted.
5. The Intensity Makes The Difference
Startup founders and entrepreneurs know better than anyone that when there’s no deadline to get something done, nothing gets done. There are a million fires to put out every day, so it can be tough to find time to buckle down on tasks like honing your pitch and pitch deck – and it can be lonely work, too. The intensive experience of the startup accelerator gives founders an exciting environment to thrive, network, target their vulnerabilities, and bolster their strengths, all while making critical connections with potential investors, mentors, and even potential customers.
Accelerate Your Journey To Success
As a tech angel investor, I love seeing that a startup has participated in an accelerator. It tells me that they’re driven, open to collaboration and feedback, have a strong team behind them, and are ready to hit the market running. I also enjoy participating in accelerators because I’ve seen firsthand the way it can propel a startup through a learning curve that could otherwise take years – during which a lot of other things can go wrong. While the program is just a few months, the connections founding teams make in these programs in many cases lead to deep relationships with investors and mentors that continue long after demo day.
Believe me, we’ve all made plenty of mistakes along the way; it’s rewarding to help the next generation of tech founders and entrepreneurs put that hard-earned experience to work for their own businesses, hitting the market ready to be the 1 out of 10 that succeeds. Are you a tech founder with a game-changing solution that’s ready for a startup accelerator? I’d love to hear about it. Reach out.
Enjoy the ride.