I was at a startup event this week in London and I met a founder working on a insurtech startup that is at idea stage. I liked the idea and he asked me what I thought about accelerators. I will share with you what I told him.
There are some good fintech and even insurtech accelerators in London, one of which is backed by a large number of insurance corporations. These programs are valuable to get good mentorship and expedited access to work with these corporates.
However, a founding team can potentially reach these mentors and corporates without getting into these accelerators, if they can build a good advisory board and personal network that is connected to these corporates, mentors and investors. Obviously this takes work and time and the founders need to weigh the options. A vertical focused equity accelerator brings these connections in a quick, concentrated and managed way and often gives some cash and good partnership deals, but good programs also ask for equity.
There are a few non-equity accelerators that add a lot of value with contacts and mentors, such as Mass Challenge and Microsoft Accelerator. While getting into them gets harder each year, I think these are really good options. However, they are usually generalist programs.
Founders can try to hack their own way by finding super advisors and giving them some equity and options to get them on board and motivated, and build the right network with their help and network. The equity you would give away would typically be less than what funding accelerators ask for. The tradeoff is that you would have fewer but more motivated advisors versus larger pools of mentors in accelerators you meet.
And if speed and competition is an issue, the accelerator may be better option as the team that gets into the right accelerator can make progress faster and grab some key milestones and assets (accounts, partners, vendors, investors). For certain startup areas that rely on network, you sometimes see there is one alumni startup doing that from each of the top accelerators.
Are accelerators really worth it. F6s.com, a website that provides services to accelerators and similar startup programmes, lists more than 12,000 programs worldwide, a good number of which are probably accelerators. Probably thousands of entrepreneurs that go trough these programs, uniformity of experienve and answer is probably impossible. However I would like to share some off the record conversations I had with MDs and alumni of some of the top 20 global accelerator programs.
A managing diretor of a top program in Europe, which is harder to get into than Harvard, shared that he starts his program with telling the founders to drop all the marketing they used to get into the program and really lay it bare, say where they are and where they are going. Even tough these programs ask for extensive data and analyze them and even do interviews with founders, it is very difficult to understand a startup before establishing trust and spending at least a few hours together. For me, this implies that the selection processes are imperfect, which I would agree with in my experience. This also means that founders should not take rejections seriously and keep applying and working.
I also worked closely with a founding team for a year that got into not only one but two top acceleration programs in Europe. Now when we ask one of the 2 cofounders, he says that one of the programs did not contribute much, but it must be noted that that program was a non-equity program and it was recently established. Regarding the other funding program they participated, their experience is more positive, they got a lot of mentorship, started their vesting process, streamlined their business and started really going after a scalable business model and a way of pursuing it.
If you can benefit from the network, if the network is relevant and the advantages that will come from this network will exceed your time investment, good non-equity accelerator programs are no brainers. The best kind of network you can get these from programs are obviously mentors who help you find product-market fit, investors, advisors, customers or sales channels and talent.
If you are really good at networking and persistent, you may be able to reach this kind of network without going through an accelerator. It might take more time, or you can be more targeted and effective. Again requires the founders to weigh the options.
I think product market fit is the most important stage for a startup. In fact, Steve Blank describes a startup as an organization formed to search for a repeatable and scalable business model which include product-market fit and then business-model fit. Before a startup reaches this point, only those activities that help a startup achieve this are worthwhile, and all others are distractions, including publicity, which can in fact hurt more than help before product market fit. Therefore, founders who have not yet reached product market fit should evaluate accelerators to see if they would help here and talk to happy and unhappy alumni. If a startup has fit, then the founders should evaluate accelerators to see if they would help with business model fit and if they are beyond it, with sales, channels, scaling. It is all a matter of where you are.