When you're just starting out, it's hard to tell the pros from the cons. Here, Jeff Bussgang offers his take.
Last month was Demo Day for Techstars Boston. I love Techstars Demo Days for many reasons, not the least of which is the amazing community that gathers to hear the brief, well-rehearsed pitches from the various start-ups who have spent months planning for this big event.
As accelerators like Techstars gain in popularity, many entrepreneurs wonder whether they should be applying and, if admitted, joining an accelerator and when they shouldn't. I get this question a lot from my students, particularly as they're graduating and scrambling to figure out where they should start their company, how to raise capital and whether an accelerator is right for them. Here are a few guidelines that
I would think about if I were an entrepreneur making such a decisions.
First, broadly speaking, accelerators serve a very valuable role in the entrepreneurial ecosystem. In many ways, as Eugene Chung of Techstars NY points out, they are like finishing schools for entrpreneurs. Like a college, there is a rigorous admissions process. And once admitted, the participant receives an extraordinarily rich education, in this case in the field of entrepreneurship. Also like college, the best accelerators represent valuable networks, where your "classmates" and even other alumni as well as boosters all become a part of your professional support system. Finally, the brand of the network will always be associated with your brand. Dropbox and Airbnb will always be known as "Y Combinator companies", which initially helped buttress their brand, and more in more is helping enhance the Y Combinator brand.
So with that in mind, here are a few reasons when I think an accelerator is a great choice for the entrepreneur:
• Outsiders to the Entrepreneurial Community. You are early in your entrepreneurial career and want to super-charge your entrepreneurial network. To be clear, this is not a comment about age - you might be in your 50s and new to entrepreneurship. But, as Launchpad LA's Sam Teller observes, "Across the board, accelerators provide one key value: dramatically expanding your network."
• Outsiders to the Particular Community. Every major innovation hub in the world now has an accelerator and most have numerous (Boston alone has over a dozen). If you are from outside that particular community, the accelerator is an amazing way to build a network in that particular city. As Brad Feld points out in his book on innovation ecosystems, there is tremendous power in being connected to a hyper-local, dense entrepreneurial ecosystem. Accelerators are magnets for the leaders in a given community - at Techstars Demo Days, it's always a "who's who" of that particular community. The quality of the mentors at the many events and one-on-one sessions over the are course of the program is outstanding - typically, you can't get access to these people any other way.
• New to Fundraising. Accelerators pride themselves, and often measure themselves, on their ability to help their graduates raise capital. For example, across nineteen Techstars classes in its four year history, over 70% of all Techstars graduates have raised capital (Techstars publishes an amazing chart that lists every company in every class and their fundraising status as well as employee count). If you don't have existing relationships with investors, accelerators are great ways to establish instant credibility and an instant network.
That said, not all accelerators are created equal. Just like with a college, your personal and professional brand will always be associated with that particular accelerator, so choose wisely. Some accelerators specialize in certain domains (e.g., Rock Health for healthcare or Learn Launch for edtech). Others have stronger reputations for fundraising vs. product development.
If you want to get a sense of the quality of the particular accelerator you are considering, you should ask around about them - graduates, senior entrepreneurs, VCs, start-up lawyers, bankers and accounting firms will all have their opinions. One tech reporter, Frank Gruber, publishes an annual ranking of accelerators that is pretty good, although it leaves out hybrid organizations that aren't technically accelerators, like Boston's Mass Challenge (which is a contest) and NYC's First Growth Venture Network (which doesn't take any equity).
Accelerators are thus not for everyone. If you are already well-connected to a particular entrepreneurial community, have a entrepreneurial track record and network, and are comfortable with your fundraising skills and relationships, then an accelerator probably isn't worth it for you. But if those attributes don't describe you as an entrepreneur, an accelerator may be an excellent choice.