In the summer of 2012, Efrem Weiss, the CEO of YouGift, a social-media site for gift giving, relocated his startup team from New York City to upstate New York to join a three-month accelerator program. Like most accelerators, this one offered a common workspace, a program of classes and seminars, access to top business mentors, and an opportunity to pitch to investors at a Demo Day. The founders also received $18,000 of funding, in return for a 6 percent equity stake.
Sadly, the experience turned into a decelerator. Mentoring sessions were group chats over Skype in a crowded room. The office's couches looked as if they were out of Animal House. Weiss pulled his team out two weeks later, negotiated the return of his equity, and slunk back to the city. He shut down the business in March 2013. He says YouGift might have survived if he had chosen his program more wisely.
Finding the best accelerator is challenging, but when you choose well, entrepreneurs say, rewards can be enormous: invaluable business advice, new connections, introductions to potential investors, and the help and camaraderie of other startups. Incubators and accelerators share many traits-networks, classes, mentors-but incubators tend to be longer (one to five years), and they don't frequently offer funding. Accelerators, by contrast, usually offer funding in exchange for equity, tend to have short programs (as brief as three months), and seek to ready startups for seed funding.
How to Choose
During her hunt for an accelerator, Jennifer Hill noticed that although each of them told her the same thing, they weren't all alike. Hill, the co-founder and CEO of Sixty Vocab, a mobile gaming platform for learning languages, advises you ask these questions to find the right fit:
1. What do alums think? Would they do it again?
2. Do you want to relocate? Consider local options. Relocation can be disruptive, expensive, and time-consuming.
3. Do the managing directors and mentors have the expertise and connections you need? Try to interview some before accepting.
4. Do you want a frat-house or an office atmosphere? Assess the culture carefully-you'll be part of it for months.
5. Can you handle the curriculum? Be honest about your ability to juggle the workload, classes, and lectures with your company's needs.
6. How much equity are you giving away, and can you get it back if you drop out? Read the financial and legal terms carefully, and consult your own advisers before signing anything.
Some accelerators are harder to get into than Harvard. WeeSpring, a social-media site started by Allyson Downey; her husband, Jack; and Melissa Post to help new parents share product recommendations, was one of just 11 companies selected-from a pool of 1,700 applicants-for Techstars's 2013 class at its New York City office. "We felt like we had won the lottery," Allyson Downey says. What are competitive accelerators looking for?
"We look for a great team, an interesting market, and an interesting business model," says Jonathan Axelrod, managing director of Entrepreneurs Roundtable Accelerator, a New York City-based accelerator that focuses on technology companies.
"We want you to be coachable, but not so overeager that you'll do what any mentor says," explains Weston Bergmann, lead investor of Kansas City, Missouri, accelerator BetaBlox, which operates 120 feet underground in a cave heated and cooled by geothermal energy. It focuses mostly on tech businesses.
"In essence, we look for teams that have proved themselves enough to raise initial funding of at least $1 million but now need to upshift to get to the next major milestone," says Gabriel Luna-Ostaseski, founder of the San Francisco-based sales accelerator Upshift, which helps companies build their sales and marketing systems.
"We only want warm referrals, and if you don't have one, get one," says attorney Ed Zimmerman, chair of the tech group at Lowenstein Sandler in New York City and founder of the accelerator FirstGrowthVC, which doesn't take equity or provide co-working space.
Source: University of Richmond/MIT Sloan School of Management study