‘It’s like networking on steroids’: Aimed readers share their experiences with startup accelerators
Accelerators are one of the first stops on the journey for many startups.
There are now hundreds of these cohort-based programs – which usually provide mentoring and support over a few weeks or months, plus potentially a cash injection – around the world. Arguably the world’s most famous accelerator, the US’s Y Combinator, counts Stripe and Monzo among its alumni.
But are accelerators really a stepping stone to startup success? And how much equity do founders give away to join them? We heard from 137 founders in our recent anonymous community survey about startup accelerators. And their responses were mixed.
While one first-time founder “wouldn’t have launched my startup without joining an accelerator,” others were critical of generic advice from bad mentors.
From networking opportunities and mentoring to investor exposure and equity requirements, here’s what they had to say.
Most accelerators take more than 7% in equity
Many accelerators take ownership of the companies they accept into their programs. 55% of respondents told us that an accelerator they were part of took equity, and nearly two-thirds of them thought the amount they took was fair.
One founder who gave away 7% to 10% equity to participate in an accelerator said they thought it was “fair because the accelerator I participated in took people before the idea stage—who probably wouldn’t have started a business otherwise. But it’s also difficult, because once you work on an idea that has traction, it’s a lot to give away.”
Many founders also agreed that while the amount of equity that many accelerators take may feel like a lot at the time, the value they provide at such an early stage—like finding a co-founder and validating an idea—makes them struggle worth.
But a number of founders also told us that having an accelerator own such a large part of a startup from the beginning makes the company less attractive to future investors. “Equity should be conditional on successful investments,” said one. “Having a 4% to 7% ‘zombie’ shareholder can have a dramatic impact on cap tables.”
The biggest reason to join an accelerator: finding funding
The most frequently cited reason for founders joining an accelerator was to get funding more easily, closely followed by networking.
For solo founders who joined the hunt for a co-founder, accelerators were often the perfect place to find that special someone.
“Talent matching is a real game changer and there is no way I would have found a co-founder of this caliber without an accelerator,” said one. Others told us how difficult it was to find a suitable co-founder – who provides a complementary skill set and also wants to start a business – outside of an accelerator. “It’s rare to be in a room with 60 people who are all at the same stage of life where they’re ready to start their own business and have some startup ideas.”
Joining an accelerator is like “networking on steroids,” one founder said, because everyone is so committed to building a startup.
But others felt that networking was lacking when it came to potential investors, and of the 28% who didn’t find their accelerator useful, nearly half said it was because they didn’t secure funding after the program.
“Most startup founders don’t need training on how to find product-market fit – we can put it up on YouTube,” one respondent told us. “What we need is introductions to investors.”
“Any program that doesn’t give you really solid exposure to future potential investments is very rarely worth doing,” said another. Some founders felt the accelerator they attended didn’t provide this, and one said the 15-minute calls they had scheduled with investors were often with “disenchanted” VCs.
Others felt they were not properly prepared to pitch in the real world. “At the end of the speeder, we went out to pitch and got rejected because we were trying to raise too much,” said one. “A lot of wasted effort and time could have been avoided if the speeder had helped us become pitch-ready in a practical sense.”
But a number of founders said the accelerator they participated in gave them access to opportunities to raise and accelerated the process. One described the accelerator they attended as a “fundraising bootcamp” because it taught them the strategy they needed to prepare for a fundraising round from day one to get money in the bank.
Founders complain about generic advice from bad mentors
Almost half of those surveyed said they joined an accelerator to draw on mentors’ expertise and experience. First-time founders said support from their mentors played a key role in crafting a minimum viable product (MVP) and go-to-market plans, and many told us it helped them avoid a number of costly mistakes.
But founders weren’t positive across the board, and 71% of the people who told us their accelerator wasn’t helpful said it was because their mentors didn’t have the right experience to help them.
For many, generic startup advice not relevant to their particular sector was to blame. “The prospect of a generic class on scaling with an ‘expert mentor’ who doesn’t know our startup fills me with dread,” said one.
Others found that mentors on their program were companies that had little or no experience with startups. “It was like going back to school only to find you know more than the teachers,” said one respondent.
Not enough financial support for founders from underrepresented backgrounds
Three-quarters of respondents told Sifted they believed accelerators played a role in opening up startup funding to founders from underrepresented backgrounds — but the jury was out on whether they did enough to involve those founders in the programs themselves.
Many felt that there wasn’t enough financial support for underrepresented founders, telling us that joining an accelerator is just too risky for underrepresented founders who don’t have a financial support network.
One respondent said that while the accelerator they attended had a wide range of people in the cohort, the vast majority came from comfortable socio-economic backgrounds. “More could be done to really help those who might need more security to work on building a startup. We were paid significantly less than the living wage in London and expected to invest our own money in the business to start and cover legal fees, if we got funding.”
Others told us that accelerators they attended just paid lip service to diversity and inclusion. “Our accelerator reached out to me asking for help finding more female founders, but when I asked them what they had done so far, it was basically zero,” said one founder. “They don’t work with role models or public figures that women actually listen to or follow.”
However, one respondent felt that the accelerator they participated in helped level the playing field. “As someone from a low socio-economic background, I had very limited opportunities. I wouldn’t have started my startup without it.”
The vast majority of founders will recommend accelerators to others
The general feeling among founders is that it’s worth getting involved right accelerator, and 86% said they would recommend the experience to others.
One respondent told us that accelerators can be “brilliant” if they have a laser focus on the sector or part of the business that a founder wants to develop, but warned against being attracted to one without a clear idea of what you want to get. out of it. “Otherwise, you’ll end up resenting it almost immediately because of the huge time requirement.”
For many first-time founders, accelerators speed up the learning curve, and one told us it “opened doors we didn’t know existed in the first place.”
Being with a group of other founders going through the same experience was another hugely valuable aspect for many. One respondent said that the usefulness of mentoring support and learning resources was limited, but the opportunity to create a network of peers to learn from and bounce ideas off made the experience worthwhile.
Want to be part of the next community journalism project? We want to know what you predict for startup Europe in 2023.
Kai Nicol-Schwarz is a reporter at Sifted. He covers healthtech and community journalism and tweets from @NicolSchwarzK.