Friday AM thread on startup accelerators having previously run one for years:
1) Should you do an accelerator?
As always it depends...some considerations...
2) Like everything else, figure out what is your goal?
-Is it a quick decision + $100k check?
-Introduction to a network in a diff geography?
-Help with your fundraising story?
-Connections to an industry?
3) Not all accelerators are equal!
A handful are AMAZING. The other thousands in the world, bluntly speaking, are crappy. And then there's everything in between.
Do quick internet research to find out which 1-3 may be a fit per your goal.
4) Apply and if you get in, talk with alums.
Most alums will say they had an awesome time! Ppl in general are going to be happy w/ their choice because they don't know an alternative life.
BUT, it's impt to find out if they achieved the goal you hope to w/ the program
5) E.g. if you are looking to raise $1m, did the alum raise $1m?
if you are looking to form a partnership with an insurance carrier, did the alum do that?
6) Obv not every co will be able to achieve that goal, but you should talk with some alums to get a sense of how many actually do.
You'll find that even at top accelerators, many are NOT able to hit say their fundraising goal post demo day but can hit a portion of it.
7) And based on what you hear from alums, are those results good enough for you?
I.e. if your goal is $1m but a program helps you get an addl $400k, would you think it's worth it?
8) Or if you're looking for a partnership and you learn that all the alums are able to get in touch with potential partners but no one has actually formed one yet, would that be worth it to you?
9) If your goal is just the quick check from the acc program itself because you're tired of dead-end fundraising and need extra cash in a hurry to keep going, that's ok too!
Don't let anyone tell you otherwise.
10) BUT caveat on that - acc interviews may be short & can get you a quick decision.
However, the $$ often doesn't get wired until sometime DURING the program.
You won't get the money right away. You can try asking for an advance & sometimes you'll get a partial one.
11) Other considerations: if you're an int'l company thinking about a US acc, you can often use that to get leverage on investors back at home.
By running two fundraising processes in parallel, local investors may move faster IF they are afraid US investors will steal the deal.
12) I've found that int'l companies' stature at home tends to go up significantly by joining a top US accelerator.
There's a bit of an effect of that in the US / CAN if you are joining a well known US accelerator, but significantly less effect IMO.
13) Let's talk fund models: As a vast generalization, all VCs and accelerators are looking for 100x+ gains from their winners.
For an acc, they are getting in at a lower valuation, so what they are looking for a successful outcome is < than what downstream VCs are looking for.
14) It's impt to know this, because it's easy for a VC to say "Yes we want to invest at $2m cap vs. $8m cap"
Just because you went through an acc, it does NOT mean that most ppl want to now pay $8m cap.
This is why FOMO is impt.
15) FOMO is key if you want a higher valuation.
The way you generate it is by having a LOT of investors swarm around you with strong interest.
If your deal will still be around 6 months from now, you have not generated FOMO and you have no command of valuation.
16) This is why you see a lot of companies fall short of their fundraising goals.
No one wants to pay up at that valuation.
Fundamentally valuation is about supply and demand. Supply of your round. Demand of investors.
17) And this goes back to the first couple of tweets: Can the accelerator successfully help you generate that fomo?
I.e. better story telling, LOTS of investor introductions, etc.
Do they do that for everyone? or just the top 10% of companies?
18) Another consideration: what is often unsaid is the value of an acc goes beyond your current co.
Even if it doesn't work, you can have an amazing network for life. I.e. in starting a new co, joining a batchmate's co
So look into that too. Does the network feed on itself?
19) Lastly, EVERYTHING in life is negotiable.
Set terms are not really set. All the top acc negotiate even if they say they don't. BUT ONLY if they want to (and in 99% of cases do not). (should also give you a sense of whether you are top 1% in their eyes or not as well 😉)
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