Last night I had the chance to preview some Excelerate Labs companies. If you are going to the Demo Day next week, I think you will be happy you came. The class is very creative and well prepared. I have already dispersed some material to a few target customers, downloaded some of their apps and put them on my phone.
Often times, many wonder if accelerators are worth it. My answer is, “It depends.”. It depends on a lot of things, but if the lab has the track record of Y-Combinator, TechStars, or Excelerate then I’d say they are worth it. Those are the three places I am familiar with, so I cannot comment on any others. My friend Raman Chadha probably can though.
Some accelerators aren’t worth it. Why? What should an accelerator do?
From the investor perspective, accelerators should polish the business so it has a revenue model. Or, if it’s a no revenue model company, point the business on a path to get viral customer acquisition. Figure out what the costs of running the business are and how to anticipate the costs of scaling. Getting a rough timeline is a good idea. General business planning.
They should also teach you how to pitch. Raising capital is the second most important thing for a start up. Getting customers is the most important thing and a good accelerator will focus you on that.
Once the firm graduates from the accelerator, it should have a clear idea where it’s headed and it should have intense focus. It should have goals and start to try and attain them. It should have one or two people it trusts to take problems to, mentors they call them.
The aforementioned accelerators do all that and sometimes more. In return, they take a small equity piece.
What do bad accelerators do? They don’t prepare companies for what awaits them. They give you mentors that can’t mentor, or they don’t create meaningful connections for you. They take your equity and leave you to die.
Poor accelerators will keep you busy doing tasks. But those tasks aren’t relevant to your business. They seem more like really bad basic training rather than purpose driven exercises designed to stimulate either growth of your company or team.
Another characteristic of a good accelerator is the ability of the founders to admit when they make mistakes. I think great accelerators always learn from their classes, their mentors and investors that interact with them. They get stronger over time.
I find that when I interact with anyone from the aforementioned accelerators, they will readily admit their strengths, weaknesses and where they screwed up in the past and how they tried to fix it. They share their methods and data. They have high integrity levels and they are transparent.
Over the course of the summer I have had some time to interact with Excelerate in Chicago. I am as impressed with the people running the place as I am with some of the companies in it. When I compare it to the first class, it only gets better and better.
There are opportunity costs to entering an accelerator. Time, which is more important than the little bit of equity you give up. Maybe some money if you have to move to a place to enter one. Each firm has to weigh all that before accepting a spot in one.
Many equate going to a prestigious accelerator with going to an Ivy League school. That comparison is way to simplistic. There is still plenty of risk for firms coming out of an accelerator. There is no pedigree that follows the firm around for the rest of its life. No old boys network. Each firm has to create value on its own. But well run accelerators help them get on track and up to speed much faster and more efficiently than firms that try difficult things on their own.
A well run accelerator is a gem in an entrepreneurial ecosystem. A poorly run one is a lump of fool’s gold.