What all Founders should know about the business, of business accelerators.
For founders who are unable to bootstrap on a wealth driven budget and operate outside access to crony connections, starting and scaling a business is a journey that’s fueled by passion — while likely being funded by family contributions, personal lines of credit, and possibly — blood plasma (we really met a founder who did that). It doesn’t take long for entrepreneurs to realize that the innovative, disruptive idea they want to bring to market comes with an expansive, expensive list of necessary tasks and challenges 😵
Trying to figure out the most efficient ways to identify new markets, acquire great talent, develop a product or service, market it and sell it — all while paying lawyers, paying lawyers, and did we mention, paying lawyers — can leave an ambitious founder and their equally supportive and patient team, feeling semi bewildered and extremely overwhelmed.
Business mimics nature when the opportunity for a meal arises — and the confused, desperate energy projected by most founders seeking guidance definitely attracts predators. For them, these predators come in the form of the B level national accelerator, the local accelerator, and the nearly useless new kid on the block — the corporate accelerator. But it wasn’t always this way. Startup accelerators, like most great ideas meant to help people, began and served as a legit source of knowledge, guidance and funding for early stage businesses. We all know the big names — firms like Y Combinator, 500 Startups, TechStars, and NewMe — who from around 2010 to 2013, out of sheer necessity and entrepreneurial solidarity, initiated a trend that showed the world there was a new model being created in support of startups. These firms were trailblazing. They knew how to help companies, because they were started by people who had done the work, lived the dream — and survived to sketch the map.
However, by 2014 the word was out that entrepreneurs were willing to pay for a guide through the maze, and what began as a few authentic, entrepreneur founded business accelerators quickly evolved into a market heavy with programs started by opportunists. Lawyers, fanboys, people who used to work for the SBA — basically — folks who could offer little meaningful help, but were able to raise some corporate guilt money to live their dreams, by selling dreams to real founders.
Fast forward to 2019, and a lot of those “pop up” accelerator folks are dead or dying. The guilt money is running dry, they haven’t seen any remarkable successes, and investors have run out of patience. And without a fund or an acceptable revenue model, these folks can’t make ends meet — so what do they do? They try to extract as much as they can from the startups in their programs, relying on the already over stretched dime of the early stage businesses who trust them.
Really, the true beneficiaries of many accelerators, are the accelerators themselves. They’re out here attending conferences in SF and NYC, partying at SXSW, and getting invited to Davos and Mobile Web Congress in Barcelona — all while founders struggle to monetize the ad-hoc strategies they paid for. The follow-on protocol common to these predatory programs, mainly entails ask cohort status requests — which they leverage to display whatever success a founder has managed to achieve, in spite of them — in order to convince another foolish investor to give them even more lifestyle money.
What about corporate accelerators?
Then there’s the rise of the “Corporate Accelerator”. Clearly an abomination in name alone. Just how many corporations struggle with innovation, exactly? Yet, they aim to teach startups how to grow. Grow how? By adopting Microsoft Exchange Server 2005? These accelerators are often the brainchild of a single influential executive who was able to carve out a million bucks to run the program. They don’t invest much, help even less, and love to have meetings that expend the one advantage a startup has — it’s nimble nature. These guys, Comcast, Morgan Stanley, your local power company — are great to name in on pitch decks and press releases, but will add little to no value to a startup’s overall mission.
Don’t give up. Amazing — legit — accelerators, exist! And we know a few…
At Lightship, we pride ourselves on our completely unbiased reporting. Which is why we won’t suggest Hillman and NewMe, our own programs, as great accelerator options😉 But we will point you in the direction of our friends at Y Combinator and 500 Startups. These programs have outstanding reputations in the investment community and among entrepreneurs.
Twice a year, Y Combinator invests a small amount of money ($150k) into a large number of startups — giving them the opportunity to relocate to Silicon Valley to participate in their 3 month program. Their goal is to get early stage businesses to the point where they’ve built something impressive enough to raise money on a larger scale — even introducing them to later stage investors — and occasionally, acquirers. YC has an incredible network, and it’s investor days are packed with the who’s who of silicon valley investors💰
500 Startups is an impressive operation. They’ve invested in over 2,200 companies via their 4 global funds and 15 thematic funds — all dedicated to either specific geographic markets or verticals. Its 100+ team members are located in 20 countries around the world in order to support the 500 Startups global portfolio of investments which spans more than 74 countries! But don’t let their size intimidate you. They’re supportive and available to their cohorts — and we especially like the Miami program🌴
The intentions, the sincere intentions, of a business accelerator is to provide startups with the entrepreneurship education and resources (network, network, network) needed to survive and scale. So beware of false promises, do your research, and choose the program that best fits you and your business. Get in. Get out. And get back to changing the world!
Written by the Team at Lightship 🌊