I recently came across a fascinating article by TechCocktail on Scribd detailing some of the factors that green entrepreneurs should consider before jumping on board with an accelerator. I thought I’d do my best to distill some of its wisdom for those of you with less reading time:
1) What is driving your interest in joining an accelerator? Not all accelerators are alike. Are you primarily in it for the hands-on advice and mentorship? For potential follow-on investments? For the network of startups? For publicity and PR? Understanding these primary drivers will help you pick the right program and get the most out of your experience. Of course, this is assuming you can get into an accelerator! Some of the top programs are highly competitive, often taking successful graduates of other less prominant accelerators and incubators. Many startups in accelarators already have traction, customers, revenues, etc. It may not be the corporate ladder you have to climb, but make no mistake- there are clear hierarchies in the startup world full of “prove yourself” hurdles.
2) Location, Location, Location: If you get accepted to an accelerator, you can be certain that you’ll be growing a network of peers and professional industry contacts primarily in the market where the accelerator is located. Contrary to popular myth, you DON’T need to be in Silicon Valley anymore. While this is certainly a golden place to launch a company due to the sheer volume of local angel and VC investors, many entrepreneurs enjoy smaller, tight-knit startup communities outside the Valley where they can stand out as a “big fish in a small pond”. Furthermore, some cities have obvious strengths which can give a well-located startup better access to the right resource and talent pool. For example, a policy-based startup would be well-advsied to located themselves in Washington, D.C. This may seem like common sense, but think carefully and make sure you’re building your network in a place that makes the most sense for you, both personally and professionally.
3) Funding: Although most accelerators provide a small amount of funding, the primary advantage of joining a program is the intangible benefits-mentorship, network connections, and partnerships. In most cases, programs provide only enough capital to build a prototype or first version of the product or service, typically in the $15,000-$30,000 range. This funding is usually handed out in exchange for a small amount of equity (6-7% on average). Some accelerators offer partnerships with angels and VC firms in in the form of convertible notes. Convertiable notes are a type of investment whereby a company borrows money from an investor or group of investors that will get converted to equity at a future date or round of funding.
4) Specialization of Mentorship and Advice: A number of accelerators are popping up now that are specialized and focus on particular industry sectors (e.g. Imaginek12 in Palo Alto and Code for America in San Francisco). Directors of accelerators assert that this allows them to concentrate resources and ultimately better serve the startups they’re working with. Of course, some accelerators offer scheduled mentorship sessions and group activities while others are more self-directed experiences. Make sure to do some research on this before applying so that you know your expectations are aligned with what you might be getting.
5) The Accelerator “Gap”: Although this might be common sense to anyone that’s raised captial before, it is by no means a guarantee you’ll receive funding after ”graduating” from an accelerator. Some refer to this as the “accelerator gap”, or the substantial decrease in likelihood of follow-on funding from one tier of accelerators to the next. “The quickest and easiest way to determine if the accelerator is a good investment is to look at who’s running the program. The accelerators at the top of the list are all run by successfulentrepreneurs. These are the guys who will have ties to downstream funding”.
If you’d like to read the whole article, you can find it here: http://www.scribd.com/embeds/103477093/content?start_page=1&view_mode=&access_key=key-2ixnoouf1milwexusdfy