TechStars' David Tisch: Most Accelerators Will Fail, So Choose Wisely

Accelerators and incubators are sprouting everywhere, which is why entrepreneurs should be even more careful about choosing the right one.

TechStars NYC managing director David Tisch has helped lead some of the most successful investments in the history of Silicon Alley startups. During his tenure, companies in the program have gone on to raise more than $50 million in follow-on capital. So it came as a shock when Tisch announced on Friday that he is stepping away from his day-to-day role at the popular accelerator.

Fast Company recently caught up with Tisch, and he spoke candidly about the downsides and dangers of the rapidly increasing number of accelerators and incubators popping up around the globe. This expanded interview is part of our Fast Talk series on accelerators in the September issue. If you're an entrepreneur who has ever wondered about the pros and cons of entering an accelerator, you'll want to pay attention—we'll be featuring influentials in the space all week, from TechStars and Y Combinator, to SeedCamp and Tech Wildcatters.

FAST COMPANY: There seems to be a zillion accelerators nowadays. Are they all legitimate? Or are most of them just bullshit?

DAVID TISCH: Yes, basically. The majority of accelerators are not good for companies and will fail. There are too many of them. The idea of applying to just any accelerator is totally silly. A company should do homework and figure out which one is right for them.

Perhaps it's becoming a bit like applying to college, where if an entrepreneur isn't accepted into one program, he or she can just apply to another.

Well, look, you don't just apply to colleges. You apply to specific colleges. To not do your homework beforehand and understand what accelerator is right for you is just, as I said, absolutely silly. Outside the vertical accelerators—the ones that cover, say, health care or energy—I would hesitate to do any accelerator other than TechStars or Y Combinator.

Why should an entrepreneur enter an accelerator rather than raising traditional VC dollars?

We're in the business of getting our companies funded by other people, and we work with hundreds and hundreds of VCs and angel investors. So I don't think it's a mutually exclusive choice.

How should an entrepreneur decide which accelerator is the right fit? Is it about finding the right mentors?

It's not even just about the mentors. There's a track record of success that TechStars and Y Combinator have. We have proven results thanks to our alumni network, investor network, and mentor network. Why do I know this works? It's not because we're some new accelerator that opened our doors yesterday, made up a list of mentors, shoved it on a website, and threw a demo day at the end. I know it works because we've done it before. And remember: Accelerators are not free! You're giving away a real amount of equity. So if an accelerator is charging more than TechStars or Y Combinator, I would ask why.

So what's your pitch to up-and-coming startups to apply to TechStars?

As I said, we have proven results, and our alumni speak for themselves. Just reach out to our alumni who have done this before. What do they get out of it? It's a combinator of our alumni network, our investment network, and our mentor network. Our mentorship is real and it's sincere. I don't know if you get that in a lot of the other programs.

There seems to be a lot of accelerators out there that list a ton of big-name mentors though.

I agree, but ours are real. We invented the mentor-driven accelerator. We filter and curate our mentor list every year, and if people don't engage or want to be a part of it, then we remove them. We don't want mentors who are just going to show up to give some slideshow of advice. We want them to help throughout the months to work deeply with specific companies. But it's hard for entrepreneurs who might see a list of names shoved on a website and have to decide, "Is this legit?" You see that list and you probably think that they're all going to be there to help along the way [at other accelerators], and that's just not the case.

Accelerators now all seem to follow the same formula. Can you honestly say this formula leads to startup success?

None of this is scientific. But our results are public, which is something that we push all accelerators to do. In fact, we released software that allows all accelerators to track and publicize their results. We have a really low failure rate—90% of our companies go on to raise venture capital money or reach profitability.

We've only been around since 2006. So it's too early for me to sit here and tell you, "Yes, we're massively profitable," or, "Yes, we've produced enormous returns." But we find entrepreneurs and genuinely move their companies forward.

[Image: Flickr user Philip Ray]

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5 Comments

  • Riccardo Raneri

    I don't totally agree. David is right when he says that many incubators are improvised: they are so many, that competence can't be everywhere. And it's also true that TechStars and Y Combinator are the best, everyone agrees on this fact.

    But saying that "The majority of accelerators are not good for companies and will fail." sounds like an act of conceit - especially without presenting any solid data to confirm this thesis. After all, some informations about the "success&fail" of many incubators is available (e.g.: there a 100+ list on http://www.seed-db.com/acceler... ), and they are not so bad.

    In addiction of this, we must understand if we are talking about incubators or accelerators. TechStars IS NOT an incubator, they take startups that already have good traction, thousands of users - better if already paying - and excellent prospects for the future. These startups are already living the dream, and TechStars works to make them an excellence.

    Taking a company with a good idea, a good team and a minimum viable product, helping it for some months and "sponsor" its initial launch is a different match, a different court, and maybe a different sport.

  • LoginRadius

    I agree with David. There are tonnes of accelerator and you can easily get into one of the program, but if its not right one for you, you'll be end with no substantial results and loss of your equity!!  Plus they will be major source of distraction :)

  • Scott Bailey

    I agree that it is important to spend a lot of time thinking about the program that's right for you. There was a mention in the article that all accelerators take equity and I know that's not true. I help run MassChallenge and we don't take equity from the teams or place any restrictions on them.

  • Elaine Ellis

    Love TechStars. Have seen many startups benefit from participating in this accelerator, but have also seen a tremendous amount of value of having TechStars in Boulder. 

  • Mario

    I totally agree with David Tisch...you have to choose the right Accelerator for your Team and idea. The likes of Y-Combinator and TechStars have shown that there is a real need for aspiring entrepreneurs to vet their idea, get help in the commercialization process and put you in front of real investors. Not all accelerators are set up to do that!