Q. I was asked to apply to an accelerator. Are these programs worthwhile?
—Founder of a new marketplace
I’m glad you are thinking about ways to grow that include both money and mentorship.
Oftentimes, being accepted into an accelerator is well regarded, and I hope you get in. Just be sure to understand the “tax” that comes with all the help you will get and make sure it is worth it. While accelerators don’t take controlling stakes in companies, founders can give up quite a bit of equity (2-8% of a company) for the right to participate. It’s fair to ask if that meaningful dilution is worth the benefit to your business. It may not be worth joining, for example, if you have a product already working and scaling fast. Companies such as Pinterest, Facebook, and Square never incubated.
Of course, we all know accelerators have spun out huge breakouts, as evidenced by Instacart, Airbnb, and Dropbox. About 20% of our portfolio companies have gone through accelerator programs. If you are okay with giving up equity, here’s how I see the opportunity:
- Accelerators offer access to investors and seasoned execs—and provide an important community. As various accelerators have matured, they have produced vibrant and increasingly accomplished alumni networks, which are filled with other founders who can offer advice from what they went through two years ago. Many of our founders have highlighted Y Combinator’s email list as one of the most indispensable benefits of the program, even years down the line.
- You’ll be in the company of some of the brightest, most driven entrepreneurs around, who will hopefully challenge you to be even better. The great ones will challenge a founder’s assumptions and offer routes to faster growth, based on learnings across other extremely early-stage companies.
- Increasingly, accelerators provide enough initial capital to hire a small team and have some funds for marketing. Some even relocate the team to the Bay Area or other desired locations.
It’s important to note, getting into any of these incubator programs is very selective, but admission into an incubator does not assure greatness. Being accepted into Harvard is never the real goal; you still have to perform and deliver something valuable. It is without a doubt that you will work hard. You should consider any source of good funding that can enable you to chase your dream. But keep in mind that participating in an accelerator is merely the first inning of what will hopefully be a very long game.