What Is A Startup Accelerator and Should You Apply to One?
Y Combinator — 6 min read
Startup founders always have to look for ways to gain an advantage in their business or fast-track their company lifecycle, particularly with fundraising and opening doors to new business.
Enter accelerators. A spot at a coveted startup accelerator program like Y Combinator can be transformative for a company, and helps leapfrog several barriers it might otherwise face. Startup accelerator programs, as we know them today, first saw the light of dawn in 2005, with the launch of Y Combinator by Paul Graham, and shortly thereafter Techstars by David Cohen, David Brown, Brad Feld, and Jared Polis.
What is a startup accelerator?
When terms like accelerators are thrown around freely in the world of startups, it’s important to understand what accelerators are and what they offer.
A startup accelerator is a program or ecosystem that supports early-stage startups, and typically offers access to education and resources, mentorship, and financing. Accelerator programs typically have the following characteristics:
Accelerators operate for a fixed term
The accelerator experience crunches a great deal of learning, development and programming into a fixed duration of time: three months tends to be the norm. This immersive format pushes startups to experience years’ worth of iteration and experimentation in a few short months.
Accelerators are cohort-based
An accelerator selects a certain number of startups to participate in each of its cohorts, after a rigorous application process. Founders are able to interact and engage with peers across the cohort.
They are heavily mentorship-focused
With an accelerator, you gain access to best-in-class mentors and industry leaders who work with you to iron out many of the early kinks in the process of getting a startup off the ground, be it with technology, go-to-market, or other aspects. This helps set you up for early success, bypassing many minefields that cause startups to fail.
They typically conclude with a “Demo Day” or its equivalent
At the end of an accelerator batch or cohort, the enrolled startups pitch their updated products and positioning to investors, giving them a platform to fundraise. The now-iconic YC Demo Day gives investors direct access to the best and brightest of startups that complete the accelerator program.
Seed funding or access to sources of funding is also often a part of the accelerator deal. In return, most accelerators also take company equity in exchange for participation. This is typically anywhere between 4% and 10%.
Benefits of a startup accelerator
For a startup, there is a significant upside to participating in a top-notch accelerator program. As the name suggests, it helps accelerate your company’s growth, and take part in an intensive, immersive style of learning.
A recent study found that startups that go through top accelerator programs are often able to raise venture capital faster, gain traction more quickly, and have a higher probability of being acquired compared to startups that don't.
Support and mentorship
While navigating the chaotic world of startup creation, a structured support system in an accelerator helps you create efficient processes and build right while building fast. This ‘learning by doing’ methodology ensures that you fully imbibe the resources at your disposal.
The combination of accelerator program staff, mentors, partners, and guest speakers forms an arsenal that you have access to for the period of the program and, to an extent, beyond it. 1:1 mentorship from impressive alumni is by far one of the most attractive elements of any accelerator program.
Access to capital and customers
All the learning in the world is restricted without the resources to apply it at scale. This is where an accelerator’s network in the venture capital and angel investor communities comes in handy. A Demo Day puts you in front of the who’s who of fundraising, potential customers, and also gives you valuable organic media mileage.
Are there drawbacks to accelerators?
An accelerator, if structured well and leveraged fully, can be the break that your startup needs. If it doesn’t work out, it's 3+ months of your founding team’s time that you could have spent elsewhere.
Quality of the accelerator
What you will get out of the program comes down to the quality of the accelerator and its network. An accelerator is built upon its resources, mentors, and access to investors, and this will be different across accelerator programs. While in 2005, there were a handful of accelerator programs to choose from, in 2022, that number has exploded many times over. Some estimates say there are over 7000 accelerator programs across Europe and North America.
When research was conducted across more accelerators, the positive effects vanished and negative implications crept in.
Stage of the company
While this is not really a drawback, a startup’s ability to make the most of an accelerator depends on where in the lifecycle it is. If a venture is at the idea stage, there may not be enough technology or a solution built to get useful feedback in an accelerator.
A company that is already generating hundreds of thousands in monthly revenue and has raised several million dollars, on the other hand, has to juggle a rigorous accelerator program while also providing a consistent product or service to existing customers.
So, ask yourself if you are too early, too late, or just at the right time to participate in an accelerator program.
Choosing the right accelerator for you
When faced with an abundance of choices in the accelerator space today, be mindful and apply to the ones that will work best for you, your team, and your company. Each accelerator application is rigorous so be selective and nail your candidacy for the ones that are the perfect match for you.
Here are some factors to consider when choosing your ideal fit.
Some accelerators offer focused programs dedicated to industries like education or retail. Techstars, for example, has branched out with several vertical-focused programs, in tandem with corporate partners. So if there’s a program tailored for your domain, this is definitely worth investigating.
Granted, this may be less of a factor in a post-COVID world where programs are still running virtually. But with the world crawling back to in-person interactions, the location of the accelerator will again be important. Relocating, if needed, for three to six months is a big professional and personal change. If you’re looking to primarily target a specific market with your product, try to participate in a program in that location, this will help with local contacts and leads.
For the duration of the program, the accelerator staff will be your go-to people. So make sure you know who they are and what their background is. Other mentors and speakers will come in periodically but the program staff will be the most involved.
For a top accelerator like Y Combinator or Techstars, the success stories are many and you already know the caliber. If you’re looking at a more niche program with fewer superstar startups under its belt, do your diligence on their successful startups and speak to the team from the ones that feel closest to your field. This way, you know the real value that they offer to someone like you.
If diversity in an accelerator cohort is important to you, check if the program has worked with women-led startups and companies led by underrepresented minorities, particularly any groups that are important to you. If participation from your interest group has been low, consider talking to the companies who took part and understand their experience with the program.