The accelerator dilemma

Accelerators have become an amazing asset for the tech ecosystem. For start-up founders, however, picking an accelerator is like deciding to go to grad school. First you have to decide if its right for you, and then make sure you’ve picked to the right one. Just like grad school, attendance is not a guaranteed ticket to success. 

At Founder Collective we have invested in some really exciting companies that have gone through these programs. SeatGeek (DreamIt) and Contently (TechStars) are great examples. I expect us to continue to invest in accelerator graduates.

That said, prospective companies should be aware of the realities facing accelerator companies and how to maximize their likelihood for success. These include:

Investor fatigue

Recently, I’ve noticed fewer and fewer investors in attendance at Demo Days. Personally, I’ve found it difficult to attend many of them due to conflicts and the long time commitment (usually most of a day). Instead, I swing by the accelerator during the class “semester” to give a talk or hold office hours. I’ve heard some investors say they’re not stopping by a given accelerator, instead hoping to hear about buzzy companies through their network. Start-ups seeking capital should work pre-demo day to warm investors to the team and opportunity.

Challenging mentor recruitment

It’s getting harder for companies to sign-up great investor mentors. Investor fatigue is one reason, but also many investors have never invested in a company they’ve mentored. In the early days of TechStars, I mentored one company per class (e.g. StepOut and ThinkNear). These days I tell accelerator companies that I’m available to help out, but won’t mentor a single company. Industry or entrepreneur mentors are generally more valuable for companies at the early stage and thus, start-ups should focus their recruitment there.

Post Demo Day Thaw

Companies underestimate the pressure to raise capital before or immediately after Demo Day. There’s about a 60-day halo. Once the halo is gone, investors grow weary of companies that haven’t raised capital. There’s a negative signal that forms if a company is more than two months from a given Demo Day and has not secured capital. Early conversations with investors represent one hedge against this. More importantly, before applying to an accelerator founders should think hard about whether they expect to accomplish the requisite milestones during class to secure funding.

A positive sign for accelerator graduates

A growing number of investors are revisiting companies two or three classes removed from graduation.  Investors (and hopefully accelerator organizers) have realized that not all companies mature at the same pace. Some of the real gems, in fact, may have been out of the accelerator for a year or two. So, even for companies that don’t get funded right out of the gate, the future remains bright.