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Startup Accelerators: What They Are and How to Join

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I’m asked as often as the next person about what I do in the world, and now my answer rolls right off my tongue: “My astonishing business partner Elizabeth Kraus and I are launching MergeLane, a startup accelerator focused on women-led companies.”

Sometimes when I’m talking to someone who’s, say, a sculptor, or a writer, or a fabricator of high-end road bikes, I get a blank stare. Maybe you’ve been in such a conversation with someone like me. Maybe you’ve been in a conversation with me. Maybe you faked me out on what might’ve been a blank stare and went and got another glass of wine. Fair enough.

For you, all of you, who are looking for a clear, concise, and user-friendly explanation of accelerators, this post hopefully will be even better than a glass of wine (and, importantly, reading this post and imbibing are not mutually exclusive).

What’s a Startup Accelerator?

As a general rule, an accelerator is a program that offers a mix of investment capital and in-kind resources like educational curriculum, mentoring, and a network of advisors and potential investors to a group of early-stage companies. Accelerator programs generally run for three or four months, often requiring that the participating teams be in-residence in the accelerator city during the program.

In exchange for the financial investment and in-kind benefits provided to participating teams, accelerators generally secure a small percentage of equity (shares of stock) in those companies. The objective is to create a win-win: It’s hoped that the participating companies will substantially advance their progress and success as a result of participating in an accelerator, and it’s hoped that the people running the accelerator and the investors in the accelerator will garner future positive investment returns associated with the equity interest.

Most accelerators and the mentors that support them also are motivated by a desire to work closely with talented entrepreneurs, an interest in Brad Feld’s axiom “Give before you Get,” and a wish to support and bolster the business ecosystem with job creation, economic diversity, and other macroeconomic upsides.

Examples of Accelerators

Accelerators often have thematic focuses–meaning they focus on finding great companies in certain industries or sectors. For example, Techstars Cloud (one program operated by the world-class Techstars Accelerator) focuses on companies in the areas of cloud computing and cloud infrastructure. The Brandery is a Cincinnnati-based program for brand-driven startups. AlphaLab Gear is a hardware and robotics accelerator. Our new accelerator, MergeLane, is focused on attracting extraordinary companies run by teams with at least one female leader. I could go on. The Global Accelerator Network (GAN) is a great resource for learning more about many of the finest programs in the world.

Why You Should Join a Startup Accelerator

You might be wondering to yourself: “I have a startup and this sounds interesting, but I wish someone would outline for me the most significant reasons for joining an accelerator.” Your wish. My command:

Giving your early-stage company a mandate to engage in three months of intense focus on your business, your model, your product/market fit, your pitch, and your goals offers companies a superb chance to ensure they’re on the right track.

Doing that with the added insight of a large and committed group of mentors willing to take a deep dive into your business and support the moves you make to grow and scale is invaluable. The accelerators that participate in GAN (as we do) are mentor-driven and wholly committed to providing participating companies with between 3-5 mentors who are both good personality and expertise fits for companies. These mentors are generally asked to spend an hour a week with their mentee company during the program. Many spend far more. Many continue working with and/or investing in their mentee companies for years after the program has ended.

Accelerator programs often are run by seasoned entrepreneurs who are dedicated to helping companies reach their full potential. The role of “Accelerator Managing Director” doesn’t generally include a rich package of current compensation. Generally, MDs are primarily starting programs or choosing an MD role in an existing program because they derive endless personal satisfaction from helping good companies and good leaders become great. Most MDs are incentivized in the same way the accelerator investors are–by choosing amazing companies and doing a kick-a** job of the “acceleration” part. If you want to read about one of the best MDs in the business, read about Nicole Glaros.

Companies that participate in accelerators frequently make game-changing gains. As a mentor in Techstars Boulder, I’ve witnessed this firsthand. Companies leave the program with far more focus, clarity, direction, motivation, connections, funding, and verve. I would never have considered starting an accelerator without the experience of witnessing the transformations created at what is likely the best accelerator (or one of two best) on the planet.

From accelerators, companies get the enormous day-to-day benefits of being in a tight and authentic “club” with a number of other talented entrepreneurs who are fired up about seeing their entire class win. There are endless insights, learnings, challenges that come from fellow class members. And this network of support lasts long after the program ends.

Graduating from great accelerators often opens up doors to more financing options for your business than you had before. If you’re considering raising money, the network, the program’s status, and the impact of a program’s final event (often called “Demo Day”) can be of great service.

Now you’re wondering about the other shoe. Maybe you’re a good candidate for an accelerator. Perhaps you meet our criteria for MergeLane companies. What is the most commonly articulated downside of joining an accelerator?

Simple. Qualified companies often ask whether it’s worth giving up equity. In most cases, given my clear strong (read: biased) feelings outlined here, I think that’s not a reason to opt out of a fantastic accelerator (if you happen to be admitted to one).

Most of these discussions go something like this: “I’m doing well, we’re growing fine, we’ve raised a little money (or don’t need any), and we own 100 percent of our company.” Fair enough, but I most commonly ask follow-up questions and some believe that if these companies had the range of goodies provided by a superb program, the growth with which they are satisfied would pale in comparison to the growth that would be possible with the values secured from an accelerator. So, the concession of 6 percent of equity in what companies have pre-accelerator is nothing in comparison to the size of the overall pie that is possible post-program. Pretty simple math.

How to Find and Join an Accelerator

If you’re considering applying, check out GAN programs, find a program that syncs with your company’s focus, get your ducks in a row, take the application (many are on F6S for your consideration) seriously, and find connections in your network to the people running the program in which you’re most interested. And if this post resonates, apply.

This post originally appeared on GoGirlFinance.com.

Photo: Thinkstock

Topics:

Investing #Startup #Small Business Career Advice
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