While I was CEO of BlueDot Photonics, I participated in 10 accelerator/incubator programs. Some were good; some were bad; and some got weird.1
I encourage most first-time founders to do at least one reputable accelerator program. It will force you to take a comprehensive look at your idea and help you see the gaps that will trip you up in the future if you aren’t careful.
However, accelerators are meant to be a means to an end, not the end itself.
Unfortunately, I have seen this situation play out too many times.
A startup participates in an accelerator program. They engage with the program leads, complete the homework, talk to the mentors, and deliver a decent final pitch. They talk about how great the experience was on LinkedIn.
And they do it all over again next year in a different program.
Accelerator participation is not progress
Founders: The goal of accelerators is to get unstuck. If you don’t make progress on your company goals, the accelerator is a waste of time.
In the next few sections, we will explore ways to avoid this pitfall.
Not all accelerators are created equal. So, it’s up to you as a founder to maximize the benefit. And it starts with knowing what you need, understanding what’s in it for the accelerator, ensuring the cost-benefit ratio is in your favor, and not mistaking accelerator participation for progress.
Before you jump into an accelerator, you need to figure out what you need. Are you looking for a crash course on entrepreneurship and startups? Are you looking for help with business model development? Are you looking to connect with investors and need help with pitching? Do you need some funding?
Every accelerator is unique in what it delivers. Some are really strong on corporate partnerships (e.g., Third Derivative). Others have strong investor connections (e.g., CleanTech Open). Others are uniquely suited for tech development (e.g., GCxN).
As a founder, you need to think strategically about accelerators.
If you don’t know what you need, how can you pick the right accelerator to join?
In the very early days of BlueDot Photonics, we needed some money for additional R&D, and since we were all first-time founders, we needed to learn more about entrepreneurship.
Our first accelerator-like experience was applying for the CoMotion Innovation Gap Fund at the University of Washington. It was the perfect program given our needs.
We had to fill out a Lean Canvas and create a 10-minute pitch. Along the way, we had great mentorship from Ken Myer. In a few weeks, we went from a promising techno-economic analysis to a fleshed-out business model that we could validate with potential customers and partners. And we were fortunate enough to be selected as a recipient for the Gap Fund award of $50k.
Here is our very first pitch:
So, before you join an accelerator, ask yourself:
What stage are we at?
What are our biggest challenges?
What gaps do we have in our business model or team?
What is the next milestone we really need to hit?
Very few accelerators are purely altruistic. They exist to achieve a higher goal for the parent organization.
Some are all about economic development. These are frequently publicly funded, regionally focused accelerators hosted by non-profits. They tend to be free for the participants. An example is For ClimateTech.
Others are for-profit entities. Sometimes, these programs will require participants to pay a fee ranging from a few hundred to a few thousand dollars. In other cases, startups will need to give the accelerator an ownership stake (often in the single-digit percentage range). Corporations sponsor many of these. An example is Plug and Play.
Some are all about building an investment portfolio. Venture capital firms often host these accelerators. These programs offer a combination of programming and financing for the startup in exchange for an ownership stake in the company. These can include SAFEs, convertible notes, or equity warrants. An example is Black Flag.
Others are about creating an innovation pipeline for strategic purposes. These programs are typically organized and funded by a for-profit company or a consortium of for-profit companies. They may or may not take an equity stake. An example is the IN2 program.
Why is it important that you, as a founder, understand the motivations of the accelerator organizers? Because you will get the most benefit from the program when your interests are aligned.
A Solar Startup in a Tech Accelerator
At BlueDot, I participated in the WTIA Founder Cohort Accelerator. WTIA is an industry association for tech companies. Their mission is to grow the tech sector in Washington State.
BlueDot was a solar company.
How much additional value do you think I got out of the program beyond the core curriculum?
Although I really liked the program structure and curriculum, the program offered limited benefits given BlueDot’s needs. Most of the investors only invested in tech. The mentors could help me sell enterprise SaaS products, but not scale up manufacturing of a solar panel. The lack of fit really impacted how much I could get out of the program.
OK, so you know what you need, and you’ve found a few accelerators that offer programming that will help you achieve your goals. Now, you have to pick which one to join, if any. At this point, it’s important to consider the cost-benefit ratio of any program.
All accelerators have a cost. These can include:
Your time (both preparing the application and participating in the program)
Your cash
Your equity
All accelerators have benefits. These can include:
Cash
Education
Mentorship
Networking opportunities
It’s your job as a founder to figure out if the costs are less than the benefits.
How do you do that?
Read the fine print carefully. The equity agreements are especially important to review. Many of them include “Most Favored Nation” clauses, which can result in unexpected dilution. When in doubt, have a lawyer review it.2
Ask previous participants for their opinion. Spending a couple of hours emailing and talking with other founders who have gone through an accelerator program is time well spent before you spend 12+ weeks in a program.
Talk to your existing mentors and advisors. Double-check with people who know you and your company to see if participating makes sense. Their arms-length perspective helps ensure that you have asked all the right questions.
Trust your gut. At the end of the day, you often get out what you put into an accelerator. If you are excited about participating for concrete reasons, you will probably get good results. If you have doubts, it’s probably best to move on.
Remember, accelerators are a means to an end, not the end itself.
If you’re currently in an accelerator and haven’t talked to a customer in two weeks because you’re too busy prepping a pitch deck for a mentor who doesn’t buy your product, quit the session and go make a sales call!
For those of you who have been through an accelerator: Have you ever found yourself stuck on the accelerator merry-go-round? What led you there? Were you able to get out? What unblocked you?
Sometimes things can get weird. Here is one interaction I had with an investor that I met at an accelerator networking event.
“Where did he get those glasses?” I thought to myself.
Steve’s gold-rimmed glasses matched the gold chains around his neck. His Zoom background showed a bookcase that looked genuine, but who could say for sure? He couldn’t seem to sit still; he moved incessantly as he looked back and forth between his monitor and his camera.
“So, Jared, I’ve got investors lined up who want to invest big money in green energy projects. I’m talking tens of millions of dollars. And the best thing, it’s a loan, not equity,” Steve said. “Now, I can’t say who the investors are. They want to keep things discreet for now, but just now they are from a place outside the US with lots of money.”
“Wow, OK. And what are they looking for in terms of companies and stage?” I asked.
“These guys are prepared to write checks to help you get from where you are to production-scale. You need to build a facility to take you to the next level; that’s what they want to do. As long as it’s green,” Steve replied, glancing back and forth, back and forth.
I furrowed my brow. My spidey-senses were going off. I had met Steve at an investor speed-dating event through a highly reputable accelerator program. I assumed that everyone I would meet there was legit. But now I wasn’t so sure; this all seemed too good to be true.
“So, what would the next step be?” I asked, my curiosity getting the better of me.
Steve smiled and said, “I’ll need you to send me your pitch deck. My partner and I will take a look at it. We’ll schedule another meeting to ask questions. And then if it seems like a good fit, we can talk details.”
I had two more meetings with Steve and his partner. Despite my intuition and extensive web searches that couldn’t confirm any of Steve’s details, including those of his business partner, I didn’t want to close the door on the funding opportunity. As a startup founder, you take the calls and meetings with almost any investor you can find.
But after those two meetings, with no clarity about who the investors were, where the money was coming from, and what was in it for Steve and his partner, I politely declined any further meetings.
At the very least, have an advanced AI model provide you with its critique so you get a second opinion. Obviously, do not trust AI models for legal advice.
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