The Biggest Lesson Accelerators Impart To Startups: This Isn’t A Finish Line
Christopher Steiner co-founded Aisle50, YC S2011, which was acquired by Groupon in early 2015.
Most early-stage startups, when confronted with the choice of partaking in an accelerator program or skipping it, make the decision to join. It's almost always the right move—most founders immediately see the virtues of being part of something bigger, even if it is just for three months.
Accelerators are particularly appealing not only for the cash they offer startups, but also for the sense of structure and direction they can lend. Most founders have been conditioned through 20 years of schooling and work to depend on systems and structure for cues on what to do next, what to learn next, and how to build their days and expectations.
Building a startup isn't only hard, but it can be an incredibly inscrutable process for founders who are used to achieving and progressing within conventional frameworks. Just as rudderless careerists often end up in business school, startups looking for solid footing and guidance find themselves applying to accelerators.
The difference, of course, is that business school helps graduates conform to a mold. Accelerators, however, can help provide just enough structure so that a startup may eventually become disruptive.
The only startups that face a true choice on whether to partake in an accelerator program—assuming they were accepted—are those who already have a product with formidable traction and wild growth. Now the decision comes down to a rational calculation of the equity sacrificed vs. the cash and benefits received.
Many startups, even ones without a business or traction, make the same calculation, of course, and they almost always arrive at the same, correct, conclusion: a sliver of equity in an early startup is well worth the trade for the benefits an accelerator can offer.
The experiences and shine imparted by some accelerators are worth the equity trade even for startups with real businesses. Y Combinator, which hosted me and my startup in 2011, tops everybody's list—and it belongs in a special category at this point because of the connections and successes it has forged.
FundersClub itself came out of YC a year after I did. So our perspective on the matter is probably a little biased, although most people would likely agree that YC inhabits a perch unto itself in the accelerator world.
The eliteness of the YC experience is now a motivator for many people. Getting in is looked upon as a major achievement. Like getting into Harvard. But as any founder who has been through YC can tell you, it doesn't feel like an accomplishment once you're there. Instead, founders feel constantly behind and inadequate, compared with peers who may be, almost literally, splitting the atom.
But that's part of the value in YC or any accelerator. They make clear how far it is that founders have to go, but then they also provide the structure and feedback loops that make getting to that far away point a little easier.
Knowing that most founders will apply to YC before any other accelerator, we'll first address the question that faces 98% of applicants:
YC declined my application - are other accelerators worth it?
As somebody who advises student-run startups at Northwestern's technology accelerator, The Garage, I see how beneficial the accelerator experience is to almost all founders. There's a wealth of information, methods and processes that a single person, without the benefit of having built a company before, won't possess. Good accelerators imbue founders with critical skills and information that would otherwise take years to pick up via standard evolutions and osmosis. These things don't have to come from YC.
The allure and eliteness of YC will always be a draw. But some founders—this is something I've witnessed—have let YC admission be a goal that by itself defines success to them. Getting into YC is nice, but it is in no form the end of a journey. The partners at YC will be the first group of people to tell you that.
That being said, I still meet dozens founders who are overly obsessed with being admitted to YC. In some cases, they design their startup ideas around the goal of getting into YC. This is unwise for a couple of reasons:
- YC has gotten fairly good at sniffing out these kinds of applications.
- Even for those who are admitted to YC through this kind of effort, the odds of success remain artificially suppressed. Successful startups and entrepreneurs tend of be driven by a passion for their product and company. Without that, it's unlikely that founders will be able to push through the barriers and rocky times that beset even the best startups. When founders are driven primarily by the conventional notches of accomplishment—like being accepted into elite, private clubs, even accelerators, it doesn't cultivate the kind of long-term hunger and drive that is usually necessary to push a startup into a raging business.
In short, founders who don't get the answer they want from YC shouldn't let that alter their course. Their mission should remain the same, and other accelerators can help them achieve it.
Founders should be cognizant, however, of some lesser known accelerators that can make onerous demands when it comes to equity. First, founders shouldn't surrender more than 10% of their company's equity to an accelerator, especially when the cash received in exchange is of a lesser amount—$10,000 to $30,000—or worse, no cash at all.
If the accelerator is smaller or unknown, follow up on an accelerator's "success stories," talk to founders who have been through it, determine that the experience, the cash and the connections are worth the sacrifices that will be required of the startup.
Be wary of accelerators who place too much emphasis on seminars and the teaching of business and not enough on time spent purely building and solving the important problems facing the startup.
The critical path for a startup will always be through its first customers and subsequent product iterations. Accelerators that don't recognize this should be avoided, as they won't help a startup achieve success faster than it would have otherwise.
Anybody who has built anything—be it a piece of technology or a desk—is hungry for feedback from others. Anybody will do, in some cases. And that works, to a certain extent, when it comes to technology startups. Founders can solicit feedback from anybody and everybody they know—their moms, dads, sisters, friends, etc.
But it's hard to replicate the quality and usefulness of feedback garnered from people who live and breathe technology. Founders can build their own little web of advisors and confidants with whom they can talk about ideas, debate prototypes and talk about market trends, but doing that takes time. And it's unlikely that founders will be able to put together a consortium of people with input as valuable as that from people at a proven accelerator.
Getting feedback in a quick manner from people well-versed in technology is especially valuable for founder teams who have come together in places outside of the handful of major metros where tech has achieved a critical mass.
Some of the best advice my co-founder and I ever got was from people at YC who had zero experience with our business our our application. Can you mimic that kind of effect outside of an accelerator? Yes, but it takes work and persistence, and probably some luck.
Founders immersed in an accelerator have the luxury of bouncing their ideas and product off of others in their cohort or the partners/employees of the accelerator. Unlike leveraging traditional networks of advisors, founders rarely feel like they're wasting people’s time when soliciting feedback at an accelerator. This is, after all, the point of an accelerator and why the people who run it are there.
Hacking away in a garage or a basement and continuing to grind out progress, inch by inch, is hard. Most people will quit before a true leap for the startup occurs.
An accelerator by itself doesn't provide enough time for a founding team to achieve full success. An accelerator comprises just a few months of what will be years of grinding. But that short period provides a great training ground for gaining the conditioning and discipline necessary to do all of that grinding.
It's akin to an athlete performing cardiovascular workouts. The goal during the workouts, of course, is to raise the heartbeat to a certain level above normal for a period of time. This exertion leads the muscle to get stronger, which eventually leads to a lower sitting heartbeat because the heart has to work less hard to accomplish the same amount of work.
It's unlikely that any founding team will be able to keep up the pace at which it works during its time in an accelerator.
My co-founder and I usually worked 16 hours a day during our time in Y Combinator. We both remember well a Sunday afternoon on which we went mountain biking because it was one of the few half days where we allowed ourselves to not work. That wasn't a pace that either of us would be able to maintain in the long term—and that's not a bad thing.
But the constant positive peer pressure provided by Y Combinator and other accelerators can provide amazing benefits. That act of reassembling with your batch mates once a week and chatting about where your application is now is a powerful force to move things along. At YC, we constantly did things we weren't comfortable with, whether it was writing code at 2 a.m. or flying across the country to crash a conference and cold-pitch 120 different companies—things that we likely wouldn't have been doing had we not been part of an accelerator.
It's unlikely that founders will maintain the work pace that was set while they were part of an intense accelerator cohort. But by raising the tolerance for working intensity over a period of three months, many founders find themselves operating at a higher productivity rate going forward.
Sid Sijbrandij, the founder of Gitlab, recounts his experience at YC as being transformative. "Everyone there is just going faster—and we saw that it was possible to go faster and have nothing break," he explains.
Being part of an accelerator, Sijbrandij said, helped organically instill the idea and value of shipping code and product faster, and that's something that's stayed with Gitlab over the years.
The founders at Rainforest QA also found the YC experience to be especially useful in this way. CEO Fred Stevens-Smith says that the confidence exuded by some of his batchmates eventually rubbed off on him and his team.
Access to investors
For first-time founders whose company isn't part of accelerator, networking with 20 different investors will prove to be outsized time suck. And that's before the pitching, the second and third meetings ever take place.
Meeting and convincing people to fork over large amounts of money to people whom they don't know requires as much effort as you'd expect. Founders will need to cash in favors and empty their reserves of friendship equity.
Finding, meeting and landing investors can consume most of a founder's bandwidth. I've witnessed more than one startup lose almost all product momentum when one or more founders chase capital for months.
An accelerator doesn't completely remove those pain points, but it can go a long way to alleviate them. The people who run accelerators often focus much of their effort toward getting startups ready for that big event at the end: demo day.
That's because having a polished pitch, and being able to succinctly and smoothly relate a startup's mission and opportunity will result in more initial investor interest, even if the product is deficient in more than one way.
"Some startups need help with launching a business concept – I needed help post-launch. Startups in the consumer packaged goods space have the excruciating burden of trying to raise brand awareness with limited funding," says Shelly Sahi, founder and CEO of Sahi cosmetics, which produces makeup for people with yellow and olive skin tones.
Sahi participated in the University of Michigan's Desai Accelerator.
"It's quite the vicious cycle because your initial sales often depend on capital intensive marketing efforts, but if you don't have money, there's no clear way to create brand awareness," Sahi says. "Participating in an accelerator puts you in touch with the right connections to break this cycle and grow your company."
Founders who meet potential investors through a demo day may not close the deal for months or even a year, but getting that first point of contact is a vital part of the startup evolution process—one that's hard to kindle without connections or a jump start from something like an accelerator demo day.