Great news, your idea just made it through that tough council and is now eligible to be a part of the accelerator program. But before you cash in that $10,000 check, make sure you sit with the accelerator team and give enough thought to the following points:
Mostly, the pre-money valuation offers that startups receive from accelerators are low. If an accelerator is offering $10,000 for 5% equity in your startup, the pre-money valuation is at a whopping $500,000. Only a few startups take the decision based on the equity offer and most on intangible services that come with the program. For example, if the program is giving you free vouchers to investor meets worth $100 a month, consider this; is that the amount of money you would spend on investor meeting otherwise? No, you would end up spending more than $1,000 a month. Choose the accelerator based on the intangible services but with the right valuation.
Having a good look at someone’s portfolio is not enough. Accelerators make big promises at the starting of the program, but only one way to find out if they are true! You will have to personally reach out to the startups previously accelerated by the program. Observe what stage of funding are they at, how much did they progress with the program. This would help you understand the real world scenario.
If a startup has made it through the accelerator program, chances are it has already been offered a deal by an angel investor. While most suggest, this would add complexity to your startup decision, but let’s face it; having two offers at one time is not really a bad thing. But choosing the wrong one could be. If the investor is relevant, then don’t go for the incubator which will just be a bridge leading you to the same investor 6 months later.
If you are not sure if you will get the right attention in the program, check out how well the accelerator has marketed itself in the real world. Of course, joining some incubators give startups an instant “I’m Awesome, Fund Me Now” virtual-badge. Nonetheless, if an incubator can’t promote itself, how is it going to help promote your startup or the crucial demo day event?
Making it into an accelerator is an exciting experience and event for any startup, but before signing up take a good look at the accelerator offer and how it will help your startup. Make one wrong decision and you will have to start all over again!