An accelerator, the latest buzzword used at economic-development agencies and universities, is a short-term, high-intensity program led by mentors. It may provide seed capital for participating enterpreneurs to test a business model.
On the surface the rise in number of accelerator programs may seem to benefit entrepreneurs – and in many cases it does. But this also means entrepreneurs need to be more selective and diligent than ever.
The following are some of the issues entrepreneurs need to consider about these programs before applying:
“Make sure the mentors who are assigned to you are experienced in your particular field, and not just general advisors,” advises EndoVantage CEO Robert Green, who serves as a mentor for Arizona State University’s Furnace Technology Transfer Accelerator (which I manage).
Adds Green: “Mentors have a large say in the direction of these companies and you want to make sure somebody with a lot of experience is guiding you in the right direction."
Now more than ever, entrepreneurs can find a mentor who is a really good fit for their company and who may have super niche expertise in a specific sector.
If you need someone knowledgeable about aerospace and defense issues, say, you can probably find someone with expertise in that sector and perhaps entrepreneurial experience as well.
The downside is that some service providers are positioning themselves as mentors but may simply seeking to provide services. Accelerators should have a moratorium on startup owners’ paying for any mentor-provided services while they participate in the program.
Background check a potential mentor. It will offer peace of mind and only cost you about $30.
With accelerators comes investment – both what the entrepreneur puts into and gets out of the program.
Startup founders should inquire about the time commitment expected for anyone participating in a program. Being married, having kids and maybe even a job to pay the rent shouldn’t be disqualify someone from participating in an accelerator program.
And founders should also ask about the amount of time the accelerator will invest in their company. Is the rock-star-entrepreneur-turned-accelerator-founder really going to be there every day to be hands-on with participants. Or is he or she just making a couple token appearances for orientation and demo day?
Keep in mind, someone’s joining an accelerator doesn’t mean anything to investors unless it has a reputation for turning out good companies. You want to be tied to the right reputation.
Before applying for an accelerator, entrepreneurs should ask questions like these:
How much equity is at stake? If it’s more than 6 percent or 8 percent, ask a lot of questions.
What value is the program providing for that equity?
What are the accelerator’s success metrics?
Who’s running it? Interview these players. Don’t ask about their startups. Ask about the success of the entrepreneurs who have exited the program.
Who is on the accelerator’s advisory board?
Who are the accelerator’s mentors and what are some examples of successful entrepreneurs they’ve advised through the program?
Are there hidden fees?
What’s the curriculum? There should be a balance between time spent in the classroom and hours devoted to talking to customers.
What deliverables does the accelerator want at the end of the program?
Who is investing in the accelerator’s companies when entrepreneurs exit from the program? The amount may not be as important as who the investors are and what types of companies they’re investing in.
Do any of the investors, more specifically the angel investors, serve as mentors? This gives the angel investor an opportunity to get to know a company owner prior to demo day.
“Entrepreneurs need to know what resources are made available to them to help them build a company,” says Duncan Hoffman, NextPotential’s director of technology and operations and also a member of the Furnace Technology Transfer Accelerator.
“How are you going to connect me to people who know things that perhaps I don’t know?” asks Hoffman, as a hypothetical question. “You often enter into the program with the big picture in mind, but then little things come up all along the way that you may not have even realized would be issues, and that’s where the accelerator can really help you.”
Even if an accelerator is affiliated with a university, nonprofit or government entity, drill down with your questions to be sure that it would be the right fit. Figure out if this program will help your startup grow or if it’s just in your town and convenient? Don’t be afraid to make a move to a new area, if that’s what you need to be successful.