Last month I signed papers to give Austin-based startup accelerator, Capital Factory, a portion of our company in return for happy hours, hosting credits and hope. And this is the third company I’ve done this with. Here’s why.
As a startup founder with a small team, you have so (read: too) much to do and whether it’s company formation, structuring convertible debt notes, finding co-founders, pitching investors or working out sales compensation plans, you could use some help.
A seed or startup accelerator is usually a three-month program (this can differ greatly) that pairs startups that have either a minimum viable product (MVP) or a very well-defined idea with a network of mentors, vendors, and investors in order to “accelerate” their progress and get them market- and investor-ready. As such, most accelerator programs culminate in a Demo Day where other investors and members of the press are brought in to watch, write about and/or invest in companies as they pitch their markets, solutions, business models and exit strategies (IPO or acquisition).
I’ve launched a company both in and outside of accelerators and the cost to join (usually 1–10% equity — depending on cash investment) is, in my opinion, worth it. This is especially true if this is your first time in the driver’s seat. The primary benefits of an accelerator program are:
Along with the aforementioned demo-days, acceptance into many accelerators comes with cold, hard cash. TechStars, for example, puts in $20K (along with granting you access to the training, global network etc.) for 6% of your company and then invests a further $100K as a convertible note in your first week of the program. Acceptance into Capital Factory does not equate to instant cash, but that makes joining a lighter commitment from an equity standpoint. They do however have a matching fund, whereby if you can get two of their fund partners to invest $25K each, they’ll match with $50K of their own.
You think you know it all but you don’t. You are going to need help. Accelerators combine workshops and classes with speed-dating-style office hours, where you’ll get to meet high-level experts who’ve done it all before in realms as diverse as SEO, market sizing, fundraising, UI/UX and recruiting. If you have a question, your accelerator should be able to offer a class or make an introduction to someone who has an answer!
As part of an incubator, you usually get access to a myriad of tech tools for free or at drastically reduced prices. In addition to the standard desk or co-working space, these can include tens-to-hundreds of thousands of dollars of credits, trials or discounts in everything from hosting (Amazon Web Services, Google Cloud etc.) to web services (Twilio, Zen Desk, Olark etc.) and even business card printing (FedEx etc.).
Unless you are a proven entrepreneur, you are a mostly unknown entity to potential investors, customers, recruits, and press. Having the stamp of approval from a recognized accelerator means that someone who knows something has vetted your idea and team. This vote of confidence can help open doors that might not have otherwise been accessible.
Capital Factory bills itself as “the center of gravity” for Austin’s startup scene and it’s proven so, as visitors including Presidents, rappers, congressmen, press, the Secretary of Defense, investors and multi-national companies all stop in when they visit Austin.
Either directly or indirectly, through Capital Factory my company/ies have been featured in the tech press (Mashable, TechCrunch), interviewed on international TV (CNN) and had meetings set up with several multi-national companies. And while Capital Factory (Texas), Y-Combinator and 500 Startups (Bay Area) are all multi-industry, single-location accelerators, TechStars has offices (and networks) all over the world with some of them focusing very strictly on specific industries like music and finance.
If it hasn’t already, growing your team is going to become very important very quickly. Whether it’s finding a co-founder or your first employee, incubators and accelerators have the flow of talent that is unlikely to be matched elsewhere. Many host meet-ups (Capital Factory boasts about 1000 events a year!), coding classes, job fairs and networking events that can get you in front of your next right-hand-man/woman.
What is listed here is the “typical” setup and benefits of a startup accelerator, but don’t take for granted that all “accelerators” include everything. Just as no there is no “one size fits all” solution to growing your company, there’s a multitude of accelerators and models out there.
Before you commit to giving someone a piece of your company for office space and free coffee, look around and learn what facilities, network, investment, resources, and benefits are on offer, both locally and elsewhere. Talk to others that have been through the process and do your research to decide whether the group is going to help you grow your business or if they are simply playing Pokemon with startups’ equity — collecting ’em all — on the off chance that someone stumbles upon success.
I am in residence at Capital Factory as both an Entrepreneur In Residence (EIR) and Accelerator participant (as co-founder of Shep) so stop by to say “hi” if you find yourself in Austin.
Seed-DB lists 187 Accelerator programs worldwide but here are a few of the more well-known ones — please add links to any glaring omissions (there will be some) in the comments below:
– HAXLR8R (Chenzen, China; Silicon Valley, CA)
– AngelPad (San Francisco, CA; New York, NY)
– Startupbootcamp (Worldwide)
– DreamIt Ventures (US and Israel)
– TechStars (Worldwide)
– Mass Challenge (US, Israel, Switzerland, Mexico)
– Founder Institute (Worldwide)
– 500Startups (Silicon Valley, CA)
– Y-Combinator (Silicon Valley, CA)
– Mucker Lab (Santa Monica)
– Launchpad LA (Los Angeles)
– Capital Factory (Austin)
– Tech WildCatters (Dallas)
– Entrepreneurs Roundtable Accelerator (New York)
– Highline (Toronto, Canada)
– Chinaccelerator (Shanghai, China)
– Rockstart Accelerator (Amsterdam, Netherlands)
– Propeller Venture Accelerator (Dublin, Ireland)