What are my thoughts on Accelerators and incubators?
Fundraising Oct 14, 2018
I think they’re generally fantastic if you get into the right one. The one that I have personal experience with is the LAUNCH incubator – which I took two companies through – and helped managed for the sixth cohort. I’m also a mentor to the LAUNCH incubator, and try to pitch in and help startups along their growth journey. I’ve got pretty good knowledge of YC, TechStars, and a few other programs as well. There’s incubators and accelerators popping up everywhere now. Big institutions are creating them. There are public companies creating them. There are government entities creating them. There are incubators and accelerators for pretty much every vertical and industry. I worry that maybe it’s getting a little bit watered down, but I don’t have any evidence of that personally.
With an incubator, I think the key is that you have strong cohesion among the teams and companies in the cohort. And so speaking from personal experience, when I went through the LAUNCH incubator, Jason Calacanis who runs it is fantastic about making connections between companies, and you really become peers with the people in the incubator. And so even to the point where companies that you might see as competitors end up being friends, and you actually can help each other’s businesses even in a competitive space.
So I think the thing to look at when you’re considering incubators and accelerators is what’s the value that you’re going to get out of it? Some are taking a pretty sizable chunk of equity, and I think there’s a lot of startups and a lot of founders who really don’t like that, and those startups and those founders may be folks who maybe aren’t well geared to go into an incubator or accelerator anyways. I think if you’re trying to hold on to your equity that tightly really, really early on in the game, you’re going to have bigger problems down the road. So I think that part of it is understanding what’s the value you’re going to get. What are you giving up for it? So is it 1% equity? Is it 2% of equity? 5%, 10%? And then what are you getting in return? Are you getting an investment guarantee? Are you getting a syndicate? Are you going to raise a round? What’s the likelihood that you’re going to raise a round by going through the incubator or accelerator compared to not?
In the case of one of my companies – Votion, we went through the LAUNCH incubator and raised an angel round really, really quickly because we had very quick exposure to Jason’s syndicate, and that was a fantastic way to really focus on building and running the business. As a CEO, I could focus on product development and talking to customers rather than spending my entire time on investor relations. So there’s definitely some huge benefits you can get out of it. I would be really selective, and there’s enough out there that you could probably find one in your niche or vertical, but I would absolutely talk to references, talk to the companies that have gone through it, ask for intros to the CEOs, the founders of those companies, and really do your due diligence. Do as much due diligence on the incubator and accelerators as they’re going to do on you if you apply and kind of go from there. But I’ve had a really good experience with the LAUNCH incubator that I went through. I’d highly recommend that one.