Accelerator

Pros and Cons of Tech Accelerator Programs

Jessica
Jessica on May 11th, 2016

The Tarful Experience with Tech Accelerator Programs

As part of our experience, we have had the honor and opportunity to support several different tech accelerator programs; from timely advice, structure and initial processes, conceptualization and creation of MVP as well as the complete design and development of first major release of its products.

Each Startup is different and each tech acceleration program also has its own characteristics and present different challenges during its short implementation period.

While most Startups participating in these programs target only Early Stage processes and work with you to test hypotheses and initial concepts, it’s vital that you have a concrete business idea, the team that will work with you and a road map of the product you are offering so to maximize the benefits of these programs and take full advantage of the experience.

No Accelerators will accept you without a team and business idea. So make sure those are clear to you before moving forward.

Even though it’s the Startup founding team who has a clearer vision of its products, or where and how far they want to go, it is key for us to share our experience during the initial development of their business plan. We participate or drive the full conceptualization, design and development of their products. In line with their participation in the Tech Accelerator and meeting their specific timeframe.

We’ve had the opportunity to work with some amazing teams and great product ideas. Here is the highlight reel:

ZOI Venezuela: Design and complete development of the entire project for both the MVP and for the first release. The main focus of the project was to create a User Experience (UX) that engaged the user and captivated market. During the development of this project, the ZOI Venezuela team was participating in Wayra Venezuela.

zoi_tarful

Trix & Trax: Design Interfaces (UI) and User Experience (UX) of the product as well as external sections of the website. During our continued support for this project, the Trix Trax team participated in Wayra Venezuela and Startup Chile.

Pollito Ingles: For this project we worked on a consultancy basis to creating conversion opportunities and optimizing the User Experience (UX) to improve conversion effectivity and customer happiness. With our help, the Pollito Ingles team was able to create the design and develop a user friendly and highly effective website. During our support the Pollito Ingles team participated in Wayra Venezuela.

pollitoingles_tarful

What exactly is an accelerator program?

Accelerator programs are startup boosters. They support startups during their most vulnerable early stages through cohorts, education programs, mentorship and financing for a fixed-time of 3 to 6 months. With a culminating grand event, most commonly known as Demo Day, where applicants pitch their business to large audiences of experts and potential investors.

They usually provide seeding capital and office space, as well as a large network of people and knowledge to help startups find their footing and take off to accomplish larger goals.

Accelerators vs. Incubators

Long before accelerators came into focus, there were Business Incubators. The first business incubator started in 1959 and described as “an institutionalized environment that assists and enables startup companies and business ideas to grow.”

It’s a common misconception to think that accelerator programs and business incubators are the same. In fact, most people think the terms are interchangeable.  While they both help business ventures establish themselves, they have incredibly different inner workings.

Among the key differentiators are:

  • Time — Incubators go from 1 to 5 years, while Accelerators are quick, and intense and range from 3 to 6 months only.
  • Investment — incubators are either rent or non-profit organizations, while accelerators usually provide investment and take on up to 5% of your business equity.
  • Selection — incubators have a non-competitive selection process while accelerators are are highly competitive and cyclical. There is always a new batch of prospects.
  • Community — while most incubators do provide some form of mentorship, accelerators stand out all on their own. They provide a community driven program that helps startups establish a network in their business vertical through an intense 3-6 months of meets and greets

Not all accelerators are the same

It is important to realize that all accelerators are different, most of them tackle different stages of a startup (for some, with just an idea), in different locations, with different ranges of capital and very different goals. Some take a percentage of the business equity, from 2% to %5, and others have a more holistic approach.

We can group accelerators into a specific industry class, but they can all tackle different business industries, you have to dive into that fine print to really understand them and build a model that works for you and your business idea.

Pros of Accelerator Programs

What makes accelerators programs so successful is the immersive education they provide, providing to the company founders an opportunity to learn at a fast pace. Learning by doing and listening to other people’s experiences, is something that all startup founders eventually go through, and it’s something we can all relate to at a personal level.

The goal of an accelerator program is to accelerate the learning process. Company founders must learn all there is to learn about creating and establishing a business in a very intense, time-limited program. While also developing their business structure and ideas.

“The most important thing we do is work with startups on their ideas.” Y Combinator. In fact, the key take away of an accelerator program is their early approach to a startup. They work with teams at the early stages of a business idea to provide them with the tools and knowledge they will (in theory) need to succeed later on.

Professors Cohen (University of Richmond) and Hochberg (MIT Sloan School of Management) compiled the 2013 Rankings of Top U.S. Seed Accelerators, and one of the major takeaways of their research was that “90 percent of entrepreneurs surveyed said they would do it over again, and 95 percent said the accelerator they attended was worth the equity stake they gave up”.

That’s an amazing result, considering most business owners have to give a portion of their business away.

Ultimately, what you look for most during the experience, is the expert feedback you can get from people who have, in fact, built a successful business. And in turn, it is your job to adapt their experiences to fit your business goals.

Cons of Accelerator Programs

To help founders, you have to be very good at screening so that you’re only taking in groups that really have a chance of succeeding. And I’m not convinced that all of the accelerators out there are equipped to do that” Hochberg says.

Quality funding and networking resources are a major concern. Not all accelerators out-there are necessarily equipped to provide you with what you need to succeed. It’s important to verify that an accelerator can bring valid investors to the table. “With the top programs, everybody in the Venture Capital community will be looking at you” Hochberg says. “But with some of these newer accelerators, especially regional ones or those in nontraditional verticals, you need to be sure that serious Venture Capital shops from outside your area take the program seriously and see its alumni as serious possibilities for funding.

It’s necessary to highlight the importance of that statement for Latin America. As member of the region, we have all witnessed the failure to regionally adapt of some of the most renowned companies in the world.

This is even more important if you wish to remain in the Latin American region and establish a thriving business there. You must look for options in Latin America that are created or adapted successfully for the region, its people and its needs.

Conclusion

Being part of an accelerator program is a once-in-a-lifetime opportunity, and you must treat it as such. Focus on learning as much as you can, and most importantly, focus on strengthening your team and yourself. After Demo Day, you will most likely be on your own.

With so many options available, choosing the right accelerator is crucial for your startup. You must put in the hours and do all the necessary research to finding the right fit for your idea. “If you’re a healthcare startup, it doesn’t matter if they’re the best consumer internet Venture Capitals on the planet and the mentors are all consumer internet gurus; if you’re doing healthcare, that’s not the right fit for you” Hochberg says.

In business, equity is your most prized possession, and you really should be mindful of it’s meaning and importance before you start giving it away like candy.