The most compelling reason why you should join an accelerator

Over the last 10 years there has been a dramatic growth in accelerators. While incubators such as ideaLab (Bill Gross, Los Angeles, 1990’s) had existed during the previous bubble, the absolute number of new age accelerators has gone from zero to over 300 in the US alone and from 0 to over 1000 worldwide. At the same time while, the number of early stage (less than $2 Million and company < 2 years old) deals have gone up significantly as well.

Growth in Seed Round Financing
Growth in Seed Round Financing

The chart above from Benedict Evans shows the growth in seed rounds, which indicates that the number of early rounds have increased relative to $3-6 Million rounds.

At the same time, the average amount of money invested in early stage rounds is going down. That makes sense since it is cheaper to build an early stage company and “try to find a product market fit”

Size of Early Stage Rounds
Size of Early Stage Rounds

There are 2 charts missing from this deck. First, how many of these early stage deals are going through accelerators and what is the size of the deal for companies going through accelerators versus those that are not.

Fortunately, thanks to folks like CB Insights and Mattermark, we do have access to that data. I will upload the charts in a few hours / tomorrow since I am running late to my meeting this morning.

1. Accelerator funded companies make up 13% of the total number of seed funded companies, and have been steadily rising. Obviously from zero in 2005 to 13% of total seed funded deals in 2015.

2. Accelerator funded companies raise 20% more in the seed round than non-accelerator companies.

Finally anecdotal data from Microsoft accelerator companies over the last few years alone, I can infer that accelerator companies have 25% better survival rate than those that did not go to an accelerator after the first 2 years.

How did we get this information?

We got over 250 applicants in the first cohort (Sep 2012), 450+ in the second (Mar 2013), over 600 in the third (Aug 2013) and over 1000 in the fourth (Feb 2014) in India alone. Of these, we picked 10 in the first, 12 in the second, 13 and 15 in the third and fourth cohorts.

We then tracked the remaining companies. Of them 5, 3, 11 and 13 got into other accelerator programs such as GSF, Tlabs and Kyron.

Of the remaining startups, 31%, 14%, 22% and 12% have shutdown. That compares to 20%, 10%, 22% and 0% so far.

So, if you are part of an accelerator program, you are likely to get more money, survive for longer and likely to get funding versus not.

Those are the biggest reasons to join an accelerator.