Many entrepreneurs and other venture investors have a perspective of the accelerator space with little context or a construct to think about their value. I am biased and run the Microsoft Accelerator and I think most programs are extremely valuable, though I am an insider.
There are key questions I thought I’d answer that are top of mind of most entrepreneurs and investors about accelerator programs.
How do we think about accelerator programs?
The best construct to think about accelerators is the MBA program for entrepreneurs with new age changes and modifications.
Instead of tenured professors, you have (hopefully) experienced entrepreneurs who can share their story and journey towards entrepreneurship.
Instead of textbooks with theoretical knowledge you have playbooks based on actual experiences.
Instead of one teaching assistants you have mentors who have relevant experience in the area that you need help.
Is the MBA program great for everyone? No. It is only relevant for those that believe in the power of the network and want to take advantage of the connections (not only customers and investors but other fellow entrepreneurs as well).
What happens to existing MBA programs? Will they go away? No, but there will be a serious consolidation. I can see a future where MBA programs are catered to generating folks purely to be placed at a large company such as Goldman Sacs or Bain. Tier 2 colleges and MBA programs will have to fold up.
Is there value in other accelerator programs besides YCombinator? If you believe the MBA program construct, then this is a question that answers itself. Even though there are many that falsely believe there are no programs that are better, that’s like saying if you get a MBA from any other school than Harvard, then your MBA is useless. Similar to MBA programs you pay a lot (in the accelerator space you pay equity, not cash) to get that “stamp of approval” or “credibility”. Is that worth it? For most it probably is.
What value to accelerator programs provide? For most novice entrepreneurs it is advice, for amateurs it is mentorship and for the professional entrepreneurs it is guidance and connections (the network).
Do most entrepreneurs benefit from accelerators? Or just the young, first-time-as-an-entrepreneur do? Do most experienced professionals (who work before joining an MBA program) benefit from an MBA program – absolutely. In fact I would argue they benefit more from the program than young fresh graduates, because they are able to take advantage of the connections, network, mentorship and guidance immediately.
What does the future of accelerators look like? Similar to MBA programs, accelerators are beginning to specialize to compete better. There is a need for a lot of management thinkers for companies beyond the consulting and banking industries, which is why so many MBA programs are churning out graduates.
Depending on how you see entrepreneurship play out – will it be a winner-take-all market or a very competitive one with many startups and many entrepreneurs, there’s a likelihood that many accelerator programs will consolidate or get “acquired” by venture capital teams.
In a winner-take-all market, YCombinator wins. Which means, they get the 80% of the best entrepreneurs and rest are fighting for the scraps.
In a more competitive market, YC, like the others has good share, but only 30% of the best companies graduate from YC, and the rest from other programs.
I personally think it is unlikely that the accelerator market is winner-take-all. Similar to Venture capital firms, where there are tiers (Sequoia, Accel, A16Z, etc.) form the top tier, and there are over 300+ VC firms still doing well and many return good money to their LP’s. Granted the large funds deliver over-sized returns, but the rest are still doing pretty well.
Should entrepreneurs apply to multiple accelerator programs? It depends on the connections and networks you choose to leverage. If you are a health company, YC will be of value, but not by much. You want to attend YC to get the stamp-of-approval, but you will benefit a lot more from programs like Rock Health.
I don’t know of too many folks that have gone to attend multiple MBA programs, so I think that a startup going to multiple accelerators will just dilute themselves too much. Unless they attend a program that offers no dilution – like the Microsoft Accelerator program for example or many others.
Which is why TechStars is starting to offer their “equity back” (like a money back guarantee) program – You got value or your equity back.
What others questions do you have about accelerators? I’d love to think about this construct and see if it addresses more questions about the value of startup accelerator programs.