Choosing the Wrong Accelerator Can Get You Nowhere Fast

Accelerators can put startups on a fast track towards growth-stage success, but founders shouldn’t be tempted to apply to a program simply on the basis of acceptance chances. Geography, funding, office space, and mentorship availability are all important, and there are still other factors to keep in mind.

We asked interviewees during our launch week about what’s most crucial for startup founders considering accelerators.

What an Accelerator Actually Offers

An accelerator is a fixed-length program, usually a few months long, that takes in a group of startups at the same time. Most offer some mix of mentorship, workshops, workspace, introductions to investors and a final “demo day” where companies pitch. Many also invest a small amount of money in exchange for equity, though some, particularly non-profit or publicly funded programs, don’t take a stake at all.

That variety is the point of this article. Two programs can both call themselves accelerators and offer completely different things, so the label alone tells a founder very little.

Match the Program to the Product

“It is very important to get the right accelerator based on the product that you have,” says Amir Azhari, President and COO of AOMS Technologies, a startup focused on fibre optic sensors for extreme environments such as oil and natural gas wells. The first accelerator he tried, which focused on software and app development, wasn’t meeting his needs.

Azhari joined the RIC Centre, in Mississauga, Ontario, Canada, which he says worked better because of its manufacturing focus. “[They] introduced us to different potential investors who might be interested in our technology,” he says.

Hardware companies like AOMS have different needs from app developers. They build physical prototypes, sell to industrial customers with long buying cycles, and need investors who understand that a product can take years to reach the market. A program built around software sprints and quick launches can leave that kind of company with plenty of advice that doesn’t apply.

The introductions Azhari described paid off. In December 2016, GreenSky Capital announced that AOMS, which it described as a Mississauga-based company with proprietary fibre optic sensor technology for harsh conditions, had closed the first $500,000 of its seed round with the GreenSky Accelerator Fund I, in a release republished on the RIC Centre’s website. AOMS expected to raise up to another $500,000 from investors associated with GreenSky, and planned to use the money for sales, marketing and product development. “They were able to provide both capital and strategic support within months of our introduction,” Azhari said in that release.

The Network Effect

Sonia Strimban, Manager of Venture Operations at the MaRS Discovery District in Toronto, adds that accelerators help avoid isolation. “There’s a compounding network effect. If you’re not part, you’re missing out in introductions and meetings with potential investors. You have to be part of the community to receive the exponential effects of the momentum.”

Matt Roberts, associate director at the Business Development Bank of Canada’s IT Venture Fund, agrees that accelerators provide an important role, particularly with filling missing skills in your initial team. “They’re more often than not providing advice and feedback to allow founders to do some of that early sales and marketing themselves, or giving them advice and connections to make the first hires they need.”

But perhaps the best value you can get out of an accelerator is working with those already established. According to Strimban: “Founders like to learn from each other. There’s an element of trust they have with other entrepreneurs… It’s invaluable knowledge that will save you so much time and effort if you can benefit from the experience of others.”

How Accelerators Have Changed Since 2016

The programs mentioned here have kept evolving. The RIC Centre, after 13 years as the innovation hub for Ontario’s Peel Region, rebranded as Altitude Accelerator in September 2021, according to the organization. During the pandemic it moved into a new space in Brampton’s innovation district, and it says the companies it supports have raised more than $575 million in funding.

The amount of money top accelerators put into each company has also grown. In January 2022, Y Combinator announced it would invest a total of $500,000 in every company accepted into its program: its usual $125,000 for 7% equity, plus another $375,000 on an uncapped SAFE, YC said on its blog. A SAFE is an agreement that converts into shares at a later funding round, so founders get the cash now and the price is set later.

That shift raises the stakes of choosing well. A bigger cheque usually comes with a bigger say in the company, and an accelerator stake is something a founder carries into every future round.

Questions to Ask Before You Apply

The advice from 2016 still works as a checklist:

Does the program know your industry? Azhari’s experience shows that a software-focused program may not suit a hardware or industrial company, however well it’s run.

Who will you actually meet? Ask for a list of past mentors and investors who attended demo day, and talk to founders from earlier cohorts about which introductions turned into meetings.

What are the terms? Find out how much equity the program takes, if any, and what you get in return. Compare that with what non-dilutive programs in your region offer.

Where do you need to be? Some programs require founders to work on site for the full term, while others now run partly or fully remotely. That affects hiring, family life and costs.

What gaps does your team have? As Roberts noted, a good accelerator can fill missing skills, especially early sales and marketing and first hires. If you know where your team is weak, look for a program that’s strong in exactly that area.