500 Startups, Y Combinator — Are accelerators really worth it?
I’m a 500 startups alumni. I went through batch 9 in 2014 as a founder/CEO and now a year on, a popular topic of conversation with many of my batch mates and 500 alumni has been whether it was all worth it?
Let’s break it down — accelerators like this don’t tell you how to run your business. They don’t provide some magical formula or trade secret that will turn you into a super star founder that builds a billion dollar company. They don’t queue up a line of investors who will automatically close your round, they don’t find you customers, they don’t AB test your product, they don’t hold your hand, and they don’t build your business for you.
So what do they do?
Well, in my opinion, accelerators are a lot like business school.
The first part is selectivity. Out of thousands of applications, these programs accept 20- 30 something companies (now those batch sizes are getting larger) and the benefits of this is a community of people that you don’t need to explain yourself to — they’re at the same stage you are, and they aren’t walking around at the bar after leaving their full time job talking about a “startup” they’re doing. They’re committed, and putting in 15 hours a day chasing a wild dream just the same as you. That makes it much easier to filter through the “time wasters” and really surround yourself with the people who will enable you to move forward and learn.
The second part is how expensive it is. These early stage accelerators are expensive from an equity perspective. Yes, you can build a company without going through an accelerator or even raising money, but the whole point in accepting money from an accelerator is that they provide the means for you to move your business forward, and their reward for that high-risk investment is great term sheet. But do consider that the point of this money is that it’s a lot more than cash in the bank — they provide you experienced perspectives, education, access to selective networks, discounted products, and community.
Just like business school, accelerators are expensive, they give you an incredible experience, a marker of “status,” a solid network, and an education. No, you don’t need to go through an accelerator, and no you don’t need to get an MBA.
Despite the cons, the people who go to business school say it’s worth it, and in my opinion, going through an accelerator is also worth it. But in much the same way you go to business school once, I’m not sure you would want to do an accelerator more than once.
I’m going to be starting a new company, and I have the option of applying to YC & 500 Startups. Should I do it again? Every situation is different. It’s up to you to decide what’s right for YOU, and your company.