Even though startup accelerators exist all over the world and have a relatively uniform structure, they remain a huge mystery to the vast majority of people. I cannot tell you how frustrating this is to someone who has successfully gone through two of them, most recently the ZeroTo510 Medical Device Accelerator in Memphis, Tennessee. I still get asked, “What was that grant that you won?” or “Didn’t you win some prize money?” It’s an honest mistake, but it makes me want to scream because it’s clear that most people have no idea what accelerators do.
Accelerators can be supported or sponsored by any number of organizations. Most of the time it’s a combination of venture capital funds, big corporations or local economic development organizations. For example, two corporations—an insurance provider and hospital system—and an economic development organization sponsored one of the accelerators I completed. For the most part, the economic development organizations handle the day-to -day operations. Obviously, the people funding the accelerator are really important, but we’ll get into that later.
Usually the accelerator makes a small investment in each company selected for the cohort. This investment can range greatly in amount ($10,000 to $200,000 or more) and also in the amount and type of equity they get in return.
So after the romantic courting period, these company founders pack up their earthly belongings and move to the host city. The day-in-day-out grind usually happens in a co-working space where there is constant idea flow, industry pros giving presentations, founders participating in workshops, etc. Another crucial piece of the accelerator is getting “plugged in” to the community. The relevant institutions (in our case hospitals, clinics, insurance headquarters, local investors) are more than happy to open their doors, and usually have some sort of loose partnership with the accelerator stakeholders. This is key for founders, because it instantly gives you credibility with local customers or competition. Not to mention that developing these types of connections could take years if done organically.
Accelerators typically last 13 weeks, and generally move at breakneck speed. The whole point is to condense one year of business into a three-month period. During this time there is a curated program that the founders follow, usually taught by the program director, the entrepreneur-in-residence, and local mentors. Some accelerators will have monthly investor meetings that act as a board meeting lite and always include a sanity check on how you’re spending money and how you’re making progress.
Whether its $20,000 or $100,000, the stakeholders want to know what you’re spending it on. Regional mentors are constantly in and out of the co-working space delivering high-quality presentations and offering one-on-one office hours. These people can be tapped offline and usually are very accessible. There’s always an emphasis on customer discovery, meaning you’re forced to go out and talk with, interview, watch, probe, solicit and gauge your customers and their reaction to your product. This way you can know immediately if they like what you have, if you’re wrong about who your customer is, or if you are trying to wrong channel to reach them.
This all culminates in a Demo Day, which is a big event that recaps the cohorts’ journey, thanks the supporting casts, and ends with each company delivering an eight-minute pitch. The crowd is filled with venture firms, angel investors, entrepreneurs, industry pros, and, of course, friends and family. This type of PR and exposure to investors is massive for startups, and helps the founders de-risk their investment ask. Some accelerators have a grand prize, some don’t, but all accelerators have demo days because it’s essentially the fruit of all their labor coming to bare for all to see. If you ever get a chance to attend one, go.
So there you have it, that’s what an accelerator is all about. It’s no joke, it’s hard work, but the payoff is immense, and not just for the cohorts themselves. Accelerators are also a huge boon for their communities, through the jobs they create and social impact they produce.
What about you? Do you have experience with an accelerator? And what do you wish people knew about them?