KEVIN COLLERAN: It has never been easier to start a technology company. This is true for many reasons, including access to funding, rising startup valuations, sinking costs and the general cultural shift and social acceptance (or even encouragement) of taking chances and pursuing the entrepreneurial dream.
The raw desire to become an entrepreneur and to build a new solution to an existing problem is engrained in many of us. The problem lies in the details of how to turn a brilliant idea into a reality — how do you actually build a company if you have never done so before?
This is where startup accelerators have found their opportunity to thrive. There are so many young people in the world with so many incredible ideas, but many lack the experience and know-how to pursue their entrepreneurial aspirations.
There are plenty of skills necessary to launch a business that may
come naturally and need to be learned. Take for example, the art of fundraising, the legal requirements of incorporating your businesses and the process of recruiting and training talent. These are all outside the core duties of building the actual product or service, but they are each as important to the success of the overall business.
Accelerators have become the new colleges and universities for budding entrepreneurs. Young people traditionally pursued higher education in order to prepare them for their eventual careers. Similarly, aspiring entrepreneurs pursue startup accelerators as a place where they can gain all of the necessary tools, skills, mentorship and advice that they need to build a valuable company and to become a successful CEO.
Unlike most colleges, which charge tuition no matter how valuable the education they give you proves to be later in life, accelerators share the risk with you by taking equity in your company. They only benefit financially if you, the student, do so as well. If your company fails, you don’t spend years in debt paying back student loans. Some would argue that this is a much more fair model for education.
Accelerators may not be great for every aspiring entrepreneur. Some businesses take longer to build than the three to six months that most accelerator programs run for. There is pressure to have a completed product or service ready to go to market by “demo day,” which is usually the final day of the short program. Many businesses, especially those manufacturing physical goods, find that there is not enough time during the accelerator “semester” to get a product from idea stage to reality.
Additionally, many accelerators cater towards young, inexperienced founders who don’t have much (or any) expertise in the formation, development or management of a company. More seasoned founders, who may have started or been part of a startup previously, may find that the basic skills taught by accelerators may not be necessary due to prior experience.
Although entrepreneurial accelerators are a fairly new concept, enough time has passed and enough alumni have “graduated” to help determine the hierarchy of prestige among accelerators. Y Combinator, for example, has proven to become the Harvard or Ivy League of all accelerators. They have produced the largest number of successful startups which have raised the most financial backing at the highest valuations. They have helped train 716 companies which have gone on to be valued at more than a collective $30 billion and have raised more than $3 billion in venture capital.
However, moving to San Francisco and getting accepted in a highly competitive Y Combinator class may be unrealistic for many aspiring founders who may wish to purse accelerators closer to home or with a higher likelihood of admission. Techstars, another top-ranked accelerator program, has solved this issue by bringing their program to many more “students” in many more geographies by launching programs in nine different cities in the U.S. and abroad.
Even though you don’t pay to attend an accelerator — as you would for college — you are still in most cases giving up a percentage of the equity in your company in exchange for the education you receive. So, it is important to do your homework and make sure that you choose a program that is giving you enough value in exchange for the future compensation they may receive if your business does in fact become successful.