Pros and Cons of Joining an Accelerator or Incubator: Should You Take Their Offers?

Starting a tech startup can be both exciting and daunting. One common question that arises among aspiring entrepreneurs is whether to join an accelerator or incubator. While these programs can provide invaluable resources and support, they often come with trade-offs, particularly regarding equity and the value they add. This article explores the advantages and disadvantages of joining accelerators or incubators, based on personal experience and industry insights.

Understanding the Basics of Accelerators and Incubators

Let's first clarify what accelerators and incubators are. An accelerator typically focuses on an intensive, short-term (often three to six months) program where startups receive mentorship, investment, and a myriad of other resources. An incubator, on the other hand, often offers a longer-term support structure, such as workspace, resources, and guidance, and may include financial investment.

The Upside: Resources, Connections, and Support

One of the primary benefits of joining an accelerator or incubator is the access to a vast network of contacts and advisors. These programs often provide guest lectures, trilateral pitch practices, and even access to free services from large tech companies like Rackspace and Microsoft. Additionally, being part of an accelerator can provide a platform for launching your startup, with events like launch days where your company can potentially gain attention and traffic.

The Downside: Equity and Dependency

However, the downsides are equally significant. For instance, some accelerators and incubators demand a significant stake in your company—evident in cases where the exchange for funding comes at a high equity cost, often 6-7 shares for a small amount of funding, about $25k. Such arrangements can dilute your ownership and control over your startup.

My personal experience at TechStars in Seattle offers a telling example. Initially, my co-founder and I pitched an idea to a local accelerator and were ultimately rejected. However, through the informational meetups and briefings, we were accepted into TechStars, but our initial idea was different from the one we ended up participating in. My co-founder could not participate, and I was tasked with serving the accepted companies and helping run the program, which was a valuable albeit challenging learning experience.

The reason accelerators typically favor startups that require less support? The ultimate goal is to maximize returns, and not all startups need or can benefit from intense support. In my case, TechStars had over 400 applicants for only 10 spots, demonstrating the intense competition and selectivity.

Striking a Balance: Making the Most of the Opportunity

While the benefits of joining an accelerator or incubator are substantial, it is crucial to proceed with a clear understanding of the trade-offs. Here are some key points to consider:

Focus on Value Over Equity: While the services and resources provided are valuable, take a closer look at the equity you are giving up. If the deal is not fair, it's better to stay independent and take control. Independence Over Dependency: Treat these programs as a means to an end rather than relying on them entirely. Use them to build your skills and network, but don't let them dictate your long-term strategy. No Guarantees: Even with an accelerator or incubator, there's no guarantee of funding or success. Prepare for the possibility that you might not receive the investment you need.

In conclusion, joining an accelerator or incubator can be a great step toward starting and growing a tech startup. However, it is essential to weigh the potential downsides, particularly the equity stake you may have to give up. Always aim to make the most of the opportunity while maintaining control over your startup's direction and future.