NCET Biz Tips: Are accelerators worth it?

Startup accelerator programs are on the rise across the country. The big question for most entrepreneurs is whether it is worth it. Some are free, others charge fees, and many are an exchange for equity in the business.

Let’s define an accelerator versus an incubator. An accelerator is designed to help grow your existing business and is generally the most helpful when you have customers or a product. You can be pre-revenue as some companies are still testing their business with pilot (or beta) customers. An incubator or venture studio on the other hand tends to be associated with early-stage ideation, getting you to create a company.

At gener8tor, we run a variety of programs from the ideation stage up to investment accelerators, the latter is what we currently have in Reno and Las Vegas. The investment accelerator is a 12-week program geared toward fast growth in a short time. We want to help companies reach a growth curve that is appealing to investors, hence the name.

One question I normally ask founders that are interested in our program is how long do you think it could take you to grow your business 20% month-over-month and meet 100-plus mentors and investors? At gener8tor, we’ve seen it take some companies up to two years in what we help them achieve in three months.

A misconception people normally have is that accelerators are only for tech companies. I think the key is whether the company can be backed by venture capital. Investors want to invest in companies that have a “hockey stick” growth curve in a short period of time. It could be a tech company, and it could be a consumer product as well. The question I ask myself is can this business scale quickly with additional capital and guidance?

So, are accelerator programs worth it? You’re going to love my answer. It depends. As each business is unique in its own way and stage of growth. The gener8tor’s investment accelerator program is equity in exchange for funding. We invest $100K per company accepted for 7.5% ownership on a SAFE note (Simple Agreement for Future Equity).

Here are the main points I discuss with a founder when they are deciding if they want to join our accelerator. It could be in comparison with another accelerator program or not joining one at all.

• On your own, how long would it take you to get to 10-20% growth month-over-month?

• How long would it take you to meet 50 or 100 investors, knowing it could take 100 investor meetings to get one-two investments in your next round?

• How are you meeting mentors to help you?

• How much capital do you have and how long can you operate without additional investment?

The benefit of a large accelerator over a small one is the power of the network. How big is the alumni network of founders you can lean on for support? And the investor reach? Gener8tor has over 1,000 alumni companies that have raised over $1.3B.

How many companies are in the upcoming batch or cohort? We only take five companies so we can dedicate our full attention to their needs.

I also think the founder to managing director fit is important. Both parties should interview each other to see if it’s a fit. This last point is often overlooked on the company’s side.

If you’re interested in learning more about our gener8tor investment accelerator program in Reno this fall, we’re looking to invest in five early-stage companies across any business model or industry. The program will run Sept. 11-Dec. 1. Applications are open on our website with a deadline of June 11. Feel free to apply directly, or email jared@gener8tor.com with any questions.

Jared Byer is managing director of gener8tor’s Reno-Tahoe accelerator.