Starting a business for the first time is a brand new journey in your life. With such a steep learning curve to overcome and so much at stake, it's only natural to feel anxious when things do not seem to be going your way. You decide that you need support and an accelerator programme seems like a reputable and reliable choice. However, an accelerator programme might not be the right choice for you for several reasons. Here's when you should think twice before joining an accelerator programme:
You are not keen to do whatever it takes to reach profitability
Starting a business of selling quality handmade products might have been your ambition for many years. This begs the following question, are you willing to make changes and pivot the business if the business model is not scalable, even after trying it out in several markets? The journey towards profitability requires a persevering attitude and a willingness to test and validate your customers' needs, as well as adjust your business model accordingly to make sure that you are selling a product that is in demand in the market. It also means that you might need to pivot your business if things do not work out the way you intended.
Notable businesses that became successful after pivoting
- Instagram, a social media platform for sharing photos and videos with aesthetic filters, was once Burbn, a location-based photo-posting application similar to Foursquare, when it first started in 2010.
- Netflix, a streaming service that offers a wide variety of TV shows, movies, anime, and documentaries, was once a DVD rental and sales site started in 1997 that mailed the DVDs to customers without due dates, late fees, or monthly rental limits.
- Starbucks, a renowned coffeehouse franchise around the world, was once a coffee roaster and retailer of whole bean and ground coffee, tea and spices with a single store when it first started in 1971.
You are just looking for funding
An accelerator is a bootcamp conducted between 3 to 6 months that provides startups with education, mentorship, seed funding, and opportunities to build traction in the market. After your application has been accepted along with other startups in the same cohort, you will go through a series of activities that will help you and your team in building your minimal viable product (MVP), leading up to the demo day when you and other startups will pitch to a group of investors. In short, you can expect the following from an accelerator programme:
- Various workshops that cover product development, branding, marketing, etc.
- Sharing sessions with fellow entrepreneurs
- Coaching by experienced mentors
More than just monetary support
Different accelerators offer different perks that can give your business a headstart upon launching. For example, Sunway iLabs Super Accelerator allows you to run pilot tests under Sunway Group's diverse business ecosystem which ranges from properties, education, medical to 10 other business units. As a participant in this accelerator programme, you can also acquire talent for your business directly through Sunway University and their new coding school, 42KL.
Nevertheless, participating in an accelerator programme is a huge commitment. If you are just looking for a business fund to mitigate your initial cash flow issue when getting your business started, you should consider to look for bank loans, equity crowdfunding (ECF), peer-to-peer financing (P2P), or angel investors with low touchpoints and commitment requirement.
You don't intend to share the equity of your company
Accelerators are essentially businesses that create a suitable environment for startups that facilitate their growth through mentorship, networking, and funding. You do not pay an accelerator in cash, but in return for the assistance and seed funding they provide in growing your business, you give them some equity of your company. An accelerator that holds equity in your company has skin in the game to support your company's growth beyond the fixed term of the accelerator programme.
How much equity will you have to give up?
An accelerator typically acquires 5% to 7% of equity from your company, depending on the stage your business is in. These are some examples of deals renowned accelerators offer:
- Y Combinator invests USD 125,000 in return for 7% equity of your company in a standard deal.
- Techstars purchases 6% equity of your company with USD 20,000 as stated in their investment terms.
- 500 Startups seed fund invests $150,000 in exchange for 6% equity from your company.
Equity dilution, where your company issues new shares, does not only happen when you onboard a co-founder, but also when investors invest in your company. If you do not plan to share the equity of your company with an investor, accelerator programmes are not for you. You can opt for bootstrapping in growing your business instead.
You want to be the only founder of your business
As the adage goes, two heads are better than one. Accelerators believe that having at least one co-founder greatly benefits your business in the following ways:
- Peer-to-peer accountability between co-founders keeps your progress in check.
- A co-founder can complement and complete the skillsets you need to build your startup.
- Having a co-founder with whom you can discuss internally may help you step out of your comfort zone and test the limits of your imagination.
- It is exceptionally difficult to build a startup from scratch, let alone building it by yourself. A co-founder can support the operation of your business and keep you motivated.
The formula for a good founding team
Tomasz Tunguz, a Venture Capitalist at Redpoint, has shared a few key observations from 30 successful startups, one of them being the average founding team has 2.4 founders where 70% of the startups have at least one technical founder. Apple Inc. is a good example of a great founding team combination — it was founded by Steve Jobs, the mastermind behind the premium design and craftsmanship of Apple, and Steve Wozniak, the technical creator who built each first-generation Apple computer by hand. It also couldn't have happened without Ronald Wayne who provided administrative oversight and documentation for the new venture.
Nonetheless, being a solo founder is not a deal-breaker. Even at Y Combinator, at least 10% of companies funded in each cohort are run by solo founders. You may not have a co-founder when you participate in an accelerator programme, but many startup founders eventually get a co-founder down the line of running the business.
You believe that joining an accelerator guarantees success
An accelerator can provide the seed funding and facilities you need to kickstart your business idea but at the end of the day, you are still the one who is accountable and has to do all the heavy lifting. In an accelerator programme, you learn about how to grow a successful business, get advice from mentors who have been in your shoes, and even receive seed funding to launch your business. These benefits do not automatically translate into success; you'll have to put in the hard work yourself to guarantee your own success. As an entrepreneur, you are expected to come out with ideas and execute them in a timely manner.
Accelerators do not take away the factors of why startups fail
The hard truth is this — the failure rate of venture-backed startups is 75%, according to the Startup Failure Rate: Ultimate Report. Among all the common reasons that lead to a startup failure, the lack of product-market fit is the greatest factor that causes downfall. Despite having all the resources you need, a product that the consumers do not want can hardly succeed; hence, it is your responsibility to validate your product and pivot accordingly if needed. The accelerator can guide you through the decision you make, but it does not ensure that the decision brings success with certainty.
While joining a renowned international accelerator programme may seem far-fetched, there are several accelerator programmes in Malaysia with unique value propositions that might suit the pace you are looking for in growing your startup. Similar to applying for college, it is best to compare different accelerator programmes before deciding on one that you think can help you most. An accelerator programme could be a good launching pad to turn your business idea into reality, but it is up to you to make it happen.
Special thanks to Jeremy from Sunway iLabs for this content collaboration! Launched in 2017, Sunway Innovation Labs (Sunway iLabs) aims to foster entrepreneurship and stimulate market-driven innovations, to help entrepreneurs become more competitive in this rapidly changing environment. It is structured as a unique, non-profit, smart partnership between Sunway Group, Sunway Ventures/SunSea Capital and Sunway University.
Sunway iLabs Super Accelerator is a 1+3 months accelerator programme designed to take your startup to the next level. Selected startups will have access to markets, mentors, and money. Top 30 startups will be selected for a 1-month pre-accelerator, of which only the Top 5 will qualify for the investment and pilot projects with Sunway through the next 3-months accelerator.