Downsides of Startup Accelerator Programs – Pitfalls Entrepreneurs Must Watch For

Acceptance into a startup accelerator program can be just the launch pad new entrepreneurs need to get their ventures off the ground. Starting a business requires more than an interesting idea or intellectual property. Several other nuances go into turning that idea into a viable product or service and selling it profitably in the market. This is where accelerators come into play.

They provide tangible and intangible resources that founders can use to build the business and run it efficiently. Mentoring, expert-led training, workshops, seed capital, support teams and infrastructure, and cohort-based programs are just some of the benefits. However, before you decide on an accelerator, you should do the necessary research and understand what exactly you are going to get yourself into. Read in advance what pitfalls entrepreneurs should know about and how to avoid them.

Choose the right type of accelerator program

There are two types of accelerator programs. Seed programs are specifically designed for founders who have no prior experience in the corporate world. These offerings last two to four months and help entrepreneurs build the foundations of their business, such as product prototypes or a founding team and production processes. The goal here is for the founders to get to the stage where they can pitch investors and convince them to invest in the startup.

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Then you have phase two programs designed for more mature businesses that are established but need that extra boost to propel them to greater success and growth. You can expect this opportunity to last at least six months and provide you with extensive support and resources.

Before enrolling in an accelerator program, determine the stage your company is in and then apply to the appropriate organization.

Choose the right branch and sphere

Most startup accelerator programs are industry specific and support business concepts in a specific area. Because their partners and networks are also active in this area. Find out about ongoing programs and successful businesses that have benefited from their support. This will ensure that by the end of the workshop you are connecting with investors who are likely to be interested in the products and services you are developing.

For example, if you’re creating a new software application to streamline digital marketing, you’re looking for a startup accelerator that will help the e-commerce industry.

Expect a move and devote six months of your time

Since the Startup Accelerator provides physical premises and workshops, founders should only apply if they are ready to relocate. Or you can choose a program that works in your city or state. Also, expect that the program will be intense and candidates will need to commit all of their time over the course of four to six months. If your business is in phase two, launching for this interval may not be feasible. Consider your options before signing up.

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Work out the stock percentage and other terms

Not all accelerator programs are created equal. Some of them are non-profit organizations run by public companies while others are organized by private entities. Before you jump into the program, check its terms and conditions. You may be required to sign 5% to 10% ownership of the company. This agreement may not seem essential at this point, but it could materialize in a significant part later. Of course, you can expect that while the accelerators will keep their stake, they are unlikely to demand voting rights or interfere in the company’s decision-making processes.

As a new founder who is unsure how to start a new business, signing up with a startup accelerator can prove very beneficial. However, make sure you research the program carefully and see if it is a good fit before making the final decision.

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Alejandro Cremaden is a serial entrepreneur and author of The Art of Startup Fundraising. With a foreword by Shark Tank star Barbara Corcoran and published by John Wiley & Sons, the book was named one of the best books for entrepreneurs. The book provides a step-by-step guide to today’s way of raising money for entrepreneurs.

Most recently, Alejandro built and left CoFoundersLab, one of the largest communities of founders on the internet.

Prior to CoFoundersLab, Alejandro was an attorney at King & Spalding, where he was involved in one of the largest investment arbitrations in history ($113 billion at stake).

Alejandro is an active speaker and has guest lectured at the Wharton School of Business, Columbia Business School, and NYU Stern School of Business.

Alejandro has been involved with the JOBS Act since its inception and has been invited to the White House and US House of Representatives to comment on the new regulatory changes affecting online fundraising.

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