Top Startup Accelerators- What It Takes To Get In

Paul Graham Y Combinator- Photo By Kevin Hale

No matter how brilliant or well educated you are, if you’re a first time startup founder, you need all the help you can get. That means mentors for important introductions and to help you avoid making rookie mistakes. And more often than not, you’re also going to need money. Startup accelerator programs provide both: access to mentors, and investors. The more prestigious the accelerator, the better connected the mentors and the greater the access to investors with deep pockets.

Among the most competitive tech startup accelerators in the U.S. are Y Combinator and TechStars, which are the two I’m going to focus on. But a number of others, including AngelPad, 500 Startups and MuckerLab appear on this 2017 Forbes list of top accelerator programs.

Y Combinator

What you get if you’re accepted:

  • $120,000 in exchange for 7% equity.
  • Exposure to top investors and mentors.
  • Joining a network of thousands of accomplished and well-connected entrepreneurs.

How the program works:

Established in 2005, Y Combinator runs two three-month cycles (January to March and June to August) per year and requires that accepted founders move to the San Francisco Bay Area for those three months to work intensively there to prepare for Demo Day, where founders present their company before an array of substantial investors. Investors that have invested in hugely successful Y Combinator alumni

companies like Dropbox, Airbnb and Reddit. A significant component of the program are private weekly dinners where founders get a chance to share what they’ve been working on and then listen luminary startup founders, like Marc Zuckerberg, address them in an intimate, no-press-allowed setting.

What they’re looking for:

Admission to Y Combinator is a two-step process that includes an online application and, if you move on, an in-person interview at the Y Combinator office in Mountain View, CA. The Y Combinator people are pretty clear on their website that they’re looking for clarity in your Y Combinator application. Clarity on what your company does. No jargon. No broad generalizations like “We are going to transform the relationship between individuals and information.” A simple, concise sentence in response to the very first question, which is “What is your company going to make?” They want the cleanest version of your elevator pitch. There, I just used jargon – “elevator pitch.” I wouldn’t have gotten in.

Y Combinator is also looking for clarity in the description of the founding team, as in citing specific accomplishments of the founders, rather than using sweeping sentences like “Max is an extremely talented engineer who also has a passion for food.”

TechStars

What you get if you’re accepted:

  • $100,000 convertible note and $20,000 in exchange for 6% common stock.
  • Exposure to top investors and mentors.
  • Joining a network of thousands of accomplished and well-connected entrepreneurs.
  • Equity Back Guarantee – as of 2015, at the end of the three-month program, you will have 3 business days to lower or eliminate TechStars’ equity position in your company if you are not satisfied with the value of TechStars.

How the program works:

The program was started in 2006 in Boulder, CO. One of the co-founders is Brad Feld, a serial entrepreneur, venture capitalist and veteran startup community builder with a great blog (Feld Thoughts). Like Y Combinator, TechStars is also three months long and includes mentors helping founders to examine and challenge their business ideas in preparation for a Demo Day in front major investors. Since opening in Boulder, it has expanded internationally and now operates in more than 15 cities in seven countries. It has invested more than $3.5 billion and it counts Uber as one of it graduate companies.

What they’re looking for:

TechStars looks for early-stage companies whose founders are open to making dramatic changes to their business. Not founders who are just open to “pivoting,” but to potentially reinventing their business.

“If you are in heads down product mode, coming into TechStars is a disaster because all we do is ask you to put your head out and share and iterate your thoughts,” said David Tisch, startup investor and co-founder of TechStars New York City.

Michael DeFranco

Michael DeFranco, co-founder and CEO of Lua Technologies, which powers HIPPA-compliant text messaging for healthcare clients, was accepted into the TechStars New York City class of Spring 2012. He and his company are proof of how the TechStars program is meant to challenge founders’ ideas and have them re-consider everything about their business.

DeFranco said he and his founding team entered TechStars pitching their product to be used primarily for entertainment production. But the program directors pushed them to start testing their product in different verticals and immediately introduced them to the right people.

“That kind of fast action eventually led us down the healthcare path we are currently on,” DeFranco said.

As for their demo day pitch: “Our demo day pitch evolved every day of the program until we were pitching a completely different version by the end, all with the same product – just tweaking the wording. That kind of thinking has gotten us to where we are today.”

Warm Introductions Are Helpful

Laksman Veeravag, a web developer and writer who has interviewed more than 50 startup founders admitted to top accelerators (see his ebook AcceleratorX), said that founders some times overlook the significance of a warm introduction to a partner at the accelerator they’re applying to.

“While many entrepreneurs I’ve interviewed succeeded by just applying cold, it can make a huge difference to have or build a relationship with someone connected to the accelerator you’re applying to,” Veeravag said.

Amanda Peyton, whose former company, MessageParty, was accepted to Y Combinator, agrees.

In Peyton’s blog post from several years ago, she wrote:

“By far the most valuable thing you can do for your application is talk to other YC founders. There are [more than one thousand] alums at this point. If you cannot track down one to chat with you, you should probably reconsider doing a startup. YC founders are among the most accessible group out there – you just have to ask. [And] Crunchbase can be really useful.”

Timing Matters

While the majority of accelerators will say that the founding team is the most important factor in deciding which startups to accept, Veeravag said that most of the accepted founders he interviewed felt that having expertise, a strong product, and traction is why they got in.

CoFounders of Burrow

Stephen Kuhl, co-founder of Burrow, which sells easy-to-assemble sofas online, was accepted into Y Combinator’s class of Summer 2016, along with his co-founder Kabeer Chopra.

Kuhl said he thinks that Y Combinator partners are excellent at identifying companies that provide products or services that support larger trends.

“eCommerce is growing, especially for furniture,” Kuhl said. “And modern consumers are moving more frequently, renting longer, and putting off buying their permanent home longer. Mattresses were the last of two big

furniture items that hadn’t been optimized for the modern consumer.”

Maybe Kuhl is just being modest, but he believes that the nature of their business played a big role in getting selected.

“Y Combinator believed in us to take care of couches,” he said.

 

 

 

 

 

Written By Todd Stone

 

 

 

 

 

 

 

 

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