Organizations that train the founder(s) for a certain period of time, and that enable them to fundraise by pitching to investors at the end of the program, and which take equity from your company in exchange for this service, are called 'startup accelerators'.
Such programs can accept startups at any level, from projects that are still in the idea stage to small companies that are already generating revenue. Generally, there is a certain scale and sector that each program focuses on; for example, while it is impossible to be accepted to the world-famous Y-Combinator with just an idea, only startups from the transportation sector can participate in another giant GAMIC. Global ecosystems like Techstars have different programs in different cities and for different industries.
Europe vs. America
The main differences in the cultures and entrepreneurial mindsets of these two continents are directly reflected in the selection criteria of the startup accelerator programs and the amount of investment they make.
In the US, first of foremost, what matters is how many users you reach or can reach; profitability is secondary. The American says, "as long as you reach a large audience, you will eventually find a way to monetize it". Furthermore, investment amounts for US programs generally range from $50,000 to $200,000, and they take 5-10% equity in return. Because of these attractive numbers and the appeal of the 'American Dream', it is very difficult to be selected for a US program because there is fierce competition.
The European is prudent and focuses on your income. No matter how many users you have, if you can't make money, it's hard to join a program in this region. On the other hand, you can get acceptance with a revenue generating project but with a much lower scalability – especially if you work in the environment and sustainability sectors. In Europe, you are not expected to conquer the world (or even Mars); just be self-sufficient. However, their investment usually does not exceed €30,000 and they can ask 10-20% of your company.
How and when do I apply?
You can apply at any stage of your venture; however, your chances of being selected will increase as you grow (i.e. the more users you reach and the more revenue you generate).
On the other hand, if you've read major entrepreneurship books and you already have a well-established company that you're running by applying what you've learned, then your main goal should be to raise money – in this case, accelerators can actually slow you down. Their primary purpose is to educate you and help your company scale quickly; apply only if you share the same goals.
The best way to filter accelerator programs and track submission deadlines is f6s.com. This site lets you build a profile page for you and your startup, allowing you to find programs that meet your criteria and apply quickly.
How do I get selected?
There are certain questions that you will encounter on the application pages of almost all such programs. Here are some:
- What problem are you solving?
- How long have the founders known each other?
- Can you work full time on your venture?
- Are you generating income?
- How much capital have you raised?
You guessed it: These questions – statistically, at least – determine whether your venture will succeed or not. For example, sole proprietorships can also grow and become lucrative (like Amazon), but this is statistically rare. Or, even if you can't make money yet, you can earn a lot in the future; but if you already are, this increases the odds a lot.
Therefore, you should consider these applications as a guide and an opportunity to explore the shortcomings of your enterprise, and fill them without any expectations.
With my previous startup, we applied to a Turkish accelerator and qualified for the last 20 projects. With my current project Steerr, we applied to many international programs; eliminated in the first round in some, reached the quarter-finals in some others.
Let me give you an example regarding the quarter-finals of GAMIC, which I regard as our most remarkable achievement so far. Hypermile, one of the other initiatives I pitched back to back, is a company that employs 25 people and has received a $1.5 million Series A investment in the past months. What a business of this scale does in an entrepreneurship competition is another matter of discussion, but it is a good example for you to grasp the extent of the competition.
The wildest dream of an entrepreneur is to witness first his/her idea turn into reality and then the reality turn into success.
Of course, there are some scammers who have realized that accelerators are one of the most attractive tools on the way to achieving your dream, and they don't hesitate abusing it. These are programs that promise you rigorous training and connection to investors – for a fee. To increase their credibility, they introduce some artificial barriers once you submit your application. They give you the feeling that you have beaten the odds. They put you through some 'personal' tests and then, by providing 'personal' reports, convince you that you are one of those rare entrepreneurs in the 1 percentile, and therefore you are eligible to participate in the program.
A good rule of thumb: No genuine startup accelerator will charge you money.
Plus, none of them will reply to you the next day to let you know you've been accepted. You'll get a response weeks, sometimes months, later. These two are red flags.
Please thoroughly research the accelerators you intend to apply for and try to find and read the opinions of entrepreneurs who have graduated from there.