As originally published by Arkansas Business on January 18, 2016
What founders should look for in an Accelerator?
Spencer Jones – CEO, LineGard Med
Accelerators are one of the best ways to launch a company, or simply boost its growth; but all accelerators are not created equal. I’ve had the privilege of participating in two accelerators, each in different states with different ecosystems. There has been a flood of new accelerators pup up, and choosing the right accelerator for your business can be a make or break decision. If you boil it down, founders should look for three things in an accelerator: strategic program offerings, founder friendly terms, and a vertically supportive ecosystem.
Every program will likely try to amplify one aspect about their program that differentiates themselves. This can be anything from their location (Southern California, NYC), the amount of capital investment, or maybe a big box sponsor. These things can all be attractive, but the glitter is not always gold. Sure, Barclays might be sponsoring the program, but are they involved? You might be getting $100K, but if the majority of that gets eaten by rent and cost of living, was it worth the equity? When you’re sifting through the options, make sure the strategic offerings that the program amplifies directly and immediately correlate to accelerated growth for your company.
When founders typically apply for accelerators, they feel lucky to be accepted and think the terms don’t matter; WRONG. Understand the full implications of the accelerator terms and thoughtfully game out fundraising scenarios down the road. This, as well as the acceptance of an accelerator term sheet, is a huge part of any application. There are many different mechanisms that can be utilized like SAFE agreements, straight equity-for-cash deals, and forms of convertible debt. Simple is usually better. Furthermore, ask the accelerator if you’re going to be getting a good deal on legal, financial, consulting, and other services. Be aware that some deals could have dilution or follow-on funding riders that can sneak up and take a bite out of your equity pie.
Ensuring that your accelerator is bolstered by a vertically supportive ecosystem is a bit of a nuanced quality, but is unbelievably important. Growing companies in accelerators is like growing bacteria a petri dish. You have to have the ager plate, the right temperature, provide enough oxygen, etc. Think about a startup ecosystem in the same way. Is there local legislative support and public investment for startups? Do the industry giants you’re disrupting exist locally? Have local corporate partners bought in? All of these ingredients provide kindling for founders so that whenever they start launching in this new environment, their spark can be nurtured and catch fire.
Apply to many, talk to the director, and network with past cohort companies. Having been through two accelerators, I’m confident that Hub-X Life Sciences possesses these three qualities important for founders. The partnership between Baptist Health Systems and Blue Cross Blue Shield has the potential to set the standard for payer-provider collaboration across the industry. The cohort companies won’t just have from row seats to their ideal customers, they’ll have seats at the table with them. This is why I’m excited to be the Entrepreneur-in-Residence, and I look forward to working alongside world-class founders during the program. To learn more, please visit HubX.biz.