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Are Startup Incubators and Accelerators Still Worth It?

Are Startup Incubators and Accelerators Still Worth It?

For startups, there's no shortage of business incubators or accelerators from which to choose these days--there are already more than 2,100 of them across the globe, with new ones popping up each year.

But are these programs still worth your time and, oftentimes, giving up an equity stake in your venture? It depends on what stage your venture is at, and what you may need help with. "As an entrepreneur, I would look at it from: What does my company need, and what program is the best to help my company in that specific need?" says David Tisch, the startup investor who co-founded the accelerator TechStars NYC.

"If you're working on something that the best accelerator doesn't work on, you should look elsewhere," he adds. "Otherwise you should go to the best."

Startup founders, as well as execs behind accelerators and incubators, also recommend:

Bigger isn't always better. Y Combinator--arguably the most well known accelerator that grooms and invests in startups--began accepting fewer applicants with its winter 2012 cohort because it grew too fast. It accepted 66 companies, "and that was fine," wrote Y Combinator's co-founder Paul Graham, "but for some reason more things than usual broke when we jumped from 66 to 84."

What changed? Structure. Graham says that at Y Combinator, every partner had to know what every startup was doing--and that became harder to accomplish as the program's cohort size increased. As a result, Graham and the selection committee felt they could decrease the number of accepted applicants without missing any Dropboxes or Airbnbs while, at the same time, they could offer more value in the form of mentorship and detailed advice to the remaining participants. While there’s no specific cohort size that startup founders should consider, Graham says, find out whether the program you're interested in has a similar policy or has expanded its resources if its cohort size has grown.

Related: Thinking of Joining and Incubator? Check off These 5 Things First

Gauge responsiveness. Older, established programs will likely better anticipate what your venture needs to grow, although they may also be among the hardest to get into. If you're considering a program that debuted more recently, speak to its alumni and gauge how responsive it was to the startups' needs.

For its part, JOLT, an incubator that launched two years ago at Toronto’s MaRS Discovery District, has evolved, says Susan McGill, JOLT's co-founder and executive director. She says the accelerator has become more loosely structured with workshops and other learning sessions. Instead of adhering to predetermined programming, it assesses each startup's "cadence and pacing" to determine whether help is needed, be it financial modeling, strategizing about acquiring users or defining metrics of success.

"When we choose the companies we have a pretty good sense of what they need to do in the next six to 12 months, and we'll sit down and we'll curate to make sure that we've got the infrastructure and support system in place to make them successful as quickly as possible," says McGill.

Scrutinize their networks. Certain programs may have stronger ties with mentors who are better suited to guide early-stage startups, or later-stage businesses for that matter. "The top programs have great alumni and mentor networks which have been helpful for us at all stages," says Stephen Lake, co-founder of Thalmic Labs, which produced the gesture-controlled Myo armband and has cycled through Velocity, Creative Destruction Lab (CDL) and Y Combinator. (Disclosure:My wife is an associate director at CDL.)

Y Combinator was "incredibly valuable" for its network of people who had been through similar experiences--"almost like having an extended family," says Lake. Meanwhile, he adds, "CDL was helpful in a different way. They have a very strong 'G7,' or board of advisors, who ask the tough questions. It's like having an informal [board of directors] much earlier on."

Related: Choose the Right Incubator for Your Startup

Know their expectations. Flexibility is key for a small but growing number of businesses that are turning to more than one incubator or accelerator to fill different needs, depending on their growth phase.

Since launching Peekapak last year, co-founders Ami Shah and Angie Chan have been accepted into or cycled through four separate programs to help them grow their interactive storytelling startup. One (SheEO) mentors women executives, while another (Imagine K12) specializes in nurturing education-focused ventures. And through a pitch competition they won a year of free office space at a digital media and gaming incubator, which they're allowed to use later--once they finish up at JOLT, where they're currently working.

Yet this kind of game plan won't work for everyone. Most programs require significant time and resources, says Lake, who warns they can become distracting from building a business in certain situations if they have too many learning sessions. His recommendation? Take advantage of the program, or programs, that offer the type of resources you need at each stage of your company's development.

"I think it's important to pick and choose the parts that are relevant to you to participate in," says Lake. "We generally skipped all the 'extras'"--like certain social events or guest speaker sessions, for instance--"and participated in the highest-value parts for us at the time."

Related: How to Get the Most Out of an Accelerator Program

Not every incubator or accelerator may allow this, however, so it's worth checking up front. And some experts warn there can be too much of what seems to be a good thing for those startups that serially cycle through one program after another: "You have to be somewhat careful because you don't want the companies to be over-mentored," says McGill. "Eventually it can be debilitating when they get all these different opinions."

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