Whenever I recommend a startup accelerator to a skeptical entrepreneur, I usually hear one of these three common objections:
- “I’m too advanced for an incubator.”
- “I don’t want to give up a huge chunk of my company so early.”
- “I don’t want to move to Silicon Valley/New York/Boulder.”
Let’s answer these one at a time:
1. Are you the perfect entrepreneur?
Does Jack Dorsey routinely call you for startup advice? If not, I would highly recommend optimizing your startup through an incubator or accelerator.
There was a startup in our accelerator class that had multiple founders with 9- or 10-figure exits under their belts, and had already raised millions of dollars for their current venture. If they can find value from a startup accelerator, I’m sure you can too.
2. Should I give up equity this early?
The average startup rarely goes through more than one accelerator/incubator, so it’s often hard to price out exactly how valuable the program is in equity terms. One great point of reference is Paul Graham’s “Equity Equation,” which boils down to the following statement: “You should give up n% of your company if what you trade it for improves your average outcome enough that the (100 – n)% you have left is worth more than the whole company was before.”
It is very hard to argue that the best programs aren’t worth the 5-10% equity for most early-stage startups. The key advice and mentorship provided in the formative months of a company can be worth years worth of failed product development and provide a support system that keeps an early team on track.
Better yet, find an accelerator that decouples advice and funding. Rock Health is a well-known example of this. Their team, mentors, and advisors all work for the non-profit Rock Health, while investments come from Rock Health Fund, with LPs Kleiner Perkins Caufield Byers, Mayo Clinic, Mohr Davidow Ventures, and Aberdare Ventures.
Y Combinator is a program that does both: it takes equity for a small stipend and also facilitates external funding options on an uncapped convertible note. But when you’ve got the name recognition, fundraising skill, and exit history of Paul Graham & Co., it doesn’t seem like that bad of a deal.
3. Moving to join a startup accelerator/incubator
In the first six months of LabDoor’s existence, I moved twice. The first time, I said goodbye to my favorite city in the world, Ann Arbor, temporarily leaving behind my girlfriend and two dogs, to join a great product team in Indianapolis. The second time, this team, now four-deep, packed up our whole lives and drove a moving truck 2,000 miles to San Francisco to join Rock Health. Without these two decisions, it’s extremely unlikely that LabDoor would be as successful as it is today.
Good entrepreneurs do whatever it takes to maximize the success of their venture. While I’m confident that startups can be successful anywhere, a great startup accelerator can take years off a company’s path to success. Don’t let your comfort zone keep you away from a great opportunity.
Note: If this all still seems too complicated of a decision, feel free to email me at neil(at)labdoor(dot)com, and I’ll do my best to help!