Incubators and Accelerators FAQs

This post answers some commonly asked questions about incubators and accelerators. I have answered these questions on Quora as well.

Is an offer of 7.5% pref equity for $30k cash & 3 months acceleration a bad deal for a startup?

It's a pretty bad deal.

YCombinator offers $120k for 7% equity for a top range 3-month program.

$30k for 7.5% equity for a 3-month acceleration program is a lousy deal, even though, many accelerators use it.

You should look for two things:

(1) A non-equity accelerator
(2) One with a longer horizon than 3 months

Unless you can get $100k+ for 3-months of acceleration as seed money, if you choose to part with 7% equity.

Can you apply to both 500 Startups and Y Combinator? What happens if both accept you?

Sure. You have a high class problem of choosing which one to go to if both accepts you. You have to choose, however.

Btw, if you make a habit of going from one accelerator to another and give away 5-10% equity each round, then very soon, your cap table becomes unpalatable.

You can work with an accelerator that doesn't charge equity, prepare, make progress, and then apply to YC, 500 Startups, Techstars. That is a better strategy. In that case, the likelihood of all 3 fighting over you is high.

It's like applying for the ivy league colleges.

What steps should I take to maximize my chances of getting into Combinator?
Join a non-equity -based accelerator and get your concept sufficiently fleshed out and ensure that it is fundable. They only accept fundable ideas.

Also, by the time you get to YC, you can fully leverage their fund-raising assistance, if you do your homework. You only have 3 months to be at YC.

What did you agree with and disagree with in Vinod Kholsa's recent criticisms of YC startups and why?

I agree that pumping up valuations too early in the game without tangible performance is a set up for future failure. Follow-on rounds will be down-rounds, which is demoralizing, and not terribly convincing for the VCs.

Photo credit: Sam Churchill/Flickr.com.