Three Months and a Demo Day for Seven Percent
Accelerators provide a small amount of capital, a cohort, mentorship, and a demo day, in exchange for equity. The capital is not the product and the equity cost is high relative to the money.
The Standard Deal
An accelerator takes a cohort of early stage companies through a fixed programme, typically three months, ending in a demo day where they present to investors.
The economic terms have converged across the industry: a modest amount of capital, commonly in the low hundreds of thousands, in exchange for a fixed equity percentage, historically around six or seven percent.
Several programmes have added a second, larger investment on uncapped terms alongside the equity purchase, which changes the arithmetic and is worth reading carefully.
The Equity Is Expensive Relative to the Money
Taking the headline terms literally implies a valuation. A hundred and fifty thousand for seven percent implies a company worth roughly two million.
For a company with a working product and early revenue, that is well below what could be raised elsewhere. For a company with two founders and an idea, it may be more than anyone else would offer.
| Company Stage | Accelerator Terms |
|---|---|
| Idea, no product, first company | Frequently the best available capital |
| Working product, early revenue | Expensive relative to a seed round |
| Growing, experienced founders | Substantially dilutive for little capital |
Nobody joins an accelerator for the money. The capital is roughly a founder salary for a few months, and the equity price is set on what the programme provides around it.
What Is Actually Being Purchased
Four things, of genuinely different value.
Signalling. Acceptance into a selective programme is a credential that changes how investors read a company. For founders without a track record, a network, or a recognisable background, that credential is the most valuable component and is difficult to obtain otherwise.
Investor access. A demo day puts a founder in front of investors who would not have taken a meeting, compressed into a period when several companies are raising simultaneously, which creates competitive tension.
The cohort. Peers going through the same problems at the same time, and an alumni network that persists. Founders consistently report this as the most durable benefit, which is not what the programme markets.
A forcing function. Three months with a fixed end date and weekly accountability produces more progress than three months without, which is a genuine effect and is the least discussed.
The Selection Question
The persistent analytical difficulty with accelerator outcomes is separating value added from selection.
Top programmes accept a very small percentage of applicants. Companies emerging from them raise more and fail less, and it is genuinely unclear how much of that reflects what the programme did versus which companies it chose.
Research attempting to isolate the effect, comparing companies just above and just below acceptance thresholds, has found positive effects on funding and survival, with magnitudes varying by programme and considerably smaller than raw outcome comparisons suggest.
The practical implication is that programme reputation is not merely marketing. The signalling value is real, and it accrues overwhelmingly to a small number of programmes.
The Tiering
The market has separated sharply.
A handful of programmes have genuine signalling value, deal flow that attracts serious investors to demo day, and alumni networks worth joining.
Below that sits a long tail of regional, corporate, and university affiliated programmes offering the same nominal deal with substantially less of what makes it worth taking.
For those, the equity cost is the same and the benefits are considerably thinner, and the honest assessment for many founders is that the programme is taking meaningful equity for mentorship of uncertain quality and a demo day nobody important attends.
Corporate Accelerators
A distinct category is run by large companies rather than by investors, and the motivations differ.
The corporate objective is frequently market intelligence, access to technology, or building a pipeline of acquisition targets, rather than financial return on the equity.
That can be favourable, since corporate programmes sometimes take less equity or none, and provide something more valuable than capital: a customer, a distribution channel, or a technical integration.
It also carries risks. A close relationship with one large company can complicate selling to its competitors, and information shared during a programme is difficult to unshare.
What a Founder Should Ask
The useful questions are specific. What proportion of the last three cohorts raised a subsequent round, and from whom. Which investors actually attended the last demo day. What the terms are including any follow on investment and its conversion mechanics. Whether any pro rata or information rights persist afterwards. And whether the founders of recent cohort companies would do it again, which is a question worth asking them directly rather than asking the programme.
The Bottom Line
An accelerator sells signalling, access, a peer group, and a deadline, and prices them at an equity percentage that is expensive relative to the capital provided. For a first time founder without a network the credential is frequently worth more than the equity. For an experienced founder who can raise a seed round on their own terms it usually is not, and the gap between the top programmes and the rest is wide enough that the same nominal deal is a good one in a few places and a poor one nearly everywhere else.