Startup Accelerators: Short-cut to success or hype?

Hope you had a Happy Thanksgiving aka you were not on-call over the holidays.

This week I got to catch up with Rifath Shaarook, a young founder I’ve been advising remotely for over a year. He’s building Catalyx, a space startup offering unmanned space labs and re-entry capsules to make space more accessible.

We finally met in person because he’s here for the TechStars Space Accelerator. Watching his journey unfold reminds me of the value, and the reality, of startup accelerators.

Every few months, I find myself having to entertain the same conversation with friends. Are startup accelerators worth it? It usually happens as the Y Combinator application deadline approaches.

To be fair, the skepticism isn’t usually from doctors, who tend to appreciate the structure and resources accelerators provide. It’s often from friends already in tech, who are trying to outsmart the system or avoid giving away equity.

If you’ve been exploring startups, you’ve probably heard of accelerators like YC, TechStars, or 500 Startups. They’re like the Ivy League of entrepreneurship, promising mentorship, funding, and networks.

But are they truly worth it? Let me share what I’ve learned.

What’s an Accelerator, Really?

Accelerators are intense boot camps for startups. You apply with anything from a raw idea to a working product with customers. If accepted, you’re paired with mentors and a group of peers. Together, you sprint through a few months of relentless building, refining, and learning.

At the end, there’s usually a Demo Day, where you pitch to investors. Graduating from a top accelerator also earns your startup a badge of credibility, like a prestigious degree for your business.

It’s important to remember that they don’t do any of the work for you. They just literally just accelerate the work your team is doing.

The Promise and the Trade-Off

The most common hesitation I hear about accelerators is equity. YC, for example, offers $500,000 in funding but takes roughly 10% of your company.

People complain it’s too much. But the truth is this.

There’s only one calculation to make when giving away equity, whether to an investor, accelerator, or employee: Will they increase the value of my company by more than the equity I’m giving them?

For us, the answer was yes. By the time we finished Demo Day, we raised funding at more than double the valuation we would have gotten before joining YC. Numerically, it more than offset the equity we gave up.

But it wasn’t just about money. YC helped us refine our business model, truly understand our customers, and remove the stress of fundraising.

Over 100 investors reached out to us after Demo Day. We closed our round in two weeks instead of the months it usually takes. It also helped us recruit talent a lot easier.

For others, the benefit is even more dramatic.

Dr. Alex Oshmyansky used his YC badge to get a meeting with Mark Cuban, which transformed his startup. Together, they have already helped over 2 million patients access more affordable medications.

Airbnb had decided to shut down when a friend suggested applying to YC as a last resort. That decision led to one of the most successful companies in history, now worth ~ $100 billion.

And for Rifath, TechStars gave him the network and credibility to be taken seriously by investors and giant customers. Before that, he was just a kid in India with an ambitious space startup that wasn’t being taken seriously by investors or customers outside of India.

Well, a kid that had already performed 26+ space missions, the first being at 16 years old, and had 4 satellites currently in orbit. He also built the world’s smallest satellite when he was 18.

Are All Accelerators Worth It?

No. The value varies widely, and the equity trade-off should align with the brand recognition and resources provided.

But here’s the truth. The most important factor is the network.

Like most things in life, from school and career choices to where your kids are born, the people you surround yourself with matter most. A great accelerator connects you to a dense, high-quality network who can challenge, inspire, and propel you forward.

YC has an incredible track record, including OpenAI, Airbnb, Reddit, Coinbase, Doordash, etc, among others that are collectively worth over $600 billion. It’s important to note that $575 billion of that comes from just 30 companies out of over 5,000, illustrating the power-law dynamic. However, it’s that track record that consistently brings in top founders vying to get through its 1% acceptance rate.

Techstars’ portfolio is worth $116 billion and 500 Global’s startups collectively surpass $300 billion. They also consistently attract top talent as a result.

There are some interesting unique ones that only the Doogie Howsers among us can access, such as the Thiel fellowship, that has an age limit of 22 years old and a surprisingly good track record.

There’s a popular new accelerator, HF0, that is being run from the historic Archbishop mansion in SF. Accepted founders live together in the mansion during the program. It’s become super popular among successful former founders because of the unique setup.

Final Thoughts

Accelerators are not a one-size-fits-all solution.

Choose an accelerator if:
1. You’re struggling to raise money or connect with investors.
2. You need a strong network to open doors you can’t on your own.
3. You’re navigating the startup world for the first time and need guidance.
4. You want credibility to help validate your idea or attract key partners.
5. You need structure and focus to accelerate your progress in a short time.
6. You need an excuse to leave clinical medicine to pursue your idea more seriously.

Doctor founders usually say yes to all 6, like I did. There’s also very little to lose with applying.

Best,
Mohammed

Investment Opportunity

Catalyx has already achieved $500K in revenue and has been entirely self-funded to this point. They claim to have nearly $5M in LOIs.

They’re now raising at an $8M valuation to help them get to their next phase of growth, which I’ll be investing in personally. This is an incredibly modest valuation given their accomplishments.

If you’re curious or interested in learning more, let me know, and I’d be happy to facilitate an introduction. The minimum check size is likely around $5K.