The Accelerator Conundrum: Equity Preservation

The Accelerator Conundrum is a multipart series that challenges the prevailing wisdom of the tech startup ecosystem that entrepreneurs should Blitzscale out of the gate. Written by Sramana Mitra, the Founder and CEO of One Million by One Million (1Mby1M), the world’s first global virtual accelerator, it emphatically argues that a better strategy is to Bootstrap First, Raise Money Later, focus on customers, revenues and profits. 1Mby1M’s mission is to help a Million entrepreneurs reach a million dollars in annual revenue and beyond. Sramana’s Digital Mind AI Mentor virtually mentors entrepreneurs around the world in 57 languages. Try it out!

Let’s address what is, perhaps, the single most critical advantage of a model like 1Mby1M over the traditional accelerator: equity preservation. 

In the world of startups, your equity is your wealth, your control, and your ultimate payoff. 

Yet, the prevailing equity-driven accelerator model demands that you surrender a significant slice of this precious asset at the very outset, often for a meager sum and unproven promises. 

This is a fundamental misstep for many entrepreneurs serious about building lasting value for themselves.

Think about it this way: every percentage point you give away early on is a percentage point less that you own when your company truly succeeds. 

If your startup is fortunate enough to raise significant capital, that initial 5-10% accelerator dilution, compounded by subsequent funding rounds, can leave founders with a shockingly small fraction of the company they poured their lives into creating. 

You become an employee in your own venture, rather than a primary beneficiary of its success.

And if your exit is small (96% of exits are sub $100M), equity dilution could leave you with staggeringly small returns.

The 1Mby1M model, by contrast, operates on a lean, bootstrap-first philosophy that inherently champions equity preservation. 

Why give away a piece of your company for generalized advice or a small check when you can access world-class guidance, a vibrant community, and strategic insights without diluting your ownership? 

By focusing on organic growth and minimizing reliance on external capital, entrepreneurs retain a much larger stake in their companies, ensuring that when the value is created, they are the ones who benefit most significantly. 

No, Accelerator is not synonymous with a 3-month sprint in exchange of equity.

There is also the 1Mby1M way.

Photo Credit: Bruce Emmerling from Pixabay

This segment is a part in the series : The Accelerator Conundrum