The Accelerator Conundrum: The Equity-for-Promise Bargain

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 strip away the glitz, the co-working space amenities, and the endless “networking opportunities” for a moment. 

At its core, the 3-month equity-based accelerator model boils down to a very simple, yet profoundly impactful, transaction: you hand over a significant chunk of your company’s equity (typically between 5% and 15%) in exchange for a small cash injection, some highly variable mentorship, and a fixed-term program. 

Is that truly a fair exchange? I say, more often than not, it’s a lopsided deal.

Consider the implications. 

You’re surrendering a piece of your future before you’ve even built anything substantial, before you’ve achieved true product-market fit, and often, before you’ve generated a single dollar of sustainable revenue. 

This early dilution, while seemingly minor at the outset, compounds with every subsequent funding round. What starts as 7% can quickly mushroom into a controlling stake for investors down the line, leaving the founders with a mere sliver of the pie they painstakingly baked.

What exactly are you paying for? 

A few tens of thousands of dollars – money that you could often raise through creative bootstrapping. 

Even at the highest range, say $250k for 15% equity, this is extremely expensive capital. 

The “promise” of mentorship is spotty. Some mentors are genuinely helpful, others are glorified cheerleaders, and many are simply too busy to offer consistent, meaningful guidance. They shoot from the hip.

The program itself is often a generic curriculum designed to fit all, rather than a bespoke solution for your unique challenges. 

This isn’t a partnership. It’s a calculated acquisition of early, cheap equity, banking on the hope that one or two ventures in a batch will hit it big, effectively subsidizing the entire portfolio. 

It’s time entrepreneurs opened their eyes to the true nature of this bargain.

Photo Credit: Phil Reese from Pixabay

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