Previously, LendEDU CEO and ISA 2014 Alumni Nate Matherson
If you’re a startup founder, you’ve probably had lots of people tell you how important it is to apply to an accelerator. Not only do they often provide you with funds for your business, but they do something far more valuable – they connect you with the expertise necessary to help you figure out how best to grow your business and the network and resources to help you actually follow through on those plans.
But being part of an accelerator isn’t all cash infusions and great connections. There are both benefits and downsides to taking part in a startup accelerator, and it’s important to be aware of them so that you can make a decision that’s right for you.
LendEDU’s Experience with the Iowa Startup Accelerator
In 2014, when Matt Lenhard and I were first starting LendEDU, an online marketplace student loans, student loan refinance, personal loans and more, we were lucky to be accepted into the Iowa Startup Accelerator. Of course, at the time, LendEDU wasn’t LendEDU. We originally started a company called ShopTutors which created software that helped college students find tutors for their classes.
We were told by friends and professors that we should apply to an accelerator program, but at first we weren’t sure if it was the right choice for us. After all, we were still in college, and we knew we wouldn’t be able to continue going to school and fully participate in the accelerator. That would mean that we would have to take a break from college – something we weren’t sure that we wanted to do.
But when we got accepted, we realized that it was worth it to take a chance and put our schooling on hold in order to take full advantage of the accelerator. We got a $20,000 investment in exchange for 6% ownership of our company and joined 9 other startups in an intensive 90-day development program. At just 20 years old, we were by far the youngest participants in the program and we were worried that people wouldn’t take our business seriously.
But when we got there, we threw ourselves into the experience. We focused on improving our business model and learned about things like how Agile theory could help our business. We were able to network and work with world-class mentors who provided us with tough, but fair feedback. It was difficult to hear this feedback as first-time entrepreneurs since we loved our business idea and were certain it would succeed.
But the accelerator taught us that we couldn’t just cling to our belief in our business concept, we had to test our concept. In doing so, we realized something that we didn’t expect. We needed to pivot our business. There just wasn’t enough of a market for our ShopTutors platform. That was when we realized that repaying student loans were a big problem that many college graduates were facing and we decided to become a marketplace for student loan refinancing.
We still credit the Iowa Startup Accelerator with having saved us a significant amount of time and money since we were able to realize quickly that our original concept wouldn’t work and pivot to something that would.
The Iowa Startup Accelerator also helped us find follow-up capital after we finished the program via Built by Iowa, which was integral in helping us continue to grow the business. That isn’t something that we would have been able to do ourselves.
The Downsides
Despite all the great benefits of the Iowa Startup Accelerator, there were also some downsides. There was definitely an opportunity cost to taking a break from college – even though we returned about six months later. It was more difficult to get back into school when we returned and then we had to balance our business’ growth with going to class – which was a juggling act. While I wouldn’t do anything differently, for some individuals it might make more sense to have waited until we graduated.
Also, it’s important that those who are thinking of participating in an accelerator realize the commitment that they are making. You are working on your business intensively for that whole period of time. We didn’t miss out on the all-nighters we had been pulling in college because we were pulling all-nighters for our business.
Another downside was that the investment was only $20,000. While this was a huge boost to our bank accounts when we were just starting, it was important that we use these funds carefully to ensure that we would be able to get the most benefit for our dollars. We definitely needed more money when we were done with the accelerator and we were lucky to have gotten help accessing more capital, but that’s not guaranteed.
Accelerators are Worthwhile
Ultimately, being part of the Iowa Startup Accelerator was very worthwhile for our company. Without it, I doubt we would have been able to thrive and grow along the same trajectory that we have.
LendEDU is currently a seven figure revenue company with 9 full-time employees. We wouldn’t be where we are today without the help and investment from the ISA. If you’re considering participating, you should definitely weigh the pros and cons for your business to make sure it is the right choice, but I highly doubt you’ll regret participating in the program if you do. We certainly don’t.