Stuck in a shark like Accelerator Program

AAnonymous ·October 30, 2015 ·4 answers

So this accelerator program we got in is starting to bite us in the back. We got some money from them and they took almost 30% of it as ‘fees’. Now our company is doing decent (growing organically with no marketing budget) and they’re fucking us in the ass about numbers. Keep giving us red flags and parachute critiques at every meeting.

Our agreement is also very predatory – participatory preference with 1.3x return and a 3 year maximum share-holding period.

I don’t know what I should do, but advice for all entreprenuers — keep away from these incubators and accelerators which are not top tier. They are literally money making schemes — second tier attracts second tier which is where companies go to die. Become first tier or die slow. Otherwise be second tier and die painfully slowly.

4 answers from the community

AAnonymous· Oct 30, 2015

If they're so predatory why did you accept the terms? Did they mislead you?

AAnonymous· Oct 31, 2015

When you're a first time entrepreneur and struggling for cash, these things take a backseat. You just want the money and the fine-print doesn't bother you until it really does.

They told us about this after signing the term sheet and before the share holding agreement. We had invested almost 3 months into this - so finally gave up a sizeable chunk of my company for 'fees' which in no way reflected in our growth numbers. Any investor trying to pass off 'fees' as something valuable to the company is bullshit is what I've learned.

Good investors will always do the good thing - 1x non-participatory with no overhead costs apart from lawyers etc. These are founder-friendly terms.

I suspect a lot of first-time entrepreneurs will not know this and are on their road to misery just because they are picking up money from investors when they are not in a strong place as a company. I could not find a single article which told me in simple language what Tag Along, Drag Along, Participatory, Liquidation etc actually mean.

AAnonymous· Oct 31, 2015

Thanks for sharing your experience. 30% is a rip off. There must be some way to get out of there.

AAnonymous· Nov 4, 2015

1) Get out: Consult a lawyer for best way to do it cleanly, then dissolve the company and go start again elsewhere. At least you know what can work. The sharkcelerator heads cannot recreate and run the biz themselves.

2) You're posting anonymously, so why can't you name names?!

Stuck in a shark like Accelerator Program

4 answers from the community

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