Y Combinator

Accelerator capital is priced differently

Programs that combine a small cheque with a fixed-term cohort are buying equity at the earliest and least measurable point in a company's life. The stated terms — a set amount for a set percentage — look simple, but the effective valuation they imply is usually far below what the company could raise a year later, which is the trade the founder is making in exchange for the network, the structure and the credibility signal.

For an individual investor, the relevant point is what an accelerator badge does and does not tell you. It says a selection process filtered this company in, and that early paperwork is likely to be standard rather than improvised. It says nothing about whether the price you are being offered now is reasonable — accelerator alumni raise at every kind of valuation, sensible and otherwise.