SA国际传媒

This is the third installment in a four-part series featuring workers displaced by the recent waves of tech layoffs who used the transition to found their own companies. In Part One we chatted with investors and founders and looked at data for early-stage startups. In Part Two we met tech-worker-turned-entrepreneur . Part Four introduces legal tech entrepreneur . Today we visit the state of accelerators during the downturn. 鈥� Special Projects Editor Christine Kilpatrick

It鈥檚 never easy to get into the most competitive accelerator programs. These days, however, there鈥檚 good reason to believe the competition is getting even fiercer.

From at top programs like to reduced seed-stage funding for newly minted founders, the environment for launching a startup has changed considerably in the past few quarters. Meanwhile, the alternative 鈥� a job at someone else鈥檚 tech company 鈥� is neither as stable nor as lucrative as it used to be.

鈥淭he sentiment is: It鈥檚 not nearly as attractive to be at these large techs in May of 2023 as in June of 2021,鈥� said , a partner at Ventures, an early-stage investor that runs a small program for pre-seed and seed-stage teams.

The rise in layoffs over the past year has also broadened the pool of potential entrepreneurs with more time for other pursuits now that they鈥檙e not toiling for a paycheck. Close to 140,000 workers at U.S.-based tech companies have been laid off in mass job cuts so far in 2023, per SA国际传媒鈥檚 Layoff Tracker. Job openings, meanwhile, are down sharply since the market peaked in late 2021.

Accelerator applications pile up

Of course, entrepreneurship doesn鈥檛 happen in a vacuum. One doesn鈥檛 just leave a 9-to-5 job, devote a few late nights to coding, and create the next big software platform. Building something scalable typically takes networks, business plans, pitching, sales calls, term sheets and a lot of rejection along the way.

That鈥檚 where accelerators and incubators come in. While programs vary widely in size, duration and sector focus, most pitch themselves as a way for founders to get access to the networks, investors, advice and support they need to turn a vision or prototype into a more viable business.

It鈥檚 a compelling offer, which helps explain why the best-known programs are notoriously tough to get into. Only an 1% of Y Combinator applicants make it into the storied program, while the acceptance rate for is said to be 1% to 2%.

There鈥檚 no established index of acceptance rates across the accelerator ecosystem, so it鈥檚 tough to say what the average is for the space. As programs become more known and established, however, they attract more applicants. And downturns don鈥檛 have a history of deterring would-be entrepreneurs.

There鈥檚 no time like a down time

At NextView, for instance, the pool applying for the latest accelerator class was larger than last year鈥檚, and the quality of applicants was also higher, per Koh. Although founders will be founders regardless of where we are in the market cycle, she did point to several factors that make this a particularly compelling time to launch.

One factor, she noted, is that plummeting valuations at public and private technology companies have left employees with stock compensation packages that look far less valuable than they were a year ago. As a result, many are 鈥渇ree from the golden handcuffs鈥� of an anticipated options payoff.

Startup founders today also face less competition, and lower advertising and marketing costs. True, their prospective customers are also likely to be tightening their belts, but Koh believes this will mean that: 鈥渢he companies rising to the top in this generation are going to be stronger.鈥�

, head of admissions at Y Combinator, shared this viewpoint in a recent titled: Why would you start a startup in an economic downturn?

鈥淐ost-sensitive customers can be helpful in the early days of your company. If they pay you in this tough environment, it’s a stronger signal. There鈥檚 a higher likelihood you鈥檙e building something they really want,鈥� Simon wrote. She added that it鈥檚 likely not a coincidence that two of the top YC companies, and , were started in the depths of the last recession.

That said, saying now is a great time to launch a startup and actually investing more in the current environment are two different things.

Last summer, Y Combinator the size of its cohort by 40% from peak levels, citing the downturn and a more muted funding environment. The accelerator also in March that it will be decreasing late-stage investment in companies that go through its program.

So while the present moment may be a great time to launch a startup in many respects, it鈥檚 certainly not an easy one.

Illustration: Dom Guzman