My answer to a question on Quora… I liked the answer well enough to post it here.
The only way you could negotiate a buy-back of equity is if things are going very poorly; and probably not even then. I’ll explain why.
An accelerator gets very inexpensive equity (often ~6-10% for less than $50k).
The reason is that they are providing substantial non-cash value: mentorship, access to their network, and exposure to investors at demo day.
Even if a company has already raised money, the accelerator almost always gets their equity cheaper than prior investors. They certainly get it cheaper than investors on demo day; which represents the superficial business model of an accelerator program: get their money in early at a steep discount, add value, and try to guarantee follow-on capital.
It’s a great business model.
It would fall apart if they accepted buy-outs of their equity position. Any company successful at raising money after the program should want to buy out the accelerator if it was an option, because the accelerator got the equity so cheaply (in monetary terms). Unsuccessful companies at raising would not buy back their equity, creating a negative selection bias.
So you might think if things are going poorly they’ll gladly take their money back? No. While the successful companies are great; in terms of return on the portfolio they are almost insignificant. Almost all the return on an accelerator’s portfolio come from the outliers (what Paul Graham calls Black Swans); a few companies that return gigantic multiples.
So the question they will ask themselves when you want to buy back your equity (whether things are going well or poorly)… is how do they know you won’t be the black swan? They’ll probably be unwilling to make that judgement. You can often learn more from your mistakes than your success, and the best outliers are often business models that get discovered in the process, and/or odd ideas that succeeded massively after appearing to fail.
fundraising is not merely a useless metric, but positively misleading. We’re in a business where we need to pick unpromising-looking outliers – Paul Graham
That, is the real business model of an accelerator program: Black Swan Farming.
Prove you’re not a black swan. You can’t, because they decided you had that potential when they accepted you into the accelerator program; and they are unlikely to throw away their betting tickets early.