A startup accelerator, sometimes known as a seed accelerator, is a type of business programme that provides education, mentorship, and funding to help early-stage, growth-driven businesses.
Startups often enrol in accelerators for a predetermined period and as a group of related businesses.
Although accelerator programmes can offer valuable tools to businesses at all stages of development, the majority of them concentrate on pre-revenue businesses.
History of Startup Accelerators
Y Combinator, which began operations in Cambridge, Massachusetts before moving to Silicon Valley, was the first independent startup incubator.
The success of this business model led to a rapid expansion of seed accelerator programmes in both the US and Europe. Around one-third of startups that received funding in 2015 were found to have gone through an accelerator.
Large organisations have started to develop their own accelerator programmes that are similar to independent startup accelerators but typically concentrate on narrower categories.
Additionally, accelerators support the growth of different types of startup activity outside of established tech hubs like Silicon Valley and the Boston-Washington corridor.
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How to Become a Startup Accelerator
To become a startup accelerator, follow the procedure below:
- Startups interested in joining an accelerator apply, and they are frequently accepted in batches that are spread out over the year.
- Once a firm has been selected, the accelerator will offer tools and services
- The tools and services are like coworking space, guest speakers, advising hours, and a negotiated amount of funding.
- Term periods are typically 3 to 4 months long and call for 3 to 8% startup ownership.
- An accelerator’s aid comes to an end with a “graduation” or demo day, at which entrepreneurs present their work and move forth on their own.
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What Do Startup Accelerators do?
In general, they assist businesses in defining and developing their initial goods, identifying lucrative customer niches, and securing resources, such as funding and personnel.
More specifically, accelerator programmes are short-term initiatives that aid startup cohorts in the launch of new ventures. They generally last three months. They typically offer working space as well as a modest amount of seed money.
Additionally, they provide a wide range of networking opportunities, including those with mentors and peers who may be successful business people, programme graduates, venture capitalists, angel investors, or even corporate executives.
The majority of programmes end in a big event called a “demo day,” where enterprises present to a large group of qualified investors. You might think that everything sounds familiar. After all, don’t startups benefit from incubators and angel investors? Undoubtedly, startup accelerators share similarities with incubators and angel investors.
Accelerators share their goal of assisting fledgling businesses during their formation. As a result, it stands to reason that incubators and angel investors would offer many of the same services that accelerators do.
Startup Accelerators, however, vary in several ways. The short duration of accelerator programmes compared to the ongoing nature of incubators and angel investments may be the most important distinction. This one little variation causes a lot of additional variations.
Advantages and Disadvantages of startup accelerators
| Advantages | Disadvantages |
| Seed money, an immediate network of contacts, mentorship, educational programming, | Success is not assured following programme completion, though. |
| Startup accelerators give increased success and great chances are all to startups. | Additionally, as accelerators grow in popularity, it is more important than ever to stand out both during and after the process.But some don’t stand out. |
Examples of Startup Accelerator
- Tech hardware
- Artificial Intelligence (Al), and
- Biotech are the most popular industries for startup accelerators, and many well-known brands have benefited from early support from accelerators.
- Plug & Play Tech Center, a Silicon Valley accelerator, assisted Google, PayPal, and Zoosk in turning their concepts into profitable enterprises.
- Other well-known accelerators include Techstars, which has funded more than 21 firms, and Y Combinator, which created Airbnb, Dropbox, and Reddit.
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Comparing Accelerators and Incubators
| Accelerator | Incubator |
| Accelerators also aid newly launched businesses. | From a philosophical standpoint, incubators support fledgling businesses by protecting them from the outside world so they have space to develop. |
| Accelerators, on the other hand, expedite market contacts to aid startup businesses in adapting and learning quickly. | According to studies on incubators, businesses might graduate from them anywhere between one and five years after they first enrol. |
| The feature that best identifies accelerator programmes is their short lifespan, which is typically three months. | Incubator guide and nurse business overtime before they can stand on their own. |
Startup Incubators versus Alternatives
Startup accelerators and other early-stage institutional support mechanisms like startup incubators, angel investors, and venture capitalists are frequently mistaken for one another. The way that accelerators vary from other programmes is that they are cohort-based, fixed-term, short-term, and mentorship-driven.
Competition in the application process, an equity-based seed capital investment, and education for the entire team rather than just the entrepreneur are additional features that are frequently only associated with startup accelerators.
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Comparing Angel Investors and Accelerators
While accelerators and incubators are frequently compared, angel investors may be a better comparison. Importantly, both finance fledgling businesses, which they refer to as portfolio enterprises.
Both are investors, therefore their motivations are similar to the founders’, who desire to expand their companies and eventually strike out on their own.
The business owners who took part in my research concur. While none of them gave incubator applications any thought, almost everyone tried or planned to raise startup money from angel investors.
Furthermore, almost all of the accelerator founders who took part in my study were active angel investors, although none of them had prior experience running incubators. Picking winners and altering businesses’ directions are two issues that the accelerator framework assists angel investors with.
Conclusion
In conclusion, incubators, angel investors, and accelerators share many similarities. They all, in particular, wish to support new businesses. Accelerators, a new class of organisation, differ from incubators and angel investors in many ways, sometimes significantly.
Startup Accelerators essentially separate the financial and knowledge resources that incubators and angel investors previously gave, offering more guidance and less funding than each one.
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Key Takeaways
- A startup accelerator, sometimes known as a seed accelerator, is a type of business programme that provides education, mentorship, and funding to help early-stage, growth-driven businesses.
- Advantages and Disadvantages of startup accelerators
- Seed money, an immediate network of contacts, mentorship, educational programming, and increased success chances are all advantages of being accepted into an accelerator.
- Success is not assured following programme completion, though. Additionally, as accelerators grow in popularity, it is more important than ever to stand out both during and after the process.
- What do accelerators do? They assist businesses in defining and developing their initial goods, identifying lucrative customer niches, and securing resources, such as funding and personnel
