Here’s What to Consider: Join an Accelerator or Incubator Program

Should Your Company Join an Accelerator or Incubator Program?

The most important things to consider before you make your decision. Opinions expressed by Entrepreneur contributors are their own. As soon as your company’s name becomes listed in a directory like Crunchbase or Pitchbook, don’t be surprised if your email inbox becomes filled with exhortations to apply to an accelerator or incubator. Even if you don’t receive these missives, you will no doubt stumble upon articles about how this or that large company got its start with two or three bright young people pivoting from one idea to the next in a famous accelerator program like Y-Combinator, TechStars or 500 Startups.

Should you consider joining one of these programs yourself? Here’s what to consider.

  1. Some networks work

One of the most significant benefits you can receive from an accelerator program is access to its network. Many young companies are initially judged based on whether more established companies are using their technology or product. Incubators and accelerators that have been around for many years and have ended up producing a number of large and ongoing companies may be better suited to help your company get its first toehold with some brand-name clients.

Do not just take it for granted that the name-dropping by accelerator promoters will result in sales for you. Ask how many of their prior participants ended up landing paying reference customers from alumni or partners of the program. Every accelerator will have one success story to tell you; however, that might not be representative. Pick a cross-section of 10 or 20 companies that have been through their program and ask specifically how many clients each one landed as a result of participation.

  1. Beware survivorship bias

Every accelerator and incubator focuses on touting their success stories. It’s possible that many of these companies would have been successful regardless of whether they joined the accelerator program or not. In order to get a true understanding of the benefit of the proposed program, you need to look at how many companies overall participated in the program and the outcome for each of them, not just the token high flyers. Is there truly a disproportionate rate of success when you examine the entire portfolio?

  1. What is the cost?

Many of the incubators and accelerators will seek a piece of your company, perhaps in exchange for a small amount of cash or just the right to participate in the program. Some incubators and accelerators may also charge an upfront fee. In the early days of your company, your cash is scarce, and you may be trying to hold onto your equity until it hits a higher price. So how should you evaluate the cost of these opportunities?

If the incubator or accelerator is offering to invest, consider the pre-money valuation and the amount of capital to be provided. Is it enough to allow you to run for a while and hit key milestones? If not, you need to be careful about setting a valuation precedent for subsequent investors. On the other hand, if there is a track record of companies receiving a step up in valuation upon exiting the accelerator, there is less cause for concern. If the rest of your diligence indicates that the accelerator can add a lot of value, then selling a small piece of your company for a somewhat lower price may be more than offset by key introductions made by the accelerator program.

  1. Is there such thing as a free lunch?

Many accelerator and incubator programs are entirely free and can provide office space, mentoring and even free lunches. Why would someone set up such program? Typically, it’s because a large company is sponsoring it and is scouting for future partners and innovative ideas. In the legal tech field, there is the LEXIS-NEXIS Legaltech Accelerator. In the enterprise-software world, there are accelerators operated by Salesforce and SAP. The Plug and Play Accelerator works with a number of large industry players to develop accelerator programs focused on particular verticals. For startups where the founder is affiliated with a particular academic institution, there are often accelerators to support students and alumni, such as StartX from Stanford and Skybridge from Berkeley.

All of these fee-free programs are worth investigating because they often provide similar mentoring benefits and a valuable network of prospected advisors and partners without any upfront fee to be paid by you. Often they organize a demo day that will help your organization get publicity and meet members of the broader community who could be subsequent investors, customers or distribution partners. Think about which large companies play in spaces adjacent to your business and start investigating whether they have accelerator program. Call the alma mater of your founders and inquire there as well.

  1. Discounts doubling?

Many programs promise discounts on a variety of services that could be of use to your company.  Before you get too excited, you need to investigate whether those discounts are cumulative with other ones you received or are subject to some other type of minimum purchase.  Also be wary of discounts for a service whose price will escalate dramatically afterwards and whose switching costs are high. It may not be worthwhile using an expensive service for free if it takes you a long time to set up and you need to spend many more hours disentangling yourself from it when the price increases.

Often times, each accelerator offers similar discounts on similar services as the other accelerators. These discounts tend not to be cumulative, and you could discover that the discount promised you by a particular accelerator is illusory because you already used it at a prior accelerator or through some other channel.

  1. Reputation matters … sometimes

If you are following the market, such as B2B, where customers may be wary of a new, unproven entrant, membership in an incubator or accelerator may give your new company a reputation boost if the accelerator or sponsor is known in the industry. Think of the accelerator as a miniature “stamp of approval.” Such a stamp is only useful if those you’re trying to impress are familiar with it and it has a high-quality connotation to it.

For some types of products and services, such as B2C offerings, your prospective customers may be individual consumers who are more focused on the details of your offering than your pedigree.  In such situations, coming out of incubator or accelerator may do little for you in terms of reputation. However, even in the B2C setting, it is often important to establish relationships with other businesses who can help you distribute, market or otherwise promote your product or service. Those intermediary businesses may be more likely to give you the benefit of the doubt if they know that an accelerator or incubator that you’re associated with has a good track record and high-quality companies.

  1. Time is of the essence

When you’re starting your business, you’re almost always under-resourced. Your scarcest commodity is probably your time. How much time commitment does the incubator or accelerator require? Are you going to have to take classes about topics you already know about, perhaps better than the instructor? Do their mentors have deep industry or subject-matter expertise that exceeds your own? If you cannot answer the aforementioned questions affirmatively, tread carefully. Odds are high that your time might be better spent building your business than hearing advice from a fly-by mentor with insufficient perspective and not much stake in the outcome.

  1. Decisions, decisions

In the end, you need to base your decision on the near-term needs of your company. Are you most in need of reputation boost? Or introductions to prospective clients? What is the true track record of the accelerator in delivering that to all of its participants — not just the high flyers who survived? If you need to raise more capital, get a study of how graduates of that program have fared in the fundraising market. You probably know your business needs better than anyone. Only settle for programs that meet your actual business needs, not those that proffer a long list of features that are not in your top one or two near-term objectives.

Choosing Mentors for Your Startup Accelerators

Select Mentors for Your Startup

Selecting the right applicants is only half the story when it comes to building a corporate accelerator. Top accelerators thrive at the intersection of promising startups and thoughtful mentors. These two groups act as the fuel to create invaluable networks and interactions that lead to a successful and enduring accelerator.

Mentorship is ubiquitous among corporate accelerators, and it works. At their best, mentors can provide startups with advice and access to networks and funding. Having top-performing entrepreneurs as mentors gives a startup an advantage.

  1. Expand

Moreover, there’s evidence from GALI that multiple mentors are desirable. More mentors help startups separate ideas shared by successful entrepreneurs from thoughts that may be rooted in personal eccentricities. In fact, parsing the advice and input from mentors within a restricted timeframe and making decisions is one of the most complex and demanding tasks that accelerator teams will face.

Susan L. Cohen noted that involving more mentors can result in conflicting advice but consulting with multiple mentors within a short period can help founders identify commonalities in the conflicting feedback.

Brad Feld noted that information management is a vital part of the learning process. According to Feld, “If you don’t build your own muscle around collecting, synthesizing, dealing with, and deciding what to do with all the data that is coming at you, then you are going to have massive problems as your company scales up.”

Cohen suggests that accelerators schedule meetings for founders, which gives the founders a wider pool of mentors. It’s also likely to result in a more diverse set of mentors than the startups are likely to assemble themselves.

Predictably, not all experts see mentor overload as a good thing. Fred Wilson, an investor, believes that too much mentor feedback creates confusion, wastes time and energy, and even results in loss of confidence. Also, the quality of mentors is bound to have an effect.

Rhett Morris is the director of Endeavor Insight, the analytics and research arm of Endeavor Global. His take is that mentors who had already achieved success in the tech industry were able to help younger tech startups outperform their peers by a factor of three. The benefits from lower quality mentors were much lower. Ravi Belani of Alchemist Accelerator went a bit further at the 2015 Wolves Summit in Poland saying that a subpar mentor can actually do harm to a startup by consuming valuable time.

  1. So where do mentors come from, and how do you separate the wheat from the chaff? Here’s how to select the right mentor.

One method of mentor recruitment is more of a matchmaking process between startups and mentors. In a 2011 report, “Nurturing Innovation: Venture Acceleration Networks,” the World Bank suggests that mentors and entrepreneurs select each other. The idea is that the relationship becomes sticky and long-lasting for a period beyond the scope of the accelerator, creating a stronger entrepreneurship network.

The World Bank report also reviewed the methods used by leading accelerators for mentorship recruitment. Here are some of the methods.

  1. MIT’s Venture Mentorship Service: Mentor recruitment is based on referrals. MIT VMS mentors said their main motivations to join were the following
  • Exposure to interesting MIT start-ups
  • The opportunity to educate younger generations
  • Connecting with talented people as peer mentors
  1. Techstars: The selection process at this accelerator is informal and based on referrals. The managing directors typically know the mentor candidate directly, or they’re referred to them by a trusted source in their social network. Beyond that, the typical recruitment process is described as follows:
  • A short discussion with the mentor and due diligence.
  • Mentors are selected for their extensive entrepreneurial experience. Academic credentials do not play an important role in the selection of mentors.
  • Mentors looking to develop relationships with companies in view of selling their services are not accepted.
  • Mentors are attracted by the high quality of the Techstars startups and of some of the other mentors serving in the program.

Once a company has identified suitable mentors, how is their knowledge best applied? According to venture capitalist and mentor Christopher Quek, there are three areas where mentors are most valuable.

  • As domain specialists, such as mentors with experience in specific areas such as finance, education, energy, or health (for digital health technology).
  • As skill specialists, for example, mentors who can teach and coach in specific skills such as UI/UX, sales, legal, business, or design.
  • As connectors or networkers, for example, mentors who are willing to expand and share their network.

An interesting insight from the GALI study is that accelerator program alumni may not be the best mentors. Moreover, including potential customers as mentors is a good idea, which makes sense given that the consumer is the ultimate judge of any concept or innovation.

  1. External Resources: Corporate Accelerator Mentorship

Recruiting qualified people is only a part of creating a solid mentorship program. Even the highest quality candidates need to be trained in mentorship best practices. The following resources provide insight into successful mentorship models, with a focus on mentoring startups:

  • The Mentor Manifesto: The original “Mentor Manifesto,” created by David Cohen with the help of Jon Bradford and Brad Feld, outlines a set of principles supported by years of accelerator work and thousands of mentor interactions.
  • Deconstructing the Mentor Manifesto: Brad Feld goes in depth through each component of the manifesto. This series is broken up into 18 promised posts, 16 of which are live.
  • MIT’s Venture Mentoring Service: MIT has created a unique model to coach early stage startups. The VMS has trained over 66 organizations from 18 countries on its mentorship model.
  1. Advantages to Corporate Accelerators

Corporate accelerators exist at the sweet spot among a number of variables: risk level, capital investment, access to the external ecosystem, and engagement level. This positioning offers a wide variety of incentives for corporations.

  • Access to talent: Startups can provide a source of high-quality talent for the host corporation. Through an accelerator program, a corporation can observe startup teams and, upon completion of the cycle, potentially bring team members on board, either through an acquisition or by targeting specific team members.
  • Proximity to emerging technology and trends: Startups occur naturally at the cutting edge of technology. By immersing themselves in the startup ecosystem, corporations gain insights into new technologies and business models (among other things) that can be applied to other business segments.
  • Open-source R&D: Corporate accelerators provide a venue for multiple industry-specific experiments. Corporations can observe how new ideas succeed or fail without having to deal with the costs or logistical hurdles associated with traditional R&D.
  • Financial returns: If the corporation chooses an equity stake in a participating startup, the corporation may experience financial gains if the startup grows rapidly or is acquired. (Deloitte)
  • Innovative culture: When a corporation is engaged with the startup ecosystem, the entrepreneurial mindset rubs off on the company’s culture. Internal employees have the opportunity to become mentors, attend seminars, and interact with the startups. These new ideas help spur innovation throughout the company.
  • New partnerships: The creation of a corporate accelerator sends a signal that a corporation is committed to engaging in the external innovation system. Other corporations within the industry often seek guidance or partnerships with corporate acceleration leaders. 
  1. Choose the Design

Not all corporate accelerators are the same. According to Yael Hochberg in “Innovation Policy and The Economy,” there are five main variations of the corporate accelerator.

  • Corporate involvement in existing accelerators: Corporations and their executives join existing accelerators as mentors or investors.
  • Outsourcing accelerator creation: A corporation contracts with an independent group to run the accelerator on its behalf.
  • Joint accelerator partnerships: Corporations partner with other corporations to create joint accelerators (usually focused around an industry).
  • In-house accelerator with an external focus: Corporations create their own internally powered accelerator with outside applicants.
  • In-House accelerator with an internal focus: Corporations can create a completely internal program that accelerates internal teams.

Each of these models can succeed in an appropriate environment, but the selection of one model over another is dependent on the company’s needs and available resources. For instance, an in-house accelerator will be more expensive than a joint accelerator partnership. We investigate this issue deeper in the final section of this gu1ide on accelerator management.

Five Ways Accelerators Tackle Startup Roadblocks

Five ways that accelerators can forge the path to success for startups

It often takes several failed business ideas to come up with the successful one. But, what if you could stack the odds in your favour and shorten the journey to success?

Having a brilliant idea is not enough to make a business successful. You need to have a complete, skilled and experienced team supporting your venture from the very beginning. However, most new entrepreneurs benefit from being mentored by an industry-seasoned guru who can help bypass roadblocks that the entrepreneurs may not see but that can impede their business growth and lower the time needed to market products and services. Such individuals offer ‘accelerators’ programmes that help startups collaborate with sponsors to kick-off in the real world. Seed accelerators around the world have launched some of today’s leading companies, such as Airbnb and Dropbox. Talking about statistics, Global Accelerator Report 2016 states, “A total of US$206.7 million has been invested in 11,305 startups by 579 accelerator programmes around the world in 2016, with $17.5 million being invested in 1,368 startups by 76 accelerators in the Asia & Oceania region”.

How, you wonder? Well, here are five ways that accelerators can forge the path to success for startups and help them conquer their business challenges.

1. Conducive Ecosystem for Growth

One of the most invaluable offerings of a seed accelerator to a startup is access to all the structured building blocks under one roof, such as mentorship, funds, technology and peripheral services in legal and financial aspects. Drew Houston, co-founder of Dropbox, says that it was under the prompting of the seed accelerator that mentored him that he was able to find his co-founder—then MIT student Arash Ferdowski—that led to successful partnership and funding of the leading digital storage company. In such a conducive ecosystem, a startup can pull through an overall financial cycle with the help of its mentors, who provide historical insights to avoid pitfalls.

2. De-risked Startup Beginnings

An accelerator tweaks a programme according to the startup so as to identify the innate risks to its growth in the product market in terms of fit and quality, recruiting, sales, marketing, competition and funding. It offers to curtail them, thus effectively de-risking the growth of startups and clearing the road to success.

3. Facilitated Access to Clients and Investors

Startups often struggle to find clients and investors at the beginning of their journey, when it is most needed. In such instances, an accelerator can step in to offer their network to such key people. This helps startups to better understand the needs of their clients and customers; work on real-life business cases in accelerator programs; and get funds through forged contacts in the investment community. Accelerators reduce the cost of launching a startup by as much as 50 per cent and they also provide key mentoring help, business connections and even future funding support. Take designers Brian Chesky and Joe Gebbia for instance:  they secured $776.4 million funds from investors for their startup, AirBnB, which has now surpassed the likes of Hilton hotels in the number of nights booked.

4. Opportunities in Community Engagement Activities

The accelerator organises meaningful community engagement activities for budding startups, which helps them with recruiting, branding and improving their overall ecosystem. Accelerator-initiated events also provide avenues for other companies to discover and engage with the accelerator and its network. The foremost perk of working at a co-working space is that it becomes a platform to discuss ideas, concerns and requirements with the like-minded fellow entrepreneurs. It enhances the experience at work and also helps to build a robust team.

5. Inroads into a Global Network

For startups seeking to go global, an accelerator can also help them leverage their widespread community of peers throughout the world, known for their expertise, experience and contribution, as well as strategic support, human and financial capital and unparalleled networking. They can enter the real-world with a strong foothold, well connected.

Thus equipped, startups can take firm and deep rooting, become established brands and make their mark in their respective industries. With mentorship, possibilities for funding, potential business opportunities, industry networking and access to a global network for all-round support, startups can have a smart and smooth take-off, and soar quickly in the real-world.

Partnerships with startups are no longer nice things to have. They’re crucial.

Corporate accelerators represent a new frontier in the startup ecosystem. There’s no shortage of high-quality information about accelerators, but at this early stage, that information is scattered all over the internet. Finding impactful information in one place, organized and usable, has been difficult. Until now.

What follows is a curated resource for creating a corporate accelerator. Founders, mentors and alumni share wisdom in interviews and blog posts. Governments, organizations, and individual researchers collect and analyze data to determine accelerators’ impact and outcomes. And I, West Stringfellow, HowDo’s Founder and CEO, proposed, built, and managed a Techstars Accelerator at Target. I then took the learnings from Techstars and created several bespoke accelerators for Target. It is with this foundation in traditional accelerators and corporate innovation strategies, that this guide breaks down the core competencies necessary to tap into the entrepreneurial ecosystem via the accelerator.

Defining Startup Accelerators

The current trend in corporate innovation is startup engagement, but this terminology is confusing. Accelerators are described as incubators, and the institution that inspired this phenomenon (Y Combinator) calls itself a “new model for funding early stage startups.”

Researchers have tried to mitigate the confusion by clearly defining different startup support models. Two of the researchers on the forefront of accelerator research, Susan G. Cohen and Yael V. Hochberg, defined a seed accelerator as follows:

“A fixed-term, cohort-based program, including mentorship and educational components, that culminates in a public pitch event or demo-day.”

Accelerators are sufficiently different from their incubator counterparts and other innovation tools. The chart below provides a visual representation of these distinctions.

The creation of a corporate accelerator sends a signal that a corporation is committed to engaging in the external innovation system. Other corporations within the industry often seek guidance or partnerships with corporate acceleration leaders. (Forbes – Microsoft)

1: Choose the Design

Not all corporate accelerators are the same. According to Yael Hochberg in “Innovation Policy and The Economy,” there are five main variations of the corporate accelerator.

  • Corporate involvement in existing accelerators: Corporations and their executives join existing accelerators as mentors or investors.
  • Outsourcing accelerator creation: A corporation contracts with an independent group to run the accelerator on its behalf.
  • Joint accelerator partnerships: Corporations partner with other corporations to create joint accelerators (usually focused around an industry).
  • In-house accelerator with an external focus: Corporations create their own internally powered accelerator with outside applicants.
  • In-House accelerator with an internal focus: Corporations can create a completely internal program that accelerates internal teams.

Each of these models can succeed in an appropriate environment, but the selection of one model over another is dependent on the company’s needs and available resources. For instance, an in-house accelerator will be more expensive than a joint accelerator partnership. We investigate this issue deeper in the final section of this guide on accelerator management.

The Accelerator Business Model You Must to Know

Startup Accelerator Business Model: The A to Z Guide

Startup accelerators have become one of the top options for entrepreneurs to fund their startups. Like any business funding strategy, a startup accelerator programme will be a perfect opportunity for some businesses but not for others.

You certainly know that there are several different startup business models to explore, all with their unique fundamental differences. In recent years, one business model that many entrepreneurs and business owners fancy the most is a startup accelerator.

So, it is vital that you fully understand the startup accelerator business model before making a move. Please note that these seed accelerators are not a great fit for every startup out there. There are pros and cons to it, and each needs to be addressed.

With that said, let’s explore the fundamentals of a startup accelerator business model, understand how they function, and get done with the basics.

  1. Startup Accelerator Definition

In plain English, a startup accelerator is a hybrid business model that focuses on the development of early-stage startups by offering financial aid, education, and mentorship to owners and employees for a defined time period. Simply put, startup accelerators ‘accelerate’ the growth of a startup by offering necessary resources. In exchange for taking care of the finances, startup accelerators take equity in the business.

The concept of a startup accelerator was first generated back in 2005 by a company called Y Combinator that specialized in funding businesses during their seed stages. Their goal was simple – to provide enough capital for new businesses, enabling them to get started and advance their operations.

However, not all seed accelerators business models work the same way. There are some seed accelerators that are non-profit and funded by big companies and investors.

  1. What Startup Accelerators Do?

To understand the startup accelerator business model, it is vital to understand what they do and how they work. Broadly speaking, they help businesses build and define their initial products and services, secure resources, and identify promising customer segments. More specifically, these accelerator programs run for a specific time period, lasting about 3-6 months, and help a range of startups from diverse industries with the new venture process. They provide:

  • A small amount of seed capital
  • Working space
  • Lots of networking opportunities
  • Mentors and peer ventures

The mentors can be anyone from a successful entrepreneur, a corporate executive, an angel investor, venture capitalist, or a program graduate.

On the final day, the program ends with a grand event, where entrepreneurs pitch to a large audience of qualified investors.

Now, you might think that don’t angel investors and incubators do the same thing? Well, accelerators are certainly similar to angel investors and incubators. But they differ in several ways.

The most significant difference is the limited duration of accelerator programs as compared to the continuous nature of angel investments and incubators. This little difference leads to many other differences.

  1. Outlining the Startup Accelerator Business Model

Seed accelerators are cohort-based, mentorship-driven, fixed-term, and are finished in graduation. These are the basics that make startup accelerators different from incubators and angel investors. Accelerator programs give useful resources to new ventures at all stages of development. Most importantly, they focus on pre-revenue. In order to qualify as a startup accelerator, your business model needs to meet a number of criteria. With that said, the startup accelerator business model has the following characteristics:

  • It is a cohort of startups
  • It is a selection process
  • It is an educational program that transfers acquired knowledge
  • It includes a group of advisors to support the new venture
  • It is a fixed-term business program

A seed accelerators business model mainly comprises of 6 processes:

  • Apply and Get Accepted
  • Get Funded
  • Focus
  • Learn
  • Network
  • Demo Day
  • Apply and Get Accepted:

The startup applies to get into the accelerator program. While the applications are many, the operator only selects 1-3% of applicants. During this process, you will interact with the aspiring startups and let them know more about your business and the details. Please note that the startups are under no obligation to accept and join your program until or unless they have signed the paperwork that says otherwise. If the startups don’t like what you have to offer, they can choose not to accept your offer.

  • Get Funded:

Once the contract is signed and everybody is in agreeing terms, you will offer seed money to the startup in exchange for equity in the company. The seed money can range between $10,000 and $120,000 or even more, depending on the potential of the business.

  • Focus:

Once the funds are sanctioned, you will put the startups in a 3-6 months long process with co-working space provided.

  • Learn:

This is an intensive time for the startups. As a startup accelerator operator, it is your responsibility to provide the startups with seminars, workshops, and mentorship opportunities. Although it covers a plethora of events relevant to starting a business, practicing pitching and the legal side are more emphasized.

  • Networking:

As startups accelerate, you will provide them with plenty of opportunities to network with potential investors, their peers, and other industry professionals and support providers. These connections are valuable for startups considering their future fundraising needs.

  • Demo Day

There is a sort of graduation ceremony where each startup in the accelerator presents and pitches in front of a large audience, mostly investors and venture capitalists.

  1. How do Startup Accelerators Work?

Accelerators provide two types of knowledge where mentors pass the tacit knowledge from what they have learned over the years and the acquired knowledge is transferred through training sessions, workshops, and other structured education. Startup accelerators offer acquired and tacit knowledge through the combination of structured education and mentors. It has efficiency for the transferring of the value it creates by forming a group of startups.

The accelerator chooses the best startups from a large number of applicants and brings those startups together in such a way that corporations, investors, and others can meet them. It also chooses and brings a group of mentors who give knowledge, advice, and new contacts to startups for development. The accelerator provides a diverse network with a wide range of experience and knowledge.

This group works as a class at a university that allows delivering one lesson to a group of startups at once instead of delivering lessons to individuals multiple times. It focuses on participants who form an ecosystem around the accelerator and provide an opportunity for them to meet a group of startups at once instead of finding and meeting them all individually.

It is provided to overcome the lack of knowledge and networks of startups. Accelerators are mainly funded by corporations, government agencies, or investors to identify and support new innovations. The startups make returns in the form of investment returns, economic development, and new technologies.

  1. Are startup accelerators worth it?

With its ever-growing importance in startup communities across the globe, it’s easy to see why the startup accelerator business model is often perceived as the predominant way for scaling and securing funding from investors. While some programs actually provide limited funding or guarantee it in exchange for an equity stake, it’s important to note they aren’t suited for every startup.

The thing is – they are not mandatory for building and growing a successful business. While not every program works in the same way, the high-pressure environment is one constant you’ll find in every accelerator. Arguably, not everyone is equipped both emotionally and cognitively to thrive under such conditions, which is a must in this case.

There are plenty of alternatives where you can reap largely the same benefits without devoting yourself to the exhaustive pace of an accelerator. That being said, the truth is these programs have literally transformed promising businesses like Airbnb, Stripe, Dropbox, Udemy and many others into global companies. Plus, the value of accelerators is reflected by the fact that all parties involved (investors, startups, end users, even the economy) benefit from the intensive learning regime.

Once more, I’ll reiterate: learning-by-doing is critical to scalability, and accelerators make a point to speed up that process by stuffing years’ worth of learning into a few months. As such, they are great opportunities to quickly grow early on but also to attract other investors.

How Accelerators Make Money to Manage Operating Costs

There are over 500 startup accelerators in the US and over 1000 worldwide. Most accelerators are aligned with Universities (at over 35%), some are government funded (local government mostly) at 29% and some (15%) get grants from rich individuals and institutions such as Kauffman Fund. The remainder (21%) are privately funded accelerators such as 500 startups, Angel Pad, etc.

First, the definition of a seed accelerator, so we can understand the scope of the program:

A fixed-term, cohort-based program, including mentorship and educational components, that culminates in a public pitch event or demo-day.

While there is no reliable data on how many of these accelerators are doing well, graduating great companies and surviving, there is some data on how they are managing to stay afloat and “keep the lights on”.

Most accelerators, raise some money to invest in the startups they fund. Many (over 61%) offer some form of space to their startups to operate in during the cohort. Accelerators also have a staff of 1-5 people (some even more, but the average is 1.8) to manage the program, support the startups and recruit, select and engage the local community and ecosystem of entrepreneurs.

All this costs money. In the US, that’s usually upwards of $400K (that’s the low bar) and in other countries, more than $250K per year.

Typically the cost of the space and maintenance is about 30% to 40% of the budget, the cost of people about 40% – 45% and finally the cost of programs, marketing, etc. tends to be about 20%. This excludes the investment in the startups.

While investors in the accelerator are willing to fund the startups (and take a % stake in them), most are unwilling to pay a “management fee” for running the program.

Having interviewed and talked to many accelerator programs, over the last year, I have a list of 9 different ways programs have tried to raise the operating costs of the accelerator. I thought I’d document these so it would be useful.

  1. Sponsorship: The most frequently used means to raise operating funds, is to have large corporate sponsor. Some local government organizations also sponsor these accelerator as a means to be connected to the community. Many accelerators also raise sponsorship from local legal, accounting and real estate firms who benefit from the startup community or wish to target entrepreneurs and startup talent with their products and services. Nearly 60% of companies and 30% of all operating budget funding is sponsor driven for the 15 accelerators I know.
  1. Events: Many accelerators run events that aid future entrepreneurs, community participants and local businesses. These events are typically networking opportunities and charge attendees a nominal amount of money to cover the costs, enable marketing for the accelerator and pay for the “marketing resource” at the accelerator. Some accelerator programs also put together hackathons and still others run large industry events to generate operating cash. Typically the problems with running these events is that they take up resources and time, but if you can generate enough cash from these events, you can support 1-2 resources who can help with other activities at the accelerator during the non-event days.
  1. Entrepreneur-in-residence programs: A relatively newer program is the EIR, where employees at large companies or those at smaller ones who want to learn how to be more entrepreneurial, end up spending time at the accelerator in exchange for a fee. Typical fees are between $25K to $50K in the US. These EIR programs are full immersion programs and last 6-12 months or 1-2 cohorts. During the program, the EIR is going through the entire process from start to finish and “learning on the job”. Many of the participants end up becoming investors or entrepreneurs at the end of the program and return to their companies, learning about lean methodologies, innovation approaches and how to build on an idea and bring it to market.
  1. Grants: Both government and private donors typically give grants (no strings attached usually) to accelerators to support entrepreneurship, which promotes local jobs, makes a city more attractive to larger companies and also helps the local economy.
  1. Rentals: Many accelerators charge a portion of their investment as a fee for the space during the program per seat. So, if the accelerator invests $100,000, and the startup has 3 founders and employees, then $5000 might be charged per month of the startup for the 3-4 months they are in the accelerator space. This is more of the domain of co-working spaces, but many accelerators are starting to do this as well.
  1. Research Reports: Few accelerators I know write research reports based on their startup data for larger companies. These companies pay for the syndicated research reports so they can use them in their internal presentations. These research reports tend to be focused on a particular area of expertise and also a market domain. It is not unusual to see companies pay $50K for a syndicated report for the year about the startups within a specific area of their interest.
  1. Code Academies and Hacker schools: Many accelerators have also joined with coding schools, which teach programming to new and interested talent. This serves two purposes. First, the accelerator can raise cash by conducting training and second the graduates become good source of talent for the accelerator startups, who pay a fee to recruit the talent.
  1. Innovation scouting for larger companies: Many larger companies are also looking to recruit talent, acquire companies and learn about new disruptions and innovations. 

These companies are willing to pay a little money to scouts who can help track, recruit and manage a startup pool of entrepreneurial talent. Many accelerators provide this as a service to larger companies.

  1. Distribution, Sales, Design and Marketing consulting: A few early stage accelerator are also providing the equivalent of the “coding” school for non developers by running marketing and sales training programs. 

The difference is that the graduates are employed by the accelerator program and they end up being consultants to the startups who charge a fee for their services.

These are the various programs I have seen how accelerators make money to manage operating costs.

Key Success Factors and Key Risks Factors of Accelerators

Business models support management in the system-atic analysis of the factors of success and the adap-tation of business activities. As accelerators have diferent goals and objectives, the literature concerning accelerators lacks clear informa-tion about key success factors (KSF), as well as key risk factors (KRF). 

However, they are a further important aspect of the literature. There have been many attempts to bring together accelerators’ success factors, but these are generally derived and adapted from incubators. Additionally, due to the start-up nature of many accelerators, they do not have time and resources for gathering and processing data, which they do not commonly convey or publish.  

Table  2 shows the thirty KSFs identified in the forty-two papers examined, connected to each building block of the business model canvas. Considering the value proposition as the essence of the strategy and the most influential component of a business model, the presence of a clear value propo-sition is a relevant indicator to determine the success of an accelerator. Biloslavo et al highlight three types of value, namely customer value, partner value, and public value. The success of an accelerator is not only determined by the value delivered to its custom-ers, but also by the value delivered to its partners, like alumni, mentors, and investors, and to society, i.e., the other actors of the ecosystem in which it operates. “a firm’s business model is also about total value creation for all partners involved”.Focusing on the extended network of relationships outside the company, this broader overview allows considering the impact in the ecosystem as a key success factor, which takes into account the critical role of an accele-rator in boosting its entrepreneurial community. 

Accel-erators act as focal points for introducing and building connections between founders, investors, and other stakeholders. Symmetrically, the disconnection to the local investment community must be recognized as a key risk factor. 

Mentorship quality is the most cited KSF, together with the extent of the partners’ net-work. Indeed, these are crucial factors for start-ups and entrepreneurs who decide to join an acceleration pro-gram. All practitioners we interviewed con-firmed the importance of the development of partners’ networks, providing similar responses. The network is widely recognized as the biggest asset for accelerators because it adds credibility to the product they deliver through the involvement of men-tors, investors, corporate executives, experts, and alumni. 

Concerning the alumni network, we identified a specific KSF in the literature. The alumni network is an important source for mentors and investors, as successful graduates are more likely to invest back into the community, which supported them in the first place. 

In the resources building block, we stated brand reputation and credibility as crucial resources. Recognize the brand as part of the resources, as it is “required to deliver the value proposition to customers. An accelerator builds its brand through features, positive associations, and remarkable alumni stories. 

Reputation allows it to attract more partners and bet-ter applicants, creating a virtuous cycle: the increased quality creates better outcomes and a richer stakehold-ers and alumni network who enhance the reputation still further. The effects of accelerator’s brand reputation are not limited to raising investors and attracting the best applicants, but it also afects start-ups’ reputation. In any negotiation, the repu-tation of the start-up, which has no track record, is heavily affected by association with the accelerator. Therefore, brand reputation could be a KSF as well as a KRF, if it arises from negative feedbacks and opinions. In this sense, one practitioner said: “we are strongly concerned about the development and monitoring of our brand awareness, indeed nowadays reputation is a strong driver of attraction if positive, but if negative it is totally a business threat.”Considering the processes building block, events, meetups, talks, and hackathons work as communication channels both for accelera-tors and start-ups. Indeed, networking at events and conferences is considered an important success factor for two reasons. 

For accelerators, this represents the possibility to identify and attract promising start-ups with skilled entrepreneurial teams and excellent ideas. On the other side, for start-ups, events like demo days represent the possibility of connecting with potential investors. In the same context, another important success factor is the dialogue between accel-erator directors and participating ventures to “encour-age ventures to learn and adapt” highlights the role of dialogue inside cohorts, saying that “the practice of dialogue in accelerator cohorts creates a culture of dialogue that founders are more likely to take into their start-ups”.

Finally, looking at customers, we identify start-ups and entrepreneurs as the main customers for an accelera-tor. The most cited KFS concerning this building block is start-up financial support. In this sense, assert that, for a start-up, participating in an accelerator, of itself, may signifi-cantly mitigate the principal-agent problem. 

Consid-ering the product, focuses on two main KSFs, namely the quality of the program and the action orientation. The last one is recognized to be a critical entrepreneurial trait, and this is confirmed by the practitioners interviewed in our study. Many of them endorse the use of practical methods, which means doing things to deal with problems and not just talking about ideas. Although most of the identified KSFs are common to all four types of accelerators identified. It is possible to identify some KSFs that are more relevant for some types rather than others. For venture-backed accelera-tors, it is imperative to produce an economic return; therefore, the KSFs that lead to it are brand reputa-tion, business expertise, and program quality. 

For government-backed accelerators, the impact on the ecosystem and the location are fundamental. For corporate-backed accelerators, the link between the accelerator and the financing company is manda-tory. Thus, the accelerator team is an essential KSF and must refer to a mix of people inside and outside the company. Finally, for the university-backed accelerators, the training is the most critical aspect; consequently, the education ordered is one of the most relevant KSF.

Discussion and ConclusionsTo conclude the paper, the authors reflect on the main findings of this study and, therefore, develop and address several implications for practitioners, policy-makers, and scholars in the following sub-sections.Implication 1: Focusing on accelerators’ definitionThe starting point of our article is the effort to pre-sent a clear definition of an accelerator, identifying the main characteristics cited in the literature. As stated by Torun “there is an ambiguity about the definition of accelerators and incubators as well as their diferences. However, if an adequate amount of literature is reviewed, one can easily reach the needed stats about the incubation and acceleration industry.

Given the pragmatic role of accelerators in the entrepreneurial ecosystem, the lack of a clear definition prevents practitioners from understanding the activity of such organizations and the distinctive role of other entities like incubators. Regarding the future stream of research, it seems reasonable that scholars should try to build their studies upon a common basis to cre-ate a homogeneous understanding of accelerators and their potentialities. Additionally, “diderent definition or focus of studies may impede their comparative use when drafting international industrial policies” . 

Making the concept of accelerators more transparent, understandable, and manageable enables a clearer perception also for policymakers who are in charge of developing the right policies and regu-lations in compliance with the phenomenon. 

The most important type of research because it conjugates both methodological rigor and practical relevance. It aims to fill the gap between research and stakeholders of research findings, specifically address-ing their practical needs, thus improving collaboration between scholars and practitioners. The findings of this study help to reach a shared definition of an accel-erator. 

Interestingly, not all the papers analyzed define the concept of an accelerator, making comparison dif-ficult for academics and practitioners.Implication 2: Types of accelerators and most promising industriesThis study finds diferent types of accelerators, con-sidering the support they receive. This reflects the diferent types of missions and the objectives they intend to pursue, which explain why they exist. 

For instance, focusing on public-backed accelerators, they play a unique role as a policy tool, contributing to local innovation and entrepreneurship. Additionally, our study provides findings also about the most promising industries for acceleration, which cater implications, especially for policymakers. From a Euro-pean perspective, policies like Smart Specialization Strategies (S3), aiming to deliver smart, sustainable, and inclusive growth, can take advantage of this kind of study for their implementation. Indeed, regional pol-icymakers need to ensure that their policies facilitate innovation difusion and local development from the very start, which means, e.g., targeting start-ups in specific industry sectors. Therefore, they should be aware of which industries to focus on and which not. In this context, research can support policymakers in the decision pro-cesses concerning the sectors to develop, the funds to be allocated, and the programs to be implemented.

Discover How You Can Apply to Accelerators Around the Globe

Subtitle: Discover how accelerators can help your startup grow better and learn how you can apply to accelerators around the globe

Startup life can be lonely. Even with a growing team, dozens of customers, and supportive friends, it’s easy to slip into solitude as you figure out how to grow your business.

Thankfully, organizations and investors around the world have put together intensive business programs to combat that loneliness and provide mentorship, education, and support. One of these programs is the startup accelerator.

Startup accelerators aren’t right for everyone, and they can be competitive, exhaustive programs. However, these programs have quite literally transformed budding businesses into global, revolutionary companies. (Airbnb and Dropbox, anyone?)

Read through this guide to better understand what startup accelerators entail and if they are right for your business.

Startup accelerators are intensive two to three-month programs that established startups (those that have a fixed team, minimum viable product, and specified customer profiles) attend to accelerate the growth of their business. Accelerators typically involve a selective application process. Once accepted, startups receive education, mentorship, networking, and potential funding.

It’s common for startups to enter accelerators in hopes of walking away with funding from investors. Some programs guarantee some sort of funding in exchange for an equity stake. Other programs give away limited amounts of funding for nothing in exchange (besides successful completion of the program).

In terms of preparing for accelerators, startups don’t typically need to have any funding beforehand. Although, it can be assumed that some money is needed (whether through funding or bootstrapping) to develop a product, team, and customers — and therefore qualify to apply.

From nearly zero programs in 2005 to almost 200 in 2015 (and even more in the last few years), the number of startup accelerators in the U.S. has risen substantially in the past couple of decades. This has allowed even more startups to learn, improve, and grow. In fact, these accelerators have invested nearly $20 billion in over 5,000 startups — and that’s just in the U.S. alone.

Startup accelerators benefit all parties involved — investors, companies, customers, and the economy. But they’re not the only business development program available for startups. Often times accelerators are confused with incubators and other intensive programs.

Let’s discuss the differences and what makes accelerators stand out.

1. Incubator vs. Accelerator

While accelerators are for established businesses, incubators are for entrepreneurs who need help developing their ideas into full-blown businesses. In theory, you’d apply to and attend a business incubator prior to a startup accelerator.

The table below breaks down the main differences between an incubator and accelerator.

  • Support Office space, administrative and legal support, business planning, prototyping, and product development Seed funding, mentorship from industry experts, and networking
  • Funding Often from universities or economic development organizations Private funds; often take equity in exchange for capital. 
  • Is your business ready for an accelerator?
  • Is an accelerator right for you? If you’re thinking about applying for a startup accelerator, ask yourself the following questions to see if your business is ready.

Note: Curious about what an accelerator entails? We walk through how startup accelerators work in detail in the next section.

  • Are you growing quickly? If your company is collecting customers (and employees!) at an almost overwhelming rate, you’re likely ready to enter an accelerator to take your business to the next level.
  • Are you ready for expert mentorship? Can you articulate your challenges? If you have distinct, unanswered questions and curiosities that only experts can answer, it’s time for an accelerator.
  • Do you have a minimum viable product (MVP)? Accelerators are only for businesses who’ve defined and sold an MVP.
  • Do you have customers and an established customer profile? Accelerators benefit businesses who know who they’re selling to and are willing to conduct extensive research to deepen those customer profiles.
  • Would you be willing to relocate? Many accelerators require physical relocation to take full advantage of their resources and offerings — an arguably small sacrifice for the greater reward of growing your business.
  • Can you afford it? While accelerators provide some funding, they don’t necessarily pay your way through the program. Be sure your team and business can afford to set aside a few intensive months as you focus on growth.
  • Looking for ways to acquire and retain more customers … at a startup-friendly price? Check out HubSpot for Startups and gain access to countless educational resources and robust integrations.

Not every accelerator operates in the same way, but most follow a similar process. Complete the following steps from start to finish if you’re looking to join a startup accelerator.

  • Choose your accelerator

There are hundreds of startup accelerator programs in dozens of cities. These programs vary based on location, industry, expert involvement, funding opportunities, and the kind of network they connect you to.

In the U.S., most of these programs are in bigger cities like San Francisco, New York, and Boston. You can also find notable accelerators in Canada, the UK, Russia, and Chile — practically all around the world. Comprehensive databases like Seed-DB are a great place to start.

  • What to look for in an accelerator

Before you apply, do extensive research on the accelerators that’d be a good fit for your business. (Don’t worry if you’re a good fit for them … yet.) Here’s what to look for:

  • Social proof

Which startups have “graduated” from each accelerator, and how much funding did they receive? Make sure those businesses are successful today. Similar to formal education, names and prestige are just as important in the entrepreneurial world. Being associated with a well-regarded accelerator can help your business grow long after graduation.

Relationships and networking. What kind of community and network can each accelerator offer you? Also, what kinds of experts and educators do each accelerator provide … and are they relevant to your business? The network you gain from your time in an accelerator is another factor that outlasts graduation.

  • Industry

Some accelerators work with marketing technology companies, while others specialize in finance technology. Others focus on cybersecurity, retail food-tech, or big data. Look for a program that aligns with your product and business as the education and mentorship resources will follow suit.

  • Location

 As we mentioned above, there are accelerators around the world. You’ll likely be required to relocate to physically attend the accelerator programs. If you can’t move too far away, look for programs that are close to home. Alternatively, if you’re looking for a change of scenery, check out programs across the globe.

2. Apply to the accelerator

Startup accelerators are notoriously difficult to get into to. The most famous accelerator programs, such Y Combinator and Techstars, only accept 1% to 3% of their almost 6,000 applications — the very best of the best.

To gain ranking among the elite, take the accelerator application process seriously. You’ll likely have an extensive written application as well as multiple live interviews.

  • What accelerators look for in applicants

While all accelerators vary, most look for the same factors and features in those who apply. Here are a few things to be sure your application reflects:

  • Coachability

 If the experts who lead the accelerator choose to mentor and educate you, will you accept it? Will you choose to apply their suggestions and listen to their expert opinions about your business, product, and growth? Humility and coachability go a long way in accelerator applications.

  • A minimum viable product (MVP) and real customers

Without a viable product and customer profile, accelerators won’t take a second look at your application.

A concise competitive advantage. What sets your budding business apart? More importantly, can you communicate your competitive advantage and value proposition in one to two sentences — with real data included? Accelerators look at a lot of applications. Boil your story down to an elevator pitch to have a greater chance of being seen (and remembered). Remember, accelerators are looking to benefit from your business success, too.

A strong team. Who will lead your business to success? Accelerators are not only looking for a strong product; they’re also looking for a strong, capable team. If the team’s skills match the business needs and show cohesive dynamics, there’s a good chance the business will succeed past the accelerator.

  • Network and community

 Does your application show that you’ve networked and developed relationships with others in your industry before leaning on an accelerator to do the work for you? While name-dropping can’t promise a spot, displaying a well-connected network can reflect that you’re willing to put in the work to expand it.

Also, check out this blog post by Paul Graham of Y Combinator on how they choose between applicants.

3. Focus, learn, and grow

Applying to an accelerator is tough, but once you’re accepted, expect the real work to begin. Be ready to travel to the accelerator location, set up with your team, and get started.

Here’s what you can expect when attending an accelerator:

  • Dedicated co-working space where your team can focus on the accelerator and educational opportunities.
  • Educational seminars and workshops on a variety of topics, such as legal counsel, pitching practice, product development, and more.
  • Group and individual mentorship opportunities from industry experts, investors, and other founders.
  • One-on-one check-ins with accelerator leadership (e.g. investors, alumni founders, etc.)
  • Networking events with industry leaders, investors, and other startups, which can help with future fundraising and recruiting.

4. Present your business model and receive funding

What sets accelerators apart from other intensive business programs is how startups exit the program. When it comes time to wrap up an accelerator, founders participate in a “demo day” during which they present their business model. This process happens for two reasons: to share everything the company learned and worked on during the accelerator and to potentially receive funding.

Founders are responsible for building a comprehensive slide deck and pitching directly to investors — sometimes hundreds, depending on the accelerator. (Here’s an example deck from PayPal co-founder Peter Thiel.) If startups receive an offer for funding, it’s typically in exchange for equity.

Accelerator “graduates” also receive direct and indirect support after exiting the program. This support includes:

  • PR
  • Professional connections and networking
  • HR/recruitment support
  • Board participation
  • Office space
  • Future VC support
  • A strong alumni network and lifetime relationships
  • Startup Accelerator Programs

Interested in joining an accelerator? Time to dive into some research and figure out which accelerator is best for you.

With hundreds of accelerators available around the world, it’s impossible to list them all here. Instead, we’ve pulled together some of the most popular as well as some niche accelerators that may interest you.

Popular Startup Accelerators

  • Y Combinator, Mountain View, CA

Y Combinator is one of the most popular — and most competitive — startup accelerators. The program has produced almost 2,000 investments and 200 exits (which are sales to larger companies, meaning a return on investment for investors). Y Combinator has worked with the likes of Airbnb, Dropbox, Stripe, Reddit, Twitch, Coinbase, and Weebly.

  • 500 Startups, Mountain View, CA

500 Startups has made just over 1,600 investments (in companies in over 60 countries) and has produced 162 exits. Notable alumni include companies like Udemy and Credit Karma, as well as others that’ve been sold to Google and Rakuten.

  • Techstars, Boulder, CO

Techstars, another highly competitive accelerator, has produced over 1,500 companies and 132 exits. Companies like Bench.co, ClassPass, and Pill Pack have worked with Techstars. It’s also the name behind Startup Week and Startup Weekend.

  • MassChallenge, Boston, MA

MassChallenge has worked with over 1,300 companies, produced almost 40 exits, and indirectly produced over 80,000 jobs. The program also has locations in Israel, the UK, Mexico, and Switzerland.

International Startup Accelerators

  • Startupbootcamp, London, UK

Startupbootcamp is based in London (InsurTech) but runs a variety of programs in Mexico City (FinTech), Milan (FashionTech), Cape Town (AfriTech), Rome (FoodTech), and more. The program has made over 420 investments and produced 21 exits. Notable alumni include Bellabeat, Joyride, and Zenith. Overall, the program has raised over €1.1M.

  • Start-up Chile, Santiago, Chile

Start-up Chile, unlike other accelerators, was launched by the Chilean government to boost entrepreneurship and encourage economic investment. The program has made over 830 investments and produced 16 exits. Start-up Chile also offers a “pre-acceleration program” called The S Factory just for female founders.

  • Internet Initiatives Development Fund (IIDF), Moscow, Russia

IIDF focuses on companies in cybersecurity, adtech, big data, IOT, and more. The program has made over 330 investments and seen over 20 exits. IIDF also organizes events and hackathons, which attracts over 20,000 investments.

Minority Startup Accelerators

  • MergeLane, Boulder, CO

MergeLane only invests in startups that have at least one female leader. It offers a variety of funding and accelerator programs, and has invested in over 40 companies to-date.

  • DigitalUndivided, Atlanta, GA

DigitalUndivided works exclusively with Black and Latina women. The program has funded 52 companies, worked with over 2,000 founders, and raised over $25M in funding.

Accelerate Your Startup Today

No two startup accelerators are alike, but they all share the same vision: seeing entrepreneurs of all kinds scale their business success and impact. Regardless of what industry you operate in or what kind of product you sell, there’s a startup accelerator for you.

Follow these tips to find the right program, prepare your application, and get the most out of your accelerator experience.

Characteristics of An Accelerator Program

Startups need to submit an application to join an accelerator. Once the application is approved, the accelerator will give services and resources such as advising hours, shared coworking space, guest speakers, and a negotiated amount of capital. 

The average term period of a startup accelerator model is 3-4months. Also, the ownership of the startup should be around 3-8%. The help of an accelerator ends with a demo day or graduation after startups present their work and move forward independently.

Biotech, tech hardware, and AI are the popular sectors of the startup accelerator business model. Also, so many brands have got support from accelerators. Play Tech Center and the Silicon Valley accelerator Plug have assisted PayPal, Google, and Zoosk to convert their ideas into businesses. Y Combinator is another popular accelerator. They released Dropbox, Airbnb, and Reddit. A startup accelerator named Techstars has sponsored more than 21 startups.

Startup accelerators, also known as seed accelerators, are fixed-term, cohort-based programs that include mentorship and educational components and culminate in a public pitch event or demo day. These are the 4 factors that make accelerators unique from other startup institutions such as incubators, seed-stage venture capitalists and angel investors. Accelerators can give useful resources to organizations at all stages of development. But most accelerator programs are focusing on pre-revenue. To qualify as an accelerator requires a number of characteristics. The characteristics of a startup accelerator are given below.

1. It is a fixed-term business program with a start and an end.

2. It is a cohort of startups.

3. It includes a group of advisors to support the startup.

4. It is an educational program for the transferring of acquired knowledge.

5. It is a selection process, so the cohort of startups is considered the best.

The role of Accelerators and Incubators in the journey of an early-stage ventureis commendable. From financial assistance to mentorship and guidance, theyprovide immense support in the varied phases of a business. Here, we bring to you the list of various Startup Incubators and Accelerators.

Accelerators provide two types of knowledge where mentors pass the tacit knowledge from what they have learned over the years and the acquired knowledge is transferred through training sessions, workshops, and other structured education. Startup accelerators offer acquired and tacit knowledge through the combination of structured education and mentors. It has efficiency for the transferring of the value it creates by forming a group of startups.

The accelerator chooses the best startups from a large number of applicants and brings those startups together in such a way that corporations, investors, and others can meet them. It also chooses and brings a group of mentors who give knowledge, advice, and new contacts to startups for development. The accelerator provides a diverse network with a wide range of experience and knowledge.

This group works as a class at a university that allows delivering one lesson to a group of startups at once instead of delivering lessons to individuals multiple times. It focuses on participants who form an ecosystem around the accelerator and provide an opportunity for them to meet a group of startups at once instead of finding and meeting them all individually.

It is provided to overcome the lack of knowledge and networks of startups. Accelerators are mainly funded by corporations, government agencies, or investors to identify and support new innovations. The startups make returns in the form of investment returns, economic development, and new technologies.

We believe that every startup has a unique journey to pursue, which is based onthe idea that requires a right push in the right way. Regardless of the stage ofyour startup is in, it requires significant guidance to move forward and havesuccessful accomplishments. We have attempted to make a List:

  • Apply and Get Accepted

After submitting applications, only 1% to 3%  of applicants get accepted from total applications. During this process, the startups can interact with the operator and discover more details about them. Startups don’t have an obligation to join and accept the program until they sign any paperwork.

  • Get Funded

Money is one of the major reasons that founding teams and entrepreneurs selecting the accelerator path. Accelerators provide seed money to the company that ranges from $10,000 to $120,000. Although some have recently withdrawn the amount of funding they provide, they point to funding as a major obstacle to success as that may affect future fundraising activities.

  • Focus

A big advantage of this system is that it focuses on entrepreneurs. According to the Harvard Business Review, they are being dragged into the process for 3 to 6 months. This is an intense time, and participants are forced to focus and make progress.

  • Learn

Learning is a big part of the process. It includes opportunities such as seminars, workshops, and mentorship opportunities wherein it covers topics relevant to starting a venture, pitching practice, and the legal aspect.

  • Network

Entrepreneurs have ample opportunities to network with potential investors and other industry support providers, during the acceleration period. These connections are very valuable.

  • Demo Day

The process ends in graduation or on a demo day, where every startup in the cohort presents and pitches. This is the place for proving the time and experience invested by startups. Founders of startups usually include 15 to 20 slides on their pitch decks as part of the presentation.

  • Efficiency of Accelerators

Accelerators bring the various groups of participants around their program and facilitate interactions between them very efficiently. They bring the best startups by running a selection process that includes an open and broad application process. The evaluation is done by respected individuals. The high quality of startup has an important value within the accelerator. It attracts investors.

Another major attraction of accelerators is the mentors. A mentor provides networks and tacit knowledge to the cohort. It makes mentors an important part of accelerators. Failure to ensure that mentors receive appropriate remuneration for giving their knowledge and time can lead to mentors losing interest quickly or failing to engage. The way of gathering startups together into one space and deal with them quickly in a fixed-term program, creating the same efficiency as a university collecting students into classes.

  • Efficiency of Startup Accelerator

Mentors are able to address all startups simultaneously, so that knowledge is effectively transmitted. Accelerators can provide a way to survey and filter out many innovators, such as startups, academics, or individuals. By choosing the best from the applicants, the accelerator makes a validated cohort of startups that are valued by others, such as investors and mentors.

The accelerator experience is fast, intense, and in-depth educational process aimed at shortening the years of worthwhile learning into a few months and accelerating the life cycle of innovative startup companies. A real accelerator has very specific identifiers. If you can access them, they can give you a lot of benefits. Not everything is created equal. There are so many differences that exist between the successes of the graduates.

There are over a billion successful startups in the world, every startup striveshard to be successful and reach the top, but only a few make it to the list ofmost valuable startups in the world. Being the most valuable startup is a perk in itself because the funding securedis much more compared.

What happens in a startup accelerator? Startup accelerators periodically select a batch of companies, usually in the same early stages of their lifecycle. In return for a small portion of equity, they offer advice, investor connections, and mentorship.

Is joining an accelerator worth it? Most startup accelerators provide seed money in exchange for equity in your startup. So, if you are someone who doesn’t want to dilute the equity at the initial stage, going for an accelerator program will be a bad idea. However, there are few accelerators programs that don’t take any equity in the startups.

How do startup accelerators make money or how do accelerators make money? The accelerator would charge startups by offering desks for rent. In a way, the accelerator is actually offering similar services to a co-working space. Alternatively, accelerators make money through offerings of training and consultancy services for startups, in exchange for money or equity

So, you need to make sure you know what the characteristics of an accelerator program are. That’s what you need to follow to get success in your startup.

accelerator

Expert Tips on How to Get Into an Accelerator

accelerator

What You Need to Know About Getting Into an Accelerator

Spending a couple of months in an accelerator can be an excellent way for a fledgling startup to make serious headway and begin to consistently grow. Not only do the investors who head accelerators provide access to funding, mentoring and valuable business connections, these programs are located within shared workspaces where founders can network and form long-term relationships with other smart entrepreneurs. There’s one caveat: Some of the best accelerators are tough to get into.

Take some advice on how to do it from Jason van den Brand,co-founder and CEO of online mortgage refinancing startup Lenda, which graduated from one of the planet’s hottest accelerators, Silicon Valley-based 500 Startups last year. Since then the company raised its first round of funding, has been growing 40 percent month over month since December and recently passed the $40 million mark in loans financed through the platform. Here’s how he says you can improve your chances for getting into a hot accelerator, as well as what you need to do if you succeed.

1. Make sure your business idea is a big one.

The bigger the better. Lenda, for example, is attacking a $10 trillion vertical-the kind of number which definitely will turn an investor’s head. “Having that kind of market size behind your idea is really, really helpful, versus having an idea on the back of a napkin,” he says.

2. Have a minimum viable product (MVP) in place.

You need a product that actually works. While it will never be perfect and you’ll always be iterating, what you want to grow in an accelerator should be something customers are touching and giving you feedback about. “You’re out there talking to your customers, trying to find out how to make that product better, and trying to find ultimate product-market fit,” he says.

3. Execute to the point where you’re getting traction.

You prove it with numbers. How many customers have you worked with? How many people are visiting your site? What’s your revenue? Are your numbers growing month over month? “‘Month over month’ is the big hairy metric that all of these incubators, accelerators and VCs are looking for, so the higher that percentage of growth the better,” he says.

4. Build a team.

While exceptions certainly exist, it’s rare to see a solo founder going into an accelerator. At a minimum you’ll need someone on the team who is a domain expert and another with strong technical skills. And it has to be a full-time gig for everyone involved. “You can’t be part-time going into it, so if you have another job you’re going to have to quit,” he says. “If you have multiple ideas and you’re not sure which one to go with, you’re going to have to pick and decide and work on one.”

5. Network heavily.

500 Startups states right on its website that a positive referral from mentors and founders who have already gone through the program is the best way to get noticed. It’s going to be the same thing with any other accelerator out there.

6. Nail your interview.

You have applied to an accelerator and have been offered the opportunity to pitch. The best way to sell your idea is to know your business inside out, including your vision, roadmap and every kind of metric you may be asked about. “How many people have visited your site? What are the conversions through each step of the funnel? What’s the cost to acquire a customer if you are using any kind of paid channels? What is an estimate of the lifetime value of your customer?” he suggests asking yourself. “You need to do a lot of the heavy lifting before you apply.”

7. Once accepted, make friends within the accelerator.

The other founders and team members you will meet are incredibly bright people who possess a wealth of information and experience. Plus, these people understand the difficult and often lonely road of entrepreneurship better than anyone else.

8. Be honest with yourself and everyone else.

When you tell your mentors everything about your business-even what’s going wrong-they can help you fix it.

9. Prioritize growth.

You want more users and revenue every month. When your month-over-month numbers are high you’re in a better position to offer excellent theatre during your demo day at the end of the program.

10. Close your fundraising round as soon as possible.

Van den Brand suggests allotting six months to complete your fundraising, but aim to do it in the first month. “Be ultra-efficient with your time and batch meetings together,” he says. “Start at 9 a.m., finish at 6 p.m. and talk to six people in the same day. The faster you fundraise, the faster you can get back to building and growing.”

11. Transition the CEO role.

Taking money from investors brings with it a huge fiduciary responsibility. It sounds counterintuitive, but at this point you need less hands-on time in the business and more time finding the top talent who can help you deliver.

12. Keep growing.

This is your final-and unending-responsibility. “You have keep the business growing so you can get to your next round, which will be sooner than you think,” he says. “Time flies when you’re building your own company. Those things what you must to know how to get into an accelerator.

Business Incubator

Is Joining a Business Incubator or Accelerator Always a Good Thing?

Business Incubator

Subtitled: Many Concepts  of Incubators  and  Accelerators  

The  research  methodology  section  describes  the  research steps,  the  sources  of empirical  data and  the  type  of data  analysis  to  be  performed.  The  Results  section summarizes some of the negative experiences of entre-preneurs  who  have  been  part  of  business  incubation programs and provides some reflections about the dif-ferences in these experiences  in incubator-like and ac-celerator-like  environments.  

Finally,  the  Conclusion provides  some final  reflections and  summarizes some of  the most  typical  downsides of  being  part of  an  in-cubator or accelerator. Key Insights from the LiteratureAccording  to  Gunter  (2012),  startups  tend  to  be  the most  rapid  job  creators.  Either  startups  move  up  by rapidly expanding their innovation to become economically successful, or  they  rapidly  go  out  of  business. 

Very  often,  startups  develop  radically  innovative products  and,  eventually,  disrupt  existing  markets. However,  startups  who  seek  to  do  things  differently face  several  challenges  and  uncertainties  associated with  the  shaping of  a viable  business model,  reaching out  to  early  buyers,  setting  up  durable  partnerships and  sustainable  operations,  etc.  

To  deal  with  these challenges  and  uncertainties,  startups  usually  benefit from all available resources including  existing  regional and national business incubation programs. Incubation vs accelerators In order  to establish  a successful  business, entrepren-eurs  are  often  looking  for  business  programs  that could help the growth  of their business. In fact, incubators and accelerators are meant to  boost  the success-ful  development  of  newly  created  firms by  increasing the likelihood  of their  survival and growth.  Incubators and accelerators should  enable a  smooth start  and fu-ture  growth  for  startups. 

 However, many  concepts  of incubators  and  accelerators  have  been  put  forward, which  sometimes  confuses  both  scholars  and  practi-tioners. The  original  concept  of  an  incubator  has  changed since the first private incubator was established in New York  in  1959  (Hausberg  &  Korreck, 2018).  Since  then, many  different  forms  of  entrepreneurship  support have emerged, one of which is the accelerator. The first seed accelerator was  Y Combinator in 2005, which  was followed  by TechStars  in  2006. Many  others  have fol-lowed  their  lead, but  Y Combinator  and  TechStars re-main two of the top accelerators in the world today. Such programs are now commonplace, but there  is  still confusion regarding  the  terms incubator  and accelerat-or.  

For  example,  many  startup  programs  that  describe themselves using  the same  term do not  share common characteristics. Thus, in order to make  a  distinction between  these  two terms, it is necessary to answer the following questions:• What does an incubator or accelerator offer?• Who is an incubator or accelerator targeting? Characteristics of an incubatorThe goal of incubators can differ depending on the type. 

There  is,  therefore,  a  distinction  between  the  classic business incubator and a typical accelerator. “Accelerat-ors  usually  are  fixed-term,  cohort-based  programs providing  education,  monitoring,  and  mentoring  to start-up  teams  (usually  not  single  entrepreneurs)  and connecting them with  experienced entrepreneurs,  ven-ture  capitalists,  angel  investors  and  corporate  execut-ives  and  preparing  them  for  public  pitch  events  in which  graduates  pitch  to  potential  investors”  (Haus-berg & Korreck, 2018).

The risks associated with selecting and joining an incub-ator or acceleratorA critical assessment of  the effectiveness of an incubat-or  or accelerator can  guide entrepreneurs  to make  the right  decisions  about  engaging  with  specific  business support  programs.  Many  entrepreneurs  are  novices who  lack competencies, working  capital, and  potential for  funding.  Entrepreneurs  make  decisions  based  on what  they  perceive,  and  startups  often want  to  be ac-cepted into a well-established program without consid-ering  if  it  is  the  right  program  to  be  in.  According  to Bliemel  and  co-authors  (2016),  entrepreneurs  usually apply  to  join  an  accelerator  because  they  need  seed funding,  incubation  services,  and  partnership  net-works. 

They emphasized that, for example, when entre-preneurs  are  only  seeking  mentorship,  an  accelerator program  could be  detrimental to  them since  there are many  risks  associated  with  an  accelerator.  Miller  & Bound (2011) articulated several criticisms of accelerat-or models:•  After graduating  an accelerator,  startups are  still  fra-gile and in need of support.• The equity taken  by accelerators becomes problemat-ic for further funding. Startups fear “Rich guys launch-ing  ‘startup  accelerators’  so  they  can  rip  off  new start-up founders” (Miller & Bound, 2011).• Because of the increasing number of  accelerators and their  tendency to  invest  in  early-stage  firms,  B-grade companies will not receive investment.• “If  accelerators  continue to  grow and start producing thousands of small  companies, we can expect to  see a bottleneck  developing and  in  the  event  of  a  crash in confidence in the sector” (Miller & Bound, 2011).

•  Accelerators  will  become  “startup  schools”  who  will encourage  learning  through  educational  returns rather than building real businesses.

 •  Accelerators build small  companies that  do not  have quite global  ambitions. These  are  companies that  are building something that will become a feature of a lar-ger service, rather than aiming to become a large com-pany in its own right.

•  Accelerators are  making  entrepreneurship so  access-ible that they start draining talent from larger techno-logy firms. Yu  (2015)  argues  that  founders  with  promising  ideas avoid joining  accelerators and instead  choose different ways  of progressing.  For  most of  them,  an accelerator without  a  well-established  value  ecosystem  and  net-work  is worthless. On  the other  hand, the  best startup exit  for  an  accelerator  or  for-profit  incubator  comes when the startup is acquired. In this sense, an accelerat-or is just another type of incubator, whose goal is to in-crease  the  startups’  survival  chances  (Hausberg  & Korreck,  2018).  

But  there remains  a  lot  of  definitional uncertainty.  As  Mian  and  co-authors  (2016)  emphas-ized,  the  definition  of  accelerators  cannot  be  general-ized due to idiosyncrasies  in their  relations  to political, economic, social, and geographic conditions. The summary of the risks associated with the possibility of  startups  joining  business  incubation  programs demonstrates the  need for  more  systematic studies  fo-cusing  on  the potential  downsides of business  incuba-tion  practices.  The  next  section  describes  the methodology  adopted  to  answer  our  initial  research question,  starting with  the hypothesis  that it  is not  al-ways beneficial for new ventures to join business incub-ation programs. Research MethodologyFor this study, we adopted an explorative qualitative re-search  approach  using  multiple  semi-structured  inter-views  with  startup  founders,  complemented  by informal  discussions  with serial  entrepreneurs. 

We  de-signed  the questions  around  issues  related  to some  of the  negative  experiences  of going  through  specific  in-cubation/acceleration  programs and  how  such experi-ences  affected  the  future  of  specific  ventures.