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.

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