Over the last few years, quite a lot of attention is buzzing around startup accelerators. They are often touted as the best route a startup can take to gain funding. In fact, being accepted into an accelerator program is considered to be a huge accomplishment for early-stage startups.
Not only do startup accelerators help in the growth of the business, they also provide amazing mentorship and funding opportunities, apart from the obvious perks of being connected to a large network of like-minded individuals.
In this article, we will go through everything you need to know about startup accelerators, what they look for in a startup and the advantages and disadvantages of being admitted into some of the best accelerator programs in the country (or the world).
What is an Accelerator?
While there are many definitions and assumptions going on surrounding accelerators, one can think of startup accelerators as fixed, short-term growth programs that try to accelerate (quite, literally) the growth stage of a startup. In exchange for equity in your startup, accelerator programs will help your business in the following areas.
Provide Seed Funding
Accelerator programs will fund your business in the initial stages, called seed funding. This would most likely be the first major investment in your company, and the deals can be anywhere between $10,000 or $120,000. However, reports suggest that top accelerator programs have reduced the amount of seed funding citing overfunding as a “roadblock to success”.
Training. Learning. Coworking.
Accelerator programs, in a way, forces your startup to focus and grow, by providing you and your team with the necessary training, and by providing you with a conducive environment to work from. This presents your business with lots of learning opportunities, not to mention the networking advantages that come from being in a coworking space.
Accepted startups are provided with formal mentorship, and even informal advice from high profile founders, successful businessmen and experts in scaling startups.
Short Term, Intensive Scaling
Accelerator programs are usually a fixed term (usually between 3 to 6 months), intensive scaling and growth experience. You will be working with business leaders and visionaries to scale your business rapidly.
The Demo day usually culminates the accelerator program experience. After helping scale and grow your startup, accelerator programs conduct demo days to provide you opportunities to pitch your scaled product for Series A funding.
What Qualifies as an Accelerator?
There is definitely a lot of confusion in the space about what qualifies as an accelerator (especially when erroneously used interchangeably with incubators). For a program to qualify as an accelerator program, it should meet the following criteria.
- Fixed Term Program – Defined starting and end period, usually in the short term.
- Contains a cohort of participants – Your business will be benefitting from the accelerator program, along with other startups.
- Selection Process – Not anyone and everyone can participate in an accelerator program. Only the “best in class” startups with a clear idea and drive are accepted to these programs. Top accelerators have an acceptance rate of around 2%.
- Mentorship Driven – The focus during the 3 – 6 months would be completely on mentorship, training and learning opportunities. Accelerator programs should provide you with a diverse group of mentors that can help achieve your vision.
- Culminates in Demo Day – A graduation ceremony of sorts. Helping you pitch your startup to investors for series A (and further rounds) of funding.
If a program satisfies these criteria, it is safe to assume that it is an accelerator program.
What can you Expect from an Accelerator?
Unlike what most people think, accelerators are not a “one size fits all” solution. Each startup is fundamentally different and will require a different approach to achieve high levels of scaling.
As the number of niche accelerator programs continue to increase, it is becoming apparent that these programs go extremely deep into a particular vertical. Mentors and investors who know the niche in-and-out present you with the best advice and learning opportunities you will ever get.
The benefits will be in different forms for different startups. For some startups, accelerators are nothing more than a method to achieve seed funding. For some, the mentorship and training would mean a million times more than the funding ever would.
For others, it could be the network of investors and like-minded individuals, for proof of concept, or even the first customers.
Accelerator programs will be like a crash course to launching and managing a startup, fundraising and other necessary aspects to successfully grow your business venture.
While it is true that different accelerator programs offer different benefits, the best accelerator programs have one thing in common.
The participants go through an intensive, challenging period which ends up being extremely beneficial for the success of their business. It is a proven fact that graduates from several top-rated accelerators reached key milestones sooner than their competition.
Some of the big names who have gained a lot from accelerator programs include Stripe, Airbnb and Dropbox to name a few.
Who are Startup Accelerators Looking for?
Accelerator programs are known to be highly selective when it comes to accepting startups. Usually, these programs look for small, recently formed companies, with little investment and what they see as the potential for rapid growth.
Some accelerators like their participants to be in a particular industry/sector, like EdTech or AgroTech.
Most startup accelerators tend to rate the team behind the venture, more than the idea or the venture itself. Some common requirements include-
- A team that knows what it’s doing, and not running around like headless chickens.
- A Minimum Viable Product (What is often referred to as MVP)
- The ability to work in a team environment.
- The potential for scale.
- The tendency (and capability) of the team to learn.
The most important characteristic of all those accelerators tend to look at
6. Entrepreneurial spirit, motivation and a desire to succeed.
Pros of an Accelerator
Startup accelerators, without a doubt, are extremely beneficial. They do come with several advantages.
Perhaps the biggest benefit of being accepted into an accelerator program is the near-certain growth that your business can benefit from. You will have to utilize 100% of your time on your startup during the term of the program, along with expert training and mentorship, apart from other fundraising opportunities.
Mentorship and timely feedback provide you and your business with crucial learning opportunities that can help you make clutch business decisions and avoid crucial mistakes during the early stages of your startup.
Apart from the networking opportunities that you get from working alongside like-minded individuals and the cohort of startups, accelerator programs present you with opportunities to network with mentors, investors, and in some cases even the first customers.
Apart from presenting you with seed investment in return for a stake in your business, accelerator programs also help you pitch your venture to other potential investors, providing you with all the funding you need for the beginning stages of your business.
Brand Image and Prestige
Graduating from an accelerator program is a matter of huge prestige and contains an incredible brand value in the eyes of investors. Graduation basically signals to the investors that you have what it takes to grow your business (and in turn, their investments) exponentially.
Cons of an Accelerator
On the flip side, accelerator programs also come with their fair share of (potential) disadvantages.
Accelerator programs are in-premise experiences and would require you to move to the location of the program. Not everyone seeking mentorship or funding would be comfortable to uproot from their place of origin and relocate.
Loss of Stake
Accelerator programs usually tend to take a significant stake in the ownership of the startup, in exchange for the seed funding and other services provided. Some accelerators do work as a non-profit venture as well.
Rapid Growth may not always be the best thing. For some companies, slow, steady growth might be the best for long-term success. Perception plays an important role, it often is misinterpreted with rapid growth or stagnancy.
The necessity to work in a high-pressure, do all it takes environment might take its toll on the team. Not every entrepreneur might be able to give it all and work 24*7 to upscale. Every business is different and thus the stakeholders also have a different pace that they like to work with.
A sense of overwhelm might be prevalent, with constant meetings and social events with high profile business owners and mentors. When you’re someone in the industry you have to constantly meet new prospects and networks to help expand and grow reach. The constant staying in touch, meetings and social events could take a toll.
Start-up Accelerator Process
Different accelerators achieve success through different routes. There is no one-size-fits-all process that can be laid out. However, the different stages in the accelerator program process can be broadly categorized as
- The Application Stage – You will be required to go through rounds of selection processes to determine if your business is eligible to be accepted by the different accelerator programs.
- The Funding Stage – Seed funding will be determined, based on what your business requires, and what the accelerator programs deem worth investing in your business.
- The Learning Stage – 3 to 6 months of intense, dedicated work to achieve rapid growth for your startup. Filled with mentoring and training sessions to make the best out of your business.
- Graduation/Demo Day – After scaling your business, you will be presented with opportunities to pitch with multiple potential investors for further funding, and in turn, further growth of your business venture.
Who Should Apply to an Accelerator Program?
All startups need not necessarily attend an accelerator program to guarantee success. Most startups and entrepreneurs never participate in an accelerator during their business journey.
An accelerator program might be beneficial for your business only if you are –
- Free to relocate for the term of the program, usually for 3-6 months.
- Capable of affording and dedicating 100% of your time to work solely on your startup.
- Okay with a comparatively small seed funding round (as opposed to approaching an angel investor)
- Capable to perform well in a high-intensity, high-pressure work environment.
- Have at least one co-founder to help share the load with you.
What are the Requirements to Apply
Again, there is no one size fits all requirements/pre-requisites for you to apply for an accelerator program. Each accelerator program has a different set of requirements, most of which you’ll find directly on their website.
However, most accelerator programs require at least a minimum viable product (MVP), along with the necessary numbers to prove potential for growth.
If you think you satisfy the requirements of a particular accelerator program, you will be required to fill out a questionnaire showcasing your knowledge and research, and a short, rapid-fire interview for about 10, 15 minutes at the very minimum.
Popular Accelerator Programs Globally and in India
- Y Combinator
- 500 startups
- Plug and play
- LaunchPad LA
Startup accelerator programs are extremely beneficial for entrepreneurs looking for rapid growth in a short period of time and are capable of spending 100% of their time towards growing their startups. These programs provide the businesses with ample funding, mentorship and learning opportunities to truly take their businesses to the next level, in return for a stake at your business.
Successful graduation from accelerator programs is often seen as a badge of honor, and can directly lead to additional funding, and in turn growth of a successful startup.