The startup economy continues to grow year after year as venture capitalists keep pouring funding into them. In fact, 2021 saw startups shatter a record by raising over $621 billion in funding. This has prompted many entrepreneurs to start thinking about starting their own startup today, making them not only wonder “what is a startup accelerator?” but also if they should join one. Well, let’s take a look!
What Is a Startup Accelerator?
The first thing you should know about startup accelerators is that they are a great way to take a startup to the next level quickly. Startup accelerators are essentially a support system where there are resources to help your startup go from 0 to 100 rapidly.
Accelerator programs work with startups for a short time (3-6 months) depending on the program. They invest some sort of capital for a percentage of equity into your business. Their overall goal is to increase the size of your business and establish value by providing useful tools to boost growth.
In the last few years, you’ve had companies like YCombinator and Techstars that have been able to create great programs and helped launch some of the most successful businesses in the world. In this article, we want to help you understand how they work, what the process is like, and what to expect if your company is accepted into one of these.
Accelerators VS Incubators: What Is The Difference?
Startup accelerators and startup incubators are two terms that are often used interchangeably. However, they differ not only in the service they offer but also in their target audience.
Startup incubators are focused on helping startups that are just at the start of their journey, even when in the product development phase. Startup accelerators, on the other hand, focus on startups that are already operational and have a minimum viable product.
Incubators can be seen more frequently in academic circles like Universities as programs that allow students and graduates to get access to office space and mentoring. Accelerators, on the other hand, are usually programs offered by private organizations that focus on helping the startup grow. This means that a startup could graduate from an Incubator and join an accelerator but not the other way around.
Some key differences between accelerators and incubators are:
- Duration Of The Program. Incubators generally are the longest programs running from 6 months to 2 years. Accelerator programs are relatively faster and are done over 3 to 6 months.
- Funding And Equity. Another solid difference between these is that incubators, more often than not, do not fund nor take stakes. On the other hand, accelerators typically offer a small seed investment and access to a credible mentor network in exchange for equity or convertible shares.
- Program Application And Selection. For incubators, the selection process hugely relies on one-on-one interviews to assess the entrepreneur’s intent. The criteria are focused on the idea itself, its impact, the team’s capability, and market potential.
Accelerators are selected on a variety of things. These include product/market fit, the X factor of the founders, and the high potential of ROI for investors.
What makes a good startup accelerator?
If done well, startup accelerators help companies to reach their goals in a quicker, more effective way. This is a various months process where a variety of tools are given to the alumni, expanding their opportunities, knowledge, and networks.
But, what makes a startup accelerator good? Certainly, there are 3 main elements to identify a good accelerator.
- Mentoring and teaching. Good accelerators rely on quality teachers and mentors who can share their field knowledge. They should allow and encourage you to engage with them during the length of the program. This can happen through meetings, calls, or time in their physical facilities and offices.
- Teaching from problems. A successful accelerator program should use conflicts that may emerge as opportunities for startups funders to learn and grow. A program of this sort is a great opportunity to reflect on possible conflicts and problems with the help of mentors.
- Networking. An accelerator should help build a network of important connections around a company that can last for its lifetime. These programs work with investors and venture capital firms that are looking to invest in promising startups. An accelerator will give you credibility as a business, which will be very useful in the future for hiring and fundraising.
On the other hand, a non-successful accelerator lacks the type of vision that involves these three elements, trying to copy other accelerators and failing.
The Process Of Startup Acceleration
Now that you know what a startup accelerator is, let’s break down the process of startup acceleration. This process is often divided into 5 main stages: applying, getting funded, learning, networking, and the Demo Day.
The first step in the acceleration process is applying. This is all about submitting the necessary documentation and making sure you fulfill the requirements. This is usually done by filling out a form in which you will be talking about yourself, your business, and your background. If the accelerator likes what you’ve stated, they will call you in for an online or personal interview.
During that time, you can expect questions about the market, your business plans, and how you feel about your product. Typically, it’s a very small percentage of people that get admitted into accelerator programs as they are extremely competitive.
There are places like AngelHack or even Ycombinator that are labeled to be harder than Harvard to get into. We are talking about a percentage of acceptance that ranges between 1% to 3%. This is extremely low and you can feel special if accepted.
We also have a little advice for you. When getting the interview, we suggest you let all the passion come out. Make them understand why your background is the best to execute your business idea and bring it to life. You’ll surely do great!
The next step in the process is going to be getting funded. Basically, when you attend an accelerator program, they give anywhere from $10,000 to $120,000 for a percentage of equity in your business.
That could range from as little as 5% all the way up to 12%. Now, the structure of the investment is, for the most part, going to come in a convertible or safe note. These are documents that usually startups utilize for raising capital.
This also means that the investment they are giving you is not coming with equity or valuation. Instead, the money given to you is going to convert into equity when you do your next round of financing.
This ideally happens at your Demo Day when you connect with other investors, which is a topic we will get into very soon.
Learning a lot is the exact definition of what you’ll be doing there. When you attend one of these programs, there will be many experts and other founders that have also been successful. Here, you want to go and meet those of them that have a lot of knowledge, getting to learn from their experience.
By doing this, you will get their help on either the product or understanding internal processes. There are also going to be workshops and all types of sessions in different areas. These can include marketing, fundraising, and others which can be extremely useful.
Again, there are certain days where you are going to be in attendance, and then there are other days that will be like in the office. Hours will be used to ask questions and use that as a Q&A to understand how you are progressing.
Networking is extremely important when it comes to getting your startup to succeed. This is because there are a lot of startups out there and there is a lot of noise, which you can stand apart from with the right connections.
When it comes to the network, if you take a look at Ycombinator, you will be able to have potential access to founders of Dropbox, Airbnb, and other big companies. If you access the right network, you will gain access to companies that could help your startup’s business model succeed in your respective industry. For this reason, looking at the graduates of the accelerator you are applying for is extremely important!
When founders attend a program like this, they end up already with a bunch of customers. This is because those customers (big companies) were essentially at one point, attending this specific accelerator program.
Also, startup acceleration networks can help you connect with angel investors or venture capital firms. Taking all this into account, you’ll really want to make sure to understand who is part of their network and how they can help you on achieving the milestones that you need.
The last step in most accelerator programs is the demo day. When it comes to the demo day, it means you’ve already done your 3 or 6 months as part of the cohort of that batch of the accelerator. You’ve already made your progress and now it’s time to showcase your product or service.
Essentially, on that demo day, you are going to be explaining your finished product characteristics to investors. There are going to be all types of investors in the crowd watching for your pitch.
When investors finish considering which pitch is the best, they will reach out to the founder. They will want to engage in order to potentially invest in the business. For that reason, be prepared to persuade and explain the best parts of it.
You want to be very careful here. The best accelerator programs are the ones that bring qualified investors to demo day. There are other programs where most of the time you see a bunch of service providers that ultimately are going to waste your time. Avoid those!
In summary, don’t forget to be cautious and when asking the program questions, ask them about their type of investors in demo days. Maybe they can give you some case studies too
Best Startup Accelerators
When startups look for mentorship and education intended to accelerate their growth, finding a business accelerator can be crucial. As you may imagine, there are quite a few to choose from. This choice will probably be influenced by your startup’s location and other factors. Let’s go ahead and list some of the top Startup Accelerators.
This was one of the pioneers in the seed accelerator programs, started by Paul Graham in 2005. YCombinator has already launched more than 2000 startups including Airbnb, Doordash, Twitch, and Reddit. They remain one of the largest accelerators in the U.S.
YCombinator counts with a stellar reputation for producing outstanding program graduates such as the ones mentioned before. They invest in the startups and receive in return small stakes in the companies they fund.
Once a startup is approved on the program, they help make their ideas into reality, pitch these ideas to investors, and close beneficial deals for growth. It’s a 3-month long program that culminates with a Demo Day, where a small invite-only audience is presented with the company.
Also, their support doesn’t stop after the program ends. They rather stay active and committed with their YC graduated alumni through the rest of their business journey.
This is another startup accelerator that has been working for a long time. Techstars selects about 300 startups to join their mentorship and guidance 3-month program annually.
This is an intensive program in which, if selected, your startup will receive financial aid of $120,000 and hands-on access to their start-up mentors.
This startup accelerator has hosted many accelerator programs in different locations, giving startup founders more freedom and convenience to build their ideas. Techstars provides funding and fundraising opportunities, workshops, and curated resources, not to mention countless moments where you can learn from your peers.
This accelerator is known for having themed or industry-based programs during which the startups selected belong to similar industries and focus on similar results. Some of these are, for example, energy or social impact.
Based in San Francisco, California, this startup accelerator manages global venture investments in more than 70 countries. 500 Startups breaks away from the typical deadline system and accepts applications on a rolling basis.
Their 4-month long startup accelerator program focuses on growth and scaling. When accepted, startup founders in their program gain access to a network of other startup founders and mentors, on top of a funding aid of a hundred and fifty thousand dollars. 500 Startups offers within the program hands-on support for the startup´s product and business strategy.
500 Startups also counts with other programs in addition to their main one. These alternative options focus on other topics or are specifically made for some countries. For example, in 2020, 500 Startups launched a specific accelerator focused on working a startup in the times of Covid-19 and tackling its difficulties.
AngelPad is a startup accelerator with locations in New York City and San Francisco. They have launched more than 150 startups since 2010. Unlike other accelerators, AngelPad handpicks small amounts of startups to work with for three months of the year.
This accelerator was ranked as the number one business accelerator based on a study done at MIT and Brown University.
During the program, AngelPad assists startup founders with funding and finds the best product-market fit. They also work on refining the startup´s target marketing strategy to enhance and get the best results for your business.
MassChallenge has multiple global offices in places such as Mexico, Israel, the United Kingdom, and Switzerland, while headquartered in Boston, Massachusetts. They invest in high-potential startups from different industries around the globe with no equity taken.
What makes them different from other startup accelerators is that they are no-profit. Over the last 10 years, they have worked with 2500 startups and raised an astounding 6 billion dollars in funds, and generated more than 3 billion in profit.
Dreamit Ventures is a venture capital and accelerator firm that focuses on startups with market-ready product growth. They have already launched more than 300 startups.
Their program provides founders with access to various important resources such as access to executives, investors, and thought leaders. They target three types of fields and have a program for each: health tech, urban tech, and secure tech.
New Venture Challenge
Also known as NVC, New Venture Challenge is one of the premier accelerator programs in the U.S. More than 300 startups have graduated from this program and gone on to raise more than 1 billion dollars in funding and 7.5 billion dollars worth of merger and exit investments.
Some of the successful and well-known companies that they have launched are Braintree, Venmo, Simple Mills, and Grubhub.
Founded in 2010, Boom Startup is a top-ranked business accelerator located in Utah. They provide startups with pitch development, minimally viable product creation, extensive mentoring from experts, investor introduction, and many more.
They use a lean startup methodology to launch their acceleration plan. With this approach, startups can easily learn what works best for them. Boom Startup offers a mainly mentor-driven approach.
AlphaLab is a software accelerator firm located in Pittsburgh, Pennsylvania. Their immersive 4-month program offers early-stage tech founders funding opportunities, mentor networks, an entrepreneurial environment, and a series of educational sessions.
They invest up to $50,000 into a startup business, in exchange for 2.5% to 4% equity in a company. Another unique quality of this startup is the possibility for alumni to qualify to raise additional capital through an innovation works seed fund of up to $600,000
Google Launchpad Accelerator
Google Launchpad Accelerator program gives startups founders access to a variety of tools to help accelerate their business growth. Equity-free support, close partnerships with Google, google engineers, PR training intensive mentoring, and more are offered to the alumni.
The program offers all-expense-paid training at their Silicon Valley headquarters.
Launch KC is an industry-specific startup accelerator located in Kansas City. It is an initiative of the Downtown Council and the Economic Development Corporation, both of Kansas City.
Launch KC helps Co-hoards get involved with a top-level partner that makes a small investment in the firm and participates during the growth process by providing a number of opportunities for startups.
Offering industry-specific mentoring and education, Launch KC creates a space of opportunities for investors and entrepreneurs while growing the local economy.
Accelerating Your Startup Without an Accelerator
Unfortunately, startup accelerator programs are extremely competitive. This means that many founders who apply are not accepted and have to find another way to accelerate their startup’s growth. If this is your case, worry not! Many successful startups have made it without participating in an accelerator program.
Building a successful startup is all about grit. By translating your passion into action, you can obtain results similar to those of an accelerator without participating in a program. All that is required is that you create a solid plan and stick to it.
We are not gonna lie, the experience and resources accelerators provide can make it easier for you to grow your business. However, there are a lot of resources out there that don’t require you to be part of the 3% to take advantage of them. Remember what accelerators are all about: Education, networking, funding, and pitching. Let’s take a look at how to accelerate your startup without an accelerator!
The first thing you can do is start reading more books about startups. Or, even better, core a blog post. There are a bunch of founders that have written these amazing startup books. A famous one is Peter Thiel, one of Paypal’s founders. Learning from famous entrepreneurs can provide you with unique insights that you can then translate to your own business.
Conferences, meetups, and online courses are also great ways for you to educate yourself on the ins and outs of entrepreneurship. With most events taking place now in an online or hybrid manner, it is extremely easy for anyone to participate!
Podcasts are also a great way for you to educate yourself. In fact, Grit Daily has a podcast specifically aimed at those looking to learn about the reality of the startup world!
Ensuring that you keep learning about your industry and how to grow a business is extremely important. However, don’t forget that a startup is more than just its founder… Provide your colleagues with the necessary means to educate themselves too!
Surround Yourself With Like-Minded People
Bring people around you to ensure that you are building that support group. One very known strategy is bringing like-minded entrepreneurs to break bread. That could be lunch or dinner.
What most accelerators do are office hours where they coach and talk with you. Once a week they bring in a pretty notable entrepreneur to share their story. However, the same advice that you get being in there you can get every week using this strategy.
Bring people together, share their stories, and have you shared your stories so far of getting going. This will build that base foundation to create your own accelerator.
Create Your Own Pitch Deck
You really want to create your own pitch deck. Having your own pitch deck and creating those 10 slides of information about your competition, your market, and your strategy will get you crystal clear on what you are building.
That’s what you would learn if you are in a startup accelerator. However, you can do this for yourself, and having that capacity of creating a pitch deck for your startup is going to be very useful.
Having a great pitch deck is extremely important if you want to get funding in the future, which you will. For this reason, make sure to review your pitch every now and then, as well as to get second opinions. By building a strong pitch deck you will get closer to having your startup succeed!
The fact that you were not accepted by an accelerator program doesn’t mean that you can’t apply again. In fact, most accelerator programs will provide you with important feedback on the reasons for the rejection.
Make sure to review your application and find out what could be improved. Not only will this increase your chances of being accepted to the same or other program but will also provide you with great insights. The world of startups can be a harsh world, which is why learning from your mistakes is essential to navigating it.