What is a Startup Accelerator?
A startup accelerator, or seed accelerator, is a source of finance and other services to help new businesses get established and cover some of their initial costs that startup founders cannot provide themselves.
You usually won't get all the funding you need from a single startup accelerator program, but you might get a significant sum of financial investment over a fixed period.
During that time, you'll usually also have access to other benefits to help you get your company closer to full maturity or ready for external investment.
For first-time entrepreneurs, knowing how to access startup accelerators can be a challenge, but the benefits of doing so can be substantial.
Because startup accelerators work with companies in their infancy, they often have skills and expertise in helping new innovators to grasp the basics of running a high-growth business.
The support and perks are not available forever — startup accelerator programs usually have a fixed term — but it can help you to gain a much clearer vision of where your business is going in the years to come.
What is a startup accelerator program?
The startup accelerator business model is focused on growth-driven ventures in their infancy and aims to achieve a good return on investment within a relatively short period.
Startup accelerator programs don't just offer money to early-stage companies. They often combine financial support with training and mentorship, and may also give entrepreneurs ways to enter global networks with other businesses and find an in-road into their target market.
It's worth noting that startup accelerator programs also exist that support non-profit organizations, where the intended outcome is some form of human or environmental benefit rather than financial gain.
Some programs have even been known to promote female founders to help them scale their businesses in tough startup ecosystems.
Definition of a startup accelerator
Startup accelerators get involved early in the life of a new company, but there are other sources of finance at that early stage too.
So what sets accelerators apart from angel investors, venture capitalists, and venture capital firms? What is the unique definition of a startup accelerator?
There are several different definitions of startup accelerators, but some characteristics to look for include:
- Fixed-term (often as short as three-month program)
- A clear structure that includes education, training or mentorship
- Minimal to zero joining fees
- Competitive application process
These kinds of characteristics clearly set the startup accelerator business model apart from open-ended seed finance like equity investing.
But one other form of early-stage investment has quite a lot in common with accelerators, and that's business incubators.
Is a startup accelerator the same as a business incubator?
There's a subtle difference between startup accelerators and business incubators, and their names are an indication of this:
- Startup 'accelerators' aim to 'speed up' the growth of new businesses
- Business 'incubators' encourage 'innovation' and disruptive technologies
In some cases, the definitions of startup accelerators and incubators overlap, such as in the case of innovative high-growth technologies. But at times the two are distinct from each other.
How do you apply to an accelerator?
The decision to apply to an accelerator should not be based solely on the fact that you need money to keep your new business venture alive.
Startup accelerators offer much more than just finance. While the funding may be important — even critical — to your business, you should be ready to benefit from the coaching and the access to like-minded entrepreneurs both within and outside of your target market.
You may only get a few months to capitalize on the unique opportunities a startup accelerator offers you, so make sure that when you apply, you're ready to hit the ground running.
Remember too that most acceleration programs are heavily oversubscribed, so your chance of being successful in your application is relatively low.
In some cases, fewer than 3% of applicants are accepted to world-class accelerator programs. Some of the biggest in the world include:
- Y Combinator,
- Techstars Boulder
- 500 Startups
With that in mind, it's important to have a backup plan in case you are rejected.
You can improve your chances by making sure you closely align your business development with the goals of the accelerator.
Try to find out more details about any recent investments made by your preferred accelerator program and any long-term ambitions it has expressed in the past.
Some business accelerator programs in the United States aim to support early-stage startups based in their town or city, while others have a more general aim such as to develop eco-friendly technologies.
As always when seeking investment, a solid business plan and any proof of demand for your product or service can all help you to make your case for why your company deserves support.
This would be especially useful if your product or services are still in product development.
What is the process of application?
Startup accelerators have their own application process and often only consider applications periodically — this could be several times a year, but in some instances, it might only be once a year, so time your application carefully.
In some cases, you can make an expression of interest even when applications are not open, and the accelerator will invite you to apply at the next opportunity.
Your business should be ready to go — the accelerator is there to help you secure investment faster and take you to the next level, but it is not there to solve basic teething problems such as dealing with office space or searching for commercial real-estate.
Make sure you have resolved any technical issues, have a capable team in place and have thoroughly researched the potential market value of your product.
Follow the instructions of how to apply to startup accelerators that you can find on websites or in application packs - this sounds obvious, but you should not submit a generic application to different accelerators.
This is because some accelerators might only cater to tech-startups or fintech companies. Others might only cover geographical areas such as Silicon Valley or New York.
Take the time to complete each application in full, using information that you tailor to that specific accelerator, and you improve your chances of being accepted.
Make sure you know the deadline for applying and when you can expect to receive a notification if your application was successful.
In many cases because of the sheer volume of applications, accelerators can't notify unsuccessful applicants, so check whether or not you will receive a response if you are one of the sizable majority of rejected businesses.