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What is a startup accelerator?
Startup accelerators are programs that give establishing companies access to investors, mentorship, education and other business support — in the name of helping them scale and become self-sufficient.
Successfully getting into an accelerator program, generally results in a seed investment — in return for an equity stake.
Startup accelerators are a new model of helping entrepreneurs scale up their operations — with some of the programs being sponsored by venture capitalists. It can be considered as a form of alternative business finance.
Startup accelerators are also known as business accelerators or seed accelerators.
Startup accelerator — considerations
Startup accelerators are usually programs with fixed-terms. These programs are typically cohort-based, and getting into one involves a selection process.
Accelerators provide support to businesses, over the term of the program, culminating in a graduation or demo day (public pitch event). Investors are present at these events, and may choose to invest in any of the businesses presented.
The ultimate goal of an accelerator program is for businesses to emerge in a stronger position — where they can gain a bigger share of the market.
While seed accelerators are primarily concerned with the growth of an existing startup, business incubators take on early or late stage startups — that need to further develop their business ideas. In addition, incubator programs can last for years — unlike the typical 2-6 months seen with accelerators.
Being part of an accelerator program — is not necessary for a startup venture to be successful. Many well-known entrepreneurs and investors do not participate in them. Other options include getting a start-up loan and directly seeking angel investment.
How do startup accelerators work?
There are many seed accelerators available, and your company would need to do some research — into which programs best suit your needs. What expertise are you looking for? How much equity are you willing to give? What outcomes are you looking for?
For most accelerators, you’ll need to fully dedicate 2-6 months of your time and be ready to relocate. Additionally, be prepared for working in an intense, high-pressure environment — during this time.
After finding a suitable accelerator — you’ll need to apply and be accepted. Competition for accelerator programs can be fierce, and less than 5% of applications are normally accepted.
The application process involves you interacting with program operators. Accordingly, applying is just as much about you getting to know them — as them getting to know you. This enables you to make an even more informed decision — on whether or not the accelerator program is in your best interest.
Should you be accepted and depending on the program — you may be eligible for a seed investment. Accelerators usually offer seed money — in exchange for equity in your business. For some government sponsored accelerators, that money may be provided as a grant — where no equity is taken up. The funds offered can be anything from 100,000 Naira upwards.
As well as the potential cash injection — valuable education is provided. During the 2-6 months program — the focus is on you as an entrepreneur and your business. Training is commonly provided on site — in co-working spaces. Topics covered are related to launching and growing a business venture — as well as the legal side of things (which is often overlooked). The fundamental aim of this training, is to have a viable business model — that can scale upon graduation.
Networking opportunities, with peers and potential investors, are also something you should make use of. This can give you valuable connections, when it comes to other fundraising efforts — down the line.
Your accelerator program will finish with a graduation or demo day. Each startup, in the cohort, will present and pitch their businesses — to potentially hundreds of active investors. Therefore, you’ll need to make sure your pitch ticks all the boxes — to give yourself the best chances of sparking investor interest.
Benefits of startup accelerators
- Advice and mentoring
- Networking opportunities
- Seed capital investment
- Further access to investors
- External validation
Limitations of startup accelerators
- May have to give up equity — for any funds received
- Opportunity cost — requires a significant time investment
- Hard to get in
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