How Startup Accelerators Help Early-Stage Companies Scale Faster

Imagine you are someone with a potential business idea but have little to no knowledge about growing your business. Or if you know but lack the resources to succeed. In this situation, you would want someone who can help you without any bias.

Startup accelerators are the help you would look for. They are the perfect blend of investors and advisors in one team.

Read about how their business model works, what kind of companies they invest in, and how they can be a huge benefit to your business.

Understanding the Role of Startup Accelerators

Think of startup accelerators as investors who want to help you grow in exchange for shares in your company. Startup accelerators are programs that support early-stage startups to understand everything about business.

Many people cannot spot the difference between a startup accelerator and a startup business incubator. The main difference is that an accelerator is a program for already-founded startups, and a startup business incubator helps founders make their seed ideas solid.

Startup accelerators not only invest funds in your business but also invest time. They take the time to teach you how the business world works. Moreover, they will also introduce you to other founders and even investors.

Some startup accelerators and incubators have in-person training where they train you for a couple of months. They will also provide you with a coworking space or an office space which helps you meet other startup founders.

But what do accelerators do exactly? The role accelerators play is simple to understand: they train you and help you grow your business for 5-10%^[1] equity in your business.

• Training

As a new founder who has just entered a market, it is important to know the basics of business. That is what accelerators do. They don’t take over and manage everything on their own. They will instead train you in the know-how and guide you in establishing your business.

Sometimes, you have to drop everything to live in their in-person training spaces.

Fact: A startup business incubator will help you with the resources. A startup accelerator will mentor you intensively to find your own solutions. It is a keep difference between startup accelerators and incubators.

• Networking

When it comes to business, networking is the most important investment and marketing strategy. Digital marketing is a game-changer for marketing if you do it right. But in-person marketing comes with networking.

If you are just entering the industry, it might take you a good amount of time till you’ve developed a network. Startup accelerators speed up this process. A startup accelerator and incubator program train multiple people at once.

You can use this tactic to create a network. In addition to this, their guest speakers and trainers are investors, giving you a networking opportunity.

• Funding

Startup Accelerators are also financial investors. Their mentorship extends to providing funds for your business. In exchange for a small amount of ownership in your startup, accelerators will provide a negotiated amount of finance.

Many startups enter accelerator programs with a primary focus on funding. The mentorship they receive is an additional benefit.

• Scaling

Accelerators use success strategies like connecting you to investors. They provide you with insider knowledge about dos and don'ts learnt from past startups. Further, they help you polish and perfect your pitch for the final day (demo day).

Teams learn how to manage their fundraising and scaling. This decreases your chances of making mistakes while running your business.

5 Key Features of Effective Accelerator Programs

You must recognise and choose the right accelerator program. For this purpose, you should know what seed accelerators focus on in their training programs.

According to Harvard Business Review, startups that enter an accelerator program manage to raise 50%-170%^[2] from investors. Their chances of surviving the startup stage also increase drastically with mentorship from accelerators.

But how could you know what the right accelerator is going to be for you? This might help you make your decision.

1. Accelerator’s Founders

The first step is identifying who runs the accelerator. An effective accelerator will be run by an investor or a team of highly experienced capitalists. Many high-end corporate organisations have their accelerators, too.

2. Intensity of the Program

Brad Feld, a cofounder of TechStars (a huge name in accelerators), compared an effective accelerator to immersive education. A good program will intensively drill you into a fast-paced environment.

With the help of back-to-back seminars and workshops, you get to learn a long-term process in less than 4 months.

3. Risk Management Strategies

Another key feature you should look out for is the program’s guidance through risk management. Even the most unique and rare scenarios will be covered that young startups won’t otherwise predict.

The mentoring workshops will cover topics like HR management, legal contingencies, and perfecting your pitch for the demo day.

4. Networking Events

Other than receiving intense mentorship, you get networking opportunities with fellow founders and industry specialists in the program. On the final day of the showdown, known as demo day, startups get to use the strategies they learnt on potential investors.

5. Engaging Rivalry

The founders who enter the program are all put in a coworking space. An engaging yet friendly rivalry develops between the startups. Everyone finds themselves facing their biggest strengths and weaknesses all at once.

Once a startup sees where it stands in the acceleration progress, it can change its ideas or management. This gives them a taste of real-life competition in the industry.

Main Types of Startup Accelerators

There can be different reasons why accelerators choose to mentor you. Let’s look at the two main types of accelerators that you can choose from.

• Share and Equity Holders

These types of business accelerators are run by investors looking to buy part ownership of innovative startups. Their business model is that they will train you in exchange for equity in your company. The reason why many people prefer and trust equity-based accelerators is mutual interest.

The accelerator is permanently invested in your company; it’s guaranteed that they will do their best to scale your business. You become their priority through mutual interest in launching your company.

Here is usually no industry-specific requirement for equity-based startups. You get to network with founders from different industries. This also means you get to hear stories from market-wide investors.

• Venture Opportunities by Corporate Accelerators

Big companies like Google and Microsoft run their VC accelerator programs, and there’s a deeper reason behind it. These accelerators see the selected startups as venture capital investment opportunities.

A corporate-run VC accelerator chooses companies from its industry. It trains companies with a keen interest in collaboration. A VC accelerator gives you a chance to connect, network, and even compete with others in your industry. Your industry knowledge is nurtured by industry-related experts.

There are advantages to both types of accelerators. In the end, it comes down to picking the program that you think will help your company the most.

Entering a Startup Accelerator

You’ve decided that entering a startup accelerator is what your company needs; now what? Find and choose which accelerator is right for you. Create your pitch deck, and get started!

• Getting Selected

The leading accelerator programs are very picky with the company they are going to invest in. The rate of acceptance from a thousand submissions is 1%-3%^[3]. Make sure your pitch has a straightforward idea and strategy for your company.

Pro Tip: Sell yourself better than you sell your idea. Accelerators value the potential in the founders and their spirit the most.

• Entering the program

If selected, you will have to dedicate 3-4 months full-time to the training. The training is rigorous and fast-paced. Prepare yourself to learn and work in a competitive, high-pressure environment.

• Networking

Accelerator programs offer a plethora of networking opportunities. Cease them all - from networking with someone in your industry to pitching to investors from various industries.

• Keeping Growth Constant

During the program, you will learn a lot of business strategies from a lot of people. Learning different strategies like how to increase brand growth will be a game-changer.

• Acing Demo Day

Demo day is the very last day of your training. And yes, it’s just as intimidating as it sounds. This is the day when you get to pitch your company to external investors. It’s a chance to apply your training and receive funding.

Summing Things Up

The existence of startup accelerators has helped the most-known names in the world including AirBnB and Dropbox. Their investment in time, expertise, and capital in a company allows early-stage startups to grow rapidly. Accelerators are a win-win investment for the startups as well as the investors.

GrowthJockey is a type of business accelerator. We help you and your business grow by providing our expertise in digital transformation, marketing strategies, and business operations.

Our experts have helped startups as well as entrepreneurs spread across various industries from fashion to EV Automobiles.

FAQs

1. What are the best startup accelerators?

The most known and highly effective startups are TechStars, Y Combinator, and 500 Startups. Other than these, organisations like Toyota, AB InBev, and Salesforce have their own accelerators.

Effective accelerators will have an intensive training and mentorship program. Networking, funding, and coworking are some key features of the best startup accelerators.

2. What is startup acceleration?

Speeding up the process of launching a startup is called startup acceleration. When a startup decides to enter acceleration, they are put into an intensive training program.

The programs have investors who share their expertise about business with the founders. The founders get to learn strategies and problems that would otherwise take them years to learn.

1. 5-10% - Link ↑
2. 50%-170% - Link ↑
3. 1%-3% - Link ↑