If you’re an entrepreneur who has been looking for alternative ways to get your business idea off the ground, there’s a decent chance you’ve heard of startup accelerators. Like many aspects of startup culture, however, it’s sometimes difficult to separate the myths from the reality. Are they sleepaway camps with millionaire counselors? Contests? Are they the same thing as business incubators?
Below, we’ll try to demystify this relatively new phenomenon and explore the circumstances under which you might want to join one … or avoid one.
What Is A Startup Accelerator Program?
Startup accelerator programs are offered by an organization, usually a non-profit, to help get a startup off the ground. They do this by combining aspects of education, group collaboration, mentorship, and financing. Accelerator programs have a fixed term, not unlike a college semester or two, where founders heavily immerse themselves in a process of rapid business/concept development alongside a cohort of other entrepreneurs. At the end of which, they’ll demo their product or service.
While startup accelerators do not guarantee it, they do provide the opportunity for participants to solicit seed money from venture capitalists who sponsor or are involved in the program. Participants will also have access to seminars, advisors, and other participants in their cohort, all of which provide a high-intensity educational environment.
Startup Accelerators VS Incubators
You will sometimes hear the phrases “startup accelerator” and “startup incubator” used interchangeably, but they are, in fact, not the same thing — even if they share a few traits in common.
Where an accelerator is a short, intense program that leverages educational and financial resources within a cohort-style environment to jumpstart a business idea, incubators provide a longterm environment in which a business can develop within a dedicated space, sometimes combined with supportive on-site services. That said, they’re not really educational environments: You won’t have tons of seminars going on around you, for example.
A business will only be with an accelerator for a few months, and an incubator is more open-ended. A company may stay in an incubator for years. Incubators may be offered as a nonprofit or economic development agency service, with the company renting a portion of the physical incubator space for its operations.
Finally, there’s the matter of investment. Startup accelerators provide a formal opportunity for participants to pitch investors for seed money. Investment doesn’t usually factor into the operations of an incubator, although you could of course seek those opportunities on your own.
Why You Might Want To Work With A Startup Accelerator
So why might you want to work with a startup accelerator?
1) You Want To Dedicate Yourself Completely To Your Business
Accelerators are intense environments designed to be completely immersive. If you’re admitted to a program, you’ll be around other like-minded folks. You’ll eat, breathe, sleep startup culture for the duration of the program.
If you’ve had trouble dedicating yourself to your entrepreneurial pursuits, an accelerator will all but force you to give it 100%. It’ll be your lifestyle for a few months.
2) You’re Having Trouble Meeting The Right People
Not every entrepreneur has the benefit of starting off with a contact list full of power players. Accelerators can serve as icebreakers between entrepreneurs who might never have met under normal circumstances.
This can be particularly helpful where investors are concerned. You have an opportunity to pitch your idea to them as part of the program.
3) You Want To Learn
Cohort-style learning is a little different than what you may have experienced in high school or even college. While there will be seminars and lectures to attend, a lot of the learning process is peer-driven, with each participant bringing in the bits of knowledge they’ve picked up throughout their lives. You’ll advise, and in turn be advised, by the other participants.
And it’s an intense educational environment. Accelerators aim to condense years of education into less than half-a-year.
Why You Don’t Want To Work With A Startup Accelerator
Startup accelerators aren’t for everyone. Whether due to your life circumstances, experiences, or business concept, you may be better off with a different strategy for launching your company. Here are some of those reasons.
1) You Can’t Put Your Life On Hold For Months
Startup accelerators demand a lot of their participants. You may be expected to temporarily move to a different city and spend most of your waking hours working on your business idea or attending seminars.
As you might imagine, this may not be a great fit for entrepreneurs with families, second jobs. or other serious demands on their time.
2) Your Concept Isn’t A Good Fit For The Program
Each startup accelerator program tends to have guidelines for the types of business they support. Some will have a theme for each cohort. If your business idea doesn’t fit the criteria, chances are you won’t make it passed the application process.
Additionally, you’ll be expected to have an idea conducive to rapid growth, one that is friendly to the venture capital model of investment. If you aren’t thinking in terms of exit strategies and IPOs, an accelerator probably isn’t for you.
3) You Want To Retain All Of Your Equity
Venture capital is an important part of the accelerator model, so that means your goal going in should be to sell your idea to investors. As you probably know, venture capitalists expect a stake in your company in exchange for their money. If you aren’t comfortable with investors asserting some control over your company, you probably should try something else.
Is An Accelerator The Right Way To Start Your Business?
To sum up, an accelerator is a good fit for entrepreneurs looking to develop a business idea for venture capital investment, and who have the time and mindset to completely immerse themselves in a high-intensity for three to six months. If you’re the kind of person who thrives in atypical, high-stress environments and are a bit of an autodidact, you may get a lot of out an accelerator program.
On the other hand, if you’re looking to slowly grow a business that you retain longterm control over, or if you need to split your time between your business venture and other responsibilities, an accelerator simply won’t have much to offer you.
How To Find & Apply For The Right Startup Accelerator
Startup accelerators have become increasingly common since Y Combinator, often credited as the first of its kind, arrived on the scene in 2005. Finding them, however, can be surprisingly tricky if you don’t already know their names and associated websites. These programs are often associated with their region’s investor community, so you can sometimes find them in the same places that you’d look for investors, on sites like AngelList. Your local business community and regional industry events can also be good places to get a sense of what programs are available in your region. Keep in mind, however, that the accelerator program of your dreams may not be located in your region at all. You can apply to Y Combinator from all over the country, for example. You just have to be willing and able to live in the Bay Area for a few months (although: During the COVID-19 pandemic, it’s currently functioning remotely).
Here are some general guidelines for what to do when you’re applying:
- Find an accelerator program that serves your industry (tech, finance, etc.):Â Not all programs are particular, but make sure your idea fits their profile. Most will provide a detailed map of their application process. These processes can vary greatly between programs.
- Expect fierce competition: Because they’re cohort-based, accelerators have limited slots for each “class” that attends. Think about how to stand out and don’t be shocked if you don’t make the cut on your first try.
- Be able to pitch your business:Â You should know your business idea inside and out and be able to confidently pitch your idea to program runners.
- Be honest about what you hope to get out of the program: Remember that accelerators are, among other things, educational programs. Don’t be afraid to say what you don’t know, where you’re having trouble, and what you hope to take away in terms of knowledge.
- Know what you can contribute:Â Remember, you’ll also be a source of information for your cohort. What kinds of knowledge and resources do you bring to the table?
Learn About Other Resources For Entrepreneurs
Startup accelerators are just one resource available to entrepreneurs. If you’re not ready to pack up your life and dedicate yourself to your business idea for a few months, don’t feel bad. There are a lot of other approaches you can take.
Check out our resources on:
- 6 Financing Options For Up And Coming Entrepreneurs
- What Is Venture Capital?
- What Is An Angel Investor?
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