For startups with enthusiastic founders, barely viable products, and big goals, joining an accelerator program can give the push needed to remove the obstacles to expansion. The best accelerators have experts in the form of advisers, teams, and a six-figure amount of funding, in addition to the effect of being accepted in a prestigious accelerator program, making it easy to understand why competition is fierce.
Yet, entrepreneurs can play a lot of cards. Accelerators are fuelled by innovative ideas, and investors know that the ultimate objective is a win/win. The accelerator grants you cash and access to marketing, legal, operational, and financial know-how to help you refine your business strategy. In exchange, the accelerator is awarded equity with the expectation of massive growth and future earnings. Your contribution is valuable to the table, and the number of good-quality accelerators is growing and not just located in Silicon Valley.
Entrepreneurs from Austin, Texas, to Bangor, Maine, and cities and towns can choose. Here’s the information you must learn to identify the most effective accelerator to help your business grow.
What Is a Business Accelerator?
A business accelerator offers businesses in early stages capital access to experienced advisers, peer mentorship, and practical assistance such as workspaces, marketing, and enabling technology. The application process is through the application, and some accelerators specialize in a particular geographic, vertical, or another kind of business. You will likely be in a cohort which is a set-size group of companies with similar characteristics, regardless of their product type or market they are targeting, accepted at a given time during time periods. The program duration is between three and six months and ends with the Demo Day, where graduates present their companies to the press, investors, and potential clients.
In exchange, accelerator’s investors get equity, typically at 7% or less, as well as other benefits, including the right to buy extra shares at a discounted price and the power to influence important decisions, such as new financing rounds and executive or board appointments or acquisition proposals. They also require evidence that shows that the business has been incorporated in the first place with a capitalization estimate, outstanding equity, the number of options that have been granted, as well as intellectual propriety (IP) rights and description, and whether IP is patentable and if patents have been filed or granted.
The founding teams who enter an accelerator with a refined strategy and the capability to apply the advice of sales, marketing operations, finance, and other specialists into action will reap the most. If you enroll too early, the experience could cause more harm than good. Firms that don’t have MVPs (minimum viable products) or decently-constructed marketing plans could be better assisted through an incubator.
Accelerators vs. Incubators: What’s the Difference?
Business accelerators and business incubators are often lumped together. However, more modern hybrid programs are gaining popularity. However, there are some significant distinctions.
Business incubators take on companies at an early stage that aren’t even able to create an unavoidably viable product or a marketing strategy. The founders can stay in the incubator for many years. The support usually comes in the form of assistance in materials such as free or low-cost spaces and technology that can be used with a significant discount and assistance with incorporation or patents, for instance. An incubator can connect startups with an angel or VC investors; however, it’s not a dilutive entity, which means it doesn’t require any equity for its services.
Business accelerators aren’t non-renewable; they are an agreed-upon period of 6 months or even less. It can be a challenging experience and involves a lot of networking, learning, and refining services and products in a brief time. Similar to incubators, the main advantage is the mentorship and connections offered. The funding comes from the accelerator through its investors, who exchange equity. The accelerator could also assist an organization in hiring executive managers and acquiring new customers. It can also help form the board of directors.
Key Takeaways
- Business accelerators offer founders the mentoring, financial support, and essential skills to grow and improve their businesses.
- Investors who invest in accelerators for business receive advantages, including a steady stream of well-vetted entrepreneurs and equity in promising young businesses.
- The most common mistakes for founders are being in an accelerator too early and not reading the fine print in the accelerator contract.
