Startup accelerator

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Startup accelerators, also known as seed accelerators, are fixed-term, cohort-based programs, that include mentorship and educational components, and (sometimes) culminate in a public pitch event or demo day. [1] While traditional business incubators are often government-funded, generally take no equity, and rarely provide funding, accelerators can be either privately or publicly funded and cover a wide range of industries. [2] Unlike business incubators, the application process for seed accelerators is open to anyone, but is highly competitive. [3] There are specific accelerators, such as corporate accelerators, which are often subsidiaries or programs of larger corporations that act like seed accelerators. [4]

Contents

Distinctive qualities

The main differences between business incubators, startup studios, [5] and accelerators are: [3] [6]

  1. The application process is open to anyone but highly competitive. For instance, Y Combinator and TechStars have application acceptance rates between 1% and 3%.
  2. Seed investment in startups may be made, in exchange for equity. Typically, the investment is between US$20,000 to US$50,000 in the US, or £10,000 to £50,000 in Europe. [3]
  3. The focus is generally on small teams, not on individual founders. Accelerators generally consider that one person is insufficient to handle all the work associated with a startup. However, a number of 'founder first' accelerators exist that focus on solo founders, including Entrepreneur First, Antler, Oneday and Underdog Accelerator. [7]
  4. The startups must "graduate" by a given deadline, typically after 3 months. During this time, they receive intensive mentoring and training, and they are expected to iterate rapidly. Virtually all accelerators end their programs with a "demo day", where the startups present to investors. [8]
  5. Startups are accepted and supported in cohort batches or classes (the accelerator isn't an on-demand resource). [9] The peer support and feedback that the classes provide is an important advantage. If the accelerator doesn't offer a common workspace, the teams will meet periodically.

The primary value to the entrepreneur is derived from the mentoring, connections, and the recognition of being chosen to be a part of the accelerator. The business model is based on generating venture-style returns, not rent, or fees for services.

Seed accelerators do not necessarily need to include physical space, but many do. The process that startups go through in the accelerator can be separated into five distinct phases: awareness, application, program, demo day, and post demo day. [3]

Accelerators provide enough funding to get a company to demo day, from which point the startup is on its own. [10] Moreover, this is where accelerators distinguish themselves from incubators and venture builders. They focus with high engagement on the early stage of the startup. [11]

History

The first seed accelerator was Y Combinator, started in Cambridge, Massachusetts, in 2005, and then later moved to Silicon Valley by Paul Graham. [3] It was followed by TechStars (in 2006), Seedcamp (in 2007), AngelPad (in 2010), Startupbootcamp (in 2010), Tech Wildcatters (in 2011), several accelerators of SOSV, Boomtown Boulder (in 2014) and Antler (in 2017). [12]

In Europe, the first accelerator program was started by Accelerace in 2009 in Denmark (strongly subsidised by the Danish government) followed shortly after by Startup Wise Guys in 2012 in Estonia.

With the growing popularity of seed accelerator programs in the US, Europe has seen an increase in accelerators to support a growing startup ecosystem. [13]

Forbes published an analysis of startup accelerators in April 2012. [14] Since 2010 there has been a substantial growth of Corporate Accelerator programs, which are sponsored by established organizations but follow similar principles. [15]

Impact

Whether accelerators increase the success of accelerated firms is not always clear. A number of studies have shown that accelerated cohorts perform better than non-accelerated firms, but this is potentially due to the selection effect of programmes (i.e., the accelerators might be good at 'picking winners' rather than creating them). However, studies using regression discontinuity design show that accelerators can indeed have impact over and above their selection effect, and may also have wider ecosystem spillovers (although this does not necessarily apply to every program). [16]

See also

Related Research Articles

Seed money, also known as seed funding or seed capital, is a form of securities offering in which an investor puts capital in a startup company in exchange for an equity stake or convertible note stake in the company. The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own, or until it is ready for further investments. Seed money options include friends and family funding, seed venture capital funds, angel funding, and crowdfunding.

A business incubator is an organization that helps startup companies and individual entrepreneurs to develop their businesses by providing a fullscale range of services, starting with management training and office space, and ending with venture capital financing. The National Business Incubation Association (NBIA) defines business incubators as a catalyst tool for either regional or national economic development. NBIA categorizes its members' incubators by the following five incubator types: academic institutions; non-profit development corporations; for-profit property development ventures; venture capital firms, and a combination of the above.

<span class="mw-page-title-main">Y Combinator</span> American startup accelerator

Y Combinator Management, LLC (YC) is an American technology startup accelerator and venture capital firm launched in March 2005 which has been used to launch more than 4,000 companies. The accelerator program started in Boston and Mountain View, expanded to San Francisco in 2019, and was entirely online during the COVID-19 pandemic. Companies started via Y Combinator include Airbnb, Coinbase, Cruise, DoorDash, Dropbox, Instacart, Reddit, Stripe, and Twitch.

Social venture capital is a form of investment funding that is usually funded by a group of social venture capitalists or an impact investor to provide seed-funding investment, usually in a for-profit social enterprise, in return to achieve an outsized gain in financial return while delivering social impact to the world. There are various organizations, such as Venture Philanthropy (VP) companies and nonprofit organizations, that deploy a simple venture capital strategy model to fund nonprofit events, social enterprises, or activities that deliver a high social impact or a strong social causes for their existence. There are also regionally focused organizations that target a specific region of the world, to help build and support the local community in a social cause.

<span class="mw-page-title-main">Techstars</span> U.S. startup accelerator

Techstars is a pre-seed investor that provides access to capital, mentorship, and other support for early-stage entrepreneurs. It was founded in 2006 in Boulder, Colorado. As of January 2024, the company had accepted over 4,100 companies into its accelerator programs with a combined market capitalization of $106bn USD. Techstars operates accelerator programs in the Americas, Europe, the Middle East, Africa, Asia, and Oceania.

<span class="mw-page-title-main">500 Global</span> U.S. startup accelerator

01918791272 Bkash 500 Global is an early-stage venture fund and seed accelerator founded in 2010 by Dave McClure and Christine Tsai. The fund admitted a first "class" of twelve startups to its incubator office in Mountain View, California in February 2011. They expanded to a second class of 21 in June 2011 and a third class of 34 in October 2011.

AngelPad is an American seed-stage startup incubator, launched in September 2010 by Thomas Korte and Carine Magescas with six other former Google employees as mentors. AngelPad provides mentorship, seed money, and networking at two 10-week courses per year.

<span class="mw-page-title-main">9gag</span> Social media website

9gag is an online platform and social media website based in Hong Kong, which allows its users to upload and share user-generated content or other content from external social media websites. Since the platform for collections of Internet memes was launched on April 11, 2008, it has grown in popularity across social media such as Facebook, Twitter, and Instagram.

<span class="mw-page-title-main">StartX</span> US non-profit startup accelerator

StartX is a non-profit startup accelerator and founder community associated with Stanford University.

Canopy Labs is a customer analytics company headquartered in Toronto, Ontario, Canada, with offices in San Francisco. It was founded in 2012 and offers SaaS marketing analytics for businesses and organizations. The company is an alumnus of the Y Combinator accelerator program. Canopy Labs was acquired by Drop.

The Alchemist Accelerator is a venture-backed accelerator focused on the development of seed-stage ventures that monetize from enterprises. Alchemist's backers include Khosla Ventures, DFJ, Cisco, Siemens, GE, and Salesforce, among others. The accelerator seeds around 75 enterprise-monetizing ventures per year.

<span class="mw-page-title-main">Blue Startups</span>

Blue Startups is a Hawaii-based accelerator company co-founded by Henk Rogers, Maya Rogers and Chenoa Farnsworth in 2012. They created it to help startup companies, and help make Hawaii more identifiable as a technological business hub. The company has a network of over 120 mentors from the Hawaii, Silicon Valley, and Asia areas. The company's stated goal - according to former Program Manager Meli James - is to get companies started in Hawaii and make them want to keep working in the state.

Mobile App Business Launchpad Experiment, often stylized as Mable, is a business accelerator based in Portland, Oregon, U.S., that provides mentorship and resources to select startup companies. The program was informally launched in 2015 before converting to a formal structure in 2016. Mable participants are chosen by a selection committee following an application process. Participants will either then be sent to prepare for an investor pitch and receive limited coaching or be sent to enroll in the app academy accelerator where they spend three months developing their businesses with support from mentors and coaches. Companies that pass through the accelerator may also be provided a seed round of financial assistance.

A corporate accelerator is a specific form of seed accelerator which is sponsored by an established for-profit corporation. Similar to seed accelerators they support early-stage startup companies through mentorship and often capital and office space. In contrast to regular programs, though, corporate accelerators derive their objectives from the sponsoring organization. These objectives can include the wish to stay close to emerging trends or to establish a funnel for corporate venture capital investments.

Entrepreneur First is an international talent investor, which supports individuals in building technology companies. Founded in 2011 by Matt Clifford and Alice Bentinck, the company has offices in Toronto, London, Berlin, Paris, Singapore, Bangalore and San Francisco.

Tenity is a startup incubator, accelerator and early-stage VC founded in 2016 in Zürich focused primarily on Fintech, Insurtech, Regtech and Deeptech. It provides incubation and acceleration programs helping startups to connect with corporates, experts, mentors, and investors for early stage venture and late stage venture investing, and collaboration opportunities. The company currently has operating hubs in Zürich, Singapore, Madrid, and Tallinn.

<span class="mw-page-title-main">Entrepreneurs Roundtable Accelerator</span> NYC technology startup seed accelerator

Entrepreneurs Roundtable Accelerator is an American seed accelerator launched in January 2011.

Berkeley SkyDeck (SkyDeck) is an entrepreneurship startup accelerator and incubator program which serves as a joint venture between the Haas School of Business and Berkeley College of Engineering at the University of California, Berkeley. Founded in 2012, SkyDeck promotes research and entrepreneurship in Silicon Valley. It has become a top university incubator in both the United States and also worldwide.

<span class="mw-page-title-main">CIIE.CO</span> Indian startup accelerator

CIIE.CO is an Indian startup accelerator and incubator that supports early-stage startups located at IIM Ahmedabad in Ahmedabad, India. It was founded in 2002 to promote innovation and entrepreneurship in India. It is a Center of excellence set up at Indian Institute of Management Ahmedabad with support from the Government of India's Department of Science and Technology and the Government of Gujarat.

<span class="mw-page-title-main">MiraclePlus</span> Chinese venture capital firm

MiraclePlus is a Chinese venture capital firm headquartered in Beijing founded in 2018. It was spun off as an independent firm after Y Combinator China was closed. It is one of the largest startup accelerators in China.

References

  1. ↑ Cohen, Susan (2013). "What Do Accelerators Do? Insights from Incubators and Angels". Innovations. 8 (3–4): 19–25. doi: 10.1162/inov_a_00184 .
  2. ↑ Bone, Jonathan; Allen, Olivia; Haley, Christopher (2017). Business Incubators and Accelerators: the National Picture (PDF) (Report). UK Dept of Business, Energy and Industrial Strategy.
  3. 1 2 3 4 5 Lisa Barrehag; Alexander Fornell; Gustav Larsson; Viktor Mårdström; Victor Westergård; Samuel Wrackefeldt (May 2012). Accelerating Success: A Study of Seed Accelerators and Their Defining Characteristics. Gothenburg, Sweden: Chalmers University of Technology . Retrieved September 14, 2012.
  4. ↑ Crichton, Danny (August 25, 2014). "Corporate Accelerators Are An Oxymoron" . Retrieved June 17, 2015.
  5. ↑ Kronenberger, Craig (February 23, 2021). "What Startup Model is Right for You?". Medium. Retrieved March 23, 2021.
  6. ↑ Miller, Paul; Bound, Kirsten (June 2011). The Startup Factories - The rise of accelerator programmes to support new technology ventures (PDF). London, UK: NESTA. p. 3.
  7. ↑ "Underdog Startup Accelerator | Expert Support to Launch Your Startup". Underdog Startup Accelerator | Expert Support to Launch Your Startup. Retrieved August 14, 2023.
  8. ↑ Gilani, Aziz; Dettori, Gianluca (July 16, 2011). "Incubators in US and Europe - Speed and scale in capital formation". Kauffman Fellow Program. p. 21. Retrieved September 14, 2012.
  9. ↑ Christiansen, Jed. "Seed Accelerator Definition" . Retrieved September 14, 2012.
  10. ↑ Kronenberger, Craig (March 29, 2021). "What Startup Model is Right for You?". Medium. Retrieved May 7, 2021.
  11. ↑ Schoofs, Daan (August 29, 2023). "Venture Building". Duodeka.com. Retrieved August 29, 2023.
  12. ↑ Gilani, Aziz; Dettori, Gianluca (July 16, 2011). "Incubators in US and Europe - Speed and scale in capital formation". Kauffman Fellow Program. p. 4. Retrieved September 14, 2012.
  13. ↑ Johnson, Bobbie (July 18, 2011). "Are Europe's startup accelerators speeding out of control?". GigaOM.
  14. ↑ Tomio, Geron (April 30, 2012). "Top Startup Incubators And Accelerators". Forbes. p. 1.
  15. ↑ Heinemann, Florian (June 17, 2015). "Corporate Accelerator database".
  16. ↑ Jonathan Bone; Juanita Gonzalez-Uribe; Christopher Haley; Henry Lahr (2019). THE IMPACT OF BUSINESS ACCELERATORS AND INCUBATORS IN THE UK (Report). BEIS.
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