What is a startup accelerator?
Accelerators have become an integral part of the startup ecosystem, offering finance, mentoring and other support, with the aim of discovering the next big thing.
One of the earliest and probably the most famous accelerators, Y Combinator, had a hand in building household names such as AirBnB, Dropbox and Reddit. Since then, its model of working intensively with startups to prepare them for pitching to an audience of investors, has been replicated the world over. Some other prominent examples you might have heard of include UK Techstars, Entrepreneur First and Silicon Valley’s 500 StartUps.
According to Nesta, the financial support provided by accelerators equates to around £33 million per year, offering loads of opportunities for ambitious entrepreneurs. Yet with the accelerator market now more crowded than ever, it’s important to know the different options available and what’s involved, so you can find the one that’s best suited to your business needs.
From the what to the where, this guide will explain everything you need to know.
What’s the difference between an incubator and an accelerator?
From accelerators to incubators, angel networks to VCs - the lingo can get confusing for early-stage startups. Yet despite often being lumped together, incubators and accelerators actually differ quite significantly in their models, sources of funding and the support they provide. Below are some of the key characteristics and differences between the two.
|1. Fixed duration (usually three to twelve months)||Open-ended (usually based on the stage of the company)|
|2. Typically growth-based (payment via equity rather than fees)||Typically rent/fee-based|
|3. Focus on services over physical space||Focus on physical space over services|
|4. Often provide seed funding (usually between £10,000 and £50,000) and often via corporate partners||Usually funding is minimal, and no equity stake is taken|
|5. Admission in cohorts||Admissions on an ad-hoc basis (not cohort-based|
|6. Highly selective||Selective admission (but typically less so than accelerators)|
|7. Provision of startup services (e.g. mentorship, entrepreneurial training)||Provision of services including mentorship, entrepreneurial training|
Services provided by accelerator programmes tend to be more commercially led and aimed at helping businesses to scale rapidly, for example, assistance in developing a business plan, investor deck, prototypes, and initial market testing. Accelerators are typically aiming to produce companies that will scale rapidly or fail fast, thus minimising wasted resources.
Different types of startup accelerators
All accelerators are different, yet many have very similar characteristics. Accelerators are created for a variety of different reasons and as a result, will have different missions and areas of focus. For example, venture-backed accelerators aim to provide a fast return to investors, whereas Government-backed accelerators will usually be aligned with local development.
Dependent on their mission, accelerators will also often specialise in certain industries, which is usually driven by either a corporate partner or the person that is running the accelerator. For example, many accelerators specialise in technology, and may narrow this down to specific areas, such as blockchain. Other accelerators focus on the demographics of those running the business, for example, entrepreneurs under 30, or female entrepreneurs.
According to research from Nesta, corporate-funded accelerators are now in the majority, with 51% receiving finance from bigger businesses that are eager to benefit from innovative and disruptive entrepreneurs. In contrast, venture capital led funds now account for a small proportion of accelerators.
What support do businesses receive?
Every accelerator aims to provide the support and training necessary to transform early startups into market-ready ventures. This is likely to include:
- Co-working space membership: Encouraging knowledge sharing and collaboration.
- Mentoring: one of the most valuable aspects of any accelerator programme, giving you face-to-face contact with those who have faced the same challenges that you’re grappling with.
- Regular interactions with the management team: Where you will review progress and receive business advice.
- Networking opportunities with experts and professionals.
- Training programmes: Typically including seminars and vocational training courses. covering topics such as finance, design, PR, marketing and legal.
- Demo days: Where startups graduate and pitch in front of qualified investors.
The best accelerators also continue to support their graduates after the official programme has finished, through post-programme support. This could include:
- Public Relations opportunities
- Connections with investors
- Bridging finance
- Board participation
- HR/recruitment support
- Regional meet-ups
- Online communities
- Office space
- Alumni network
Is an accelerator right for you?
Accelerators provide an environment where your business has everything it needs to thrive - quickly. And as many accelerators were established to prepare you to pitch to investors, there’s also the chance that you will secure the funding you need to scale.
On the downside, accelerators are intense, so you need to be prepared to work your socks off for the duration of the programme. On top of that, you’ll need to develop a thick skin, as being part of an accelerator means opening yourself and your business up to lots of criticism from mentors and advisors.
While there are a growing number of accelerators in the UK, there are also hundreds overseas, so you may also be asked to up sticks and travel (and potentially live) in another country for a few months.
Ultimately, the accelerator life isn’t right for every business and you must weigh up the time and equity requirements alongside how much you feel you can get out of the programme. Think seriously about why you are applying: A network? Investment? Mentorship? There are other ways to secure all of these, so consider the alternatives before taking the plunge.
How to choose an accelerator programme?
First and foremost, consider the mission of each programme and make sure it aligns with your own. With a growing number of accelerators out there, do plenty of research as there can be differences in the quality of the guidance and mentoring. It’s advisable to talk to previous cohorts, check the backgrounds of the mentors and look at the volume of companies that didn’t graduate from the programme – this is a good indication of how effective they are.
A few key aspects to look out for include:
- What type of funding (if any) is available?
- Who are the mentors?
- How much access do you get to the mentors?
- Does the programme offer the opportunity to connect to potential customers and investors?
- Is there a strong cohort structure to encourage peer learning and support?
- How long is the programme? Can you dedicate the required amount of time?
- How strong is the brand? Will it add credibility to your product or service?
How do you find a startup accelerator?
If you’re looking for an accelerator in the UK, this government directory provides an up to date database (May 2018) of all the programmes currently available.
For those prepared to go further afield, there are also plenty of global opportunities, particularly in the US, so if you’re up for an adventure then these are worth a look. However, be sure to do your due diligence on any programmes that you come across.
How do you apply for a startup accelerator?
Applications: These usually happen online initially. The accelerator management team then assesses applicants on the quality of their idea, their experience and their knowledge of the problem.
Selection process: Most accelerators spend between one to three months recruiting each cohort. As many startups don’t have a customer-base or past revenues to speak of, identifying which ventures have the most potential and are the best fit, can be a complex process. As a result, the quality of the founding team or the strength of the idea itself often becomes the deciding factor.
Interviews: After shortlisting, a preliminary video meeting is often held, followed by selection days where you pitch and present your business. Interviews can range from an hour-long grilling to a 20–minute informal chat, depending on the accelerator.
What do accelerators look for in startups?
There are a number of factors that can help you stand out from the crowd:
Have a compelling story: Think beyond your product pitch. Your story must bring to life the problem you’re solving and why you’re the team to do it. Don’t be afraid to make it personal with details such as how well the team gels, your credibility within the sector and convey the personal emotional investment you have in the project. After all, people buy people.
Use video: Showcasing yourself and your team on video can be an incredibly powerful way to demonstrate your passion.
Network, network, network: With so many industry professionals involved in accelerators, networking is a fantastic way of becoming ‘known’ to those involved in the decision-making, or to secure a useful introduction to the right person. So meet contacts for coffees or beers, attend meetups and be active on social media. It’s important to build hype and raise awareness as much as possible pre-pitch.
Overall, if you’re ambitious, have a great business idea and you’re prepared to work hard, then an accelerator could be just the leg up you need. Just ensure you do your research, due diligence and prep thoroughly for the selection process, to maximise your chances of success.
We wish you all the very best of luck!
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