Startup accelerators, also known as seed accelerators, are fixed-term, cohort-based programs, that include mentorship and educational components and culminate in a public pitch event or demo day. 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. Unlike business incubators, the application process for seed accelerators is open to anyone but highly competitive. There are specific types of seed accelerators, such as corporate accelerators, which are often subsidiaries or programs of larger corporations that act like seed accelerators.
- The application process is open to anyone but highly competitive. Y Combinator and TechStars have application acceptance rates between 1% and 3%.
- Seed investment in startups is usually made, in exchange for equity. Typically, the investment is between US$20,000 to US$50,000 in the US, or GB£10,000 to GB£50,000 in Europe.
- The focus is on small teams, not on individual founders. Accelerators generally consider that one person is insufficient to handle all the work associated with a startup.
- 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.
- Startups are accepted and supported in cohort batches or classes (the accelerator isn't an on-demand resource). 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.
Accelerators provide enough funding to get a company to ‘Demo Day,’ from which point the startup is on its own.
The first seed accelerator was Y Combinator, started in Cambridge, Massachusetts, in 2005, and then later moved to Silicon Valley by Paul Graham. It was followed by TechStars (in 2006), Seedcamp (in 2007), AngelPad (in 2010), Startupbootcamp (in 2010), Tech Wildcatters (in 2011), several accelerators of SOSV, and Boomtown Boulder (2014).
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.
Forbes published an analysis of startup accelerators in April 2012. Since 2010 there has been a substantial growth of Corporate Accelerator programs, which are sponsored by established organizations but follow similar principles.
Notable Accelerators Exits
- AirBnB (Y Combinator (company) 2008) went public in 2020 valued at $80b
- Segment (Y Combinator (company) 2011) acquired by Twilio in 2020 for $3.2b
- Postmates (AngelPad 2010) acquired by UBER in 2020 for $4.4b
- Pipedrive (AngelPad 2011) acquired by Vista Equity Partners in 2020 for $1.5b
- Cruise Automation (Y Combinator (company) 2014) acquired by General Motors in 2016 for $1b
- PillPack (Techstars 2014) acquired by Amazon in 2018 for $1b
- SendGrid (Techstars 2010) went public in 2017 valued at $750m
- Vungle Inc. (AngelPad 2012) acquired by BlackRock in 2020 for $750m
- Cohen, Susan (2013). "What Do Accelerators Do? Insights from Incubators and Angels". Innovations. 8 (3–4): 19–25. doi:10.1162/inov_a_00184.
- 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 14 September 2012.
- Crichton, Danny (2014-08-25). "Corporate Accelerators Are An Oxymoron". Retrieved 2015-06-17.
- Kronenberger, Craig (2021-02-23). "What Startup Model is Right for You?". Medium. Retrieved 2021-03-23.
- 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.
- Gilani, Aziz; Dettori, Gianluca (Jul 16, 2011). "Incubators in US and Europe - Speed and scale in capital formation". Kauffman Fellow Program. p. 21. Retrieved 14 September 2012.
- Christiansen, Jed. "Seed Accelerator Definition". Retrieved 14 September 2012.
- Kronenberger, Craig (2021-03-29). "What Startup Model is Right for You?". Medium. Retrieved 2021-05-07.
- Gilani, Aziz; Dettori, Gianluca (Jul 16, 2011). "Incubators in US and Europe - Speed and scale in capital formation". Kauffman Fellow Program. p. 4. Retrieved 14 September 2012.
- Johnson, Bobbie (July 18, 2011). "Are Europe's startup accelerators speeding out of control?". GigaOM.
- Tomio, Geron (30 April 2012). "Top Startup Incubators And Accelerators". Forbes. p. 1.
- Heinemann, Florian (17 June 2015). "Corporate Accelerator database".
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