The biggest benefits accelerator programmes offer founders is the access and networking relations with communities of strategic partners, investors and networks of auxiliary businesses.
Startups enter accelerators as part of a cohort of companies for a fixed period of time. The intensive experience from the accelerator programme is one of rapid and immersive education for the founders and is based along the objectives of life cycle simulations of early-stage innovative companies.
Although accelerators support startups through mentorship, education, and financing, these - on a very basic level - ensure three working parameters: creating better products that receive acceptance within the industry, connecting them with investors as and when required, and ensuring the startup’s access to the market.
Many first-time founders and young entrepreneurs view accelerators as stepping stones in their startup journey. Accelerators have proven to be of vital importance for new ventures, and their assistance has often the crucial difference between success and failure in the entrepreneurial circuit.
The Pitchbook venture capital database provides valuable insights on funding trends involved with accelerators. During the 2005 to 2015 period, 172 US-based accelerators invested in more than 5,000 US-based startups with a median investment of $100,000. These companies raised a total of $19.5 billion in funding during this period—or $3.7 million per company on average—reflecting both the relatively small investments made in these early-stage companies by accelerators and the fact that many go on to raise substantial amounts of capital as they mature.
Work the network
Accelerator programmes are an opportunity to establish links and networks with people in the industry. Multiple events organised by accelerators in relation to startups are potential breeding grounds for people in the startup ecosystem, entrepreneurs, and potential investors. The essence of accelerator contribution resides in its coaching and mentoring, which helps founders with valuable feedback on their products and company.
Resolved through a mix of codified and contextual knowledge, the accelerators’ focus is on scaling up and building a better product that can acquire a decent chunk of the market. It becomes imperative at this interval to understand that an accelerator is merely a custodian of the business idea and that it never inherits the business in itself. Accelerator programmes are actually an investment vehicle with long-run aims.
The startup’s evaluation upon admission to an accelerator programme brings undeniable advantages, be it with investors, future clients, founders, or journalists. Moreover, the intensive period is full of activities such as workshops, mentor meetings, demo day, feedback sessions, networking events, and so on. On the other hand, founders can derive valuable knowledge from the experiences and skills of mentors of the management team. The streams of concentrated knowledge as grasped by the founders help with adequate startup acceleration while preventing unwanted obstacles. There is no better evidence to reassure investors funding your startups than this validation.
The importance of alumni network also needs to be emphasised with respect to stories of both success and failure, as these serve as meaningful lessons for young entrepreneurs. It fosters an encouraging environment for startup founders and first-time entrepreneurs on the principles of symbolic identification with each other. More importantly, by working in unison, they can actively support the other, providing invaluable guidance and advice.
Opening the doors
Accelerators help in establishing intimate links between founders and interested investors. Apart from this, founders also pitch ideas directly to invite-only investors during a demo day, an opportunity which if banked-on correctly, is accredited with the major chunk of funding garnered in the duration of the accelerator programme. Accelerators often open the doors to additional funding offers, especially when investors have the ability to monitor the startups’ progress and developments, in accordance with the potential for return.
The index of measurement signifying the inherent value and success of an accelerator programme is directly proportional to the number of startups raising further investment and the amount raised during and after the programme.
A typical curriculum at a startup accelerator programme focuses on helping entrepreneurs achieve a stronger understanding of business basics (sales, operations, marketing, finance) and knowledge of fundraising. Mentoring programmes focus on skills that are essential for running a business, including communications, sales and marketing, finance, and even some technical skills. The accelerator workshops focus on a diverse range of topics. For instance, a week may be dedicated to usability testing, marketing software, or financial model derivatives, or perhaps even assembling a pitch deck.
More importantly, accelerator-backed companies are gaining traction. During the periods of completing- or recently-completing accelerator programmes, the median and average valuation of these companies were $5.5 million and $7.1 million, respectively. However, those that went on to raise additional venture capital had a median valuation of $15.6 million and an average of $90 million. In 2015 alone these numbers were $30 million and $196 million, respectively. Indeed, some very well-known companies belong to this group, including those dubbed “unicorns” (private companies valued at $1 billion or more), such as Airbnb, Dropbox, and Stripe, among others.
Every accelerator programme is tweaked to identify the inherent risks within the startup concept, along with offering assistance on capably minimising or overcoming said obstacles. The fear of failure, the risk of losing it all is on the mind of every participant. Consequently, accelerator programmes also include concentrated efforts on legal training and guidance.
Generally, these programmes are known for providing significant perks in the form of discounted IT services and infrastructural benefits. These include but are not limited to credit points redeemable for engineering and customer services from prominent providers such as Amazon Web Services and Google Cloud.
Discounted operational services, such as payment processing, accounting, and early growth financials, often go a long way in establishing the startup business. Financial perks also include discounted marketing and advertising services via Facebook Start; HubSpot for the entire platform; and influential memberships with Venture Associations.
The biggest benefits undoubtedly are the access and networking relations with communities of strategic partners, investors and networks of auxiliary businesses, elevating startups on the pedestal of growth and evolution.
Ambitious startup founders and entrepreneurs keen to make it big ought to demand just three outcomes: the acceleration and business growth, whether they hit important milestones (including funding), and exit momentum. At one point of time, they all realise that they’re just jousting for a slice of the pie with the competition instead of doing what they earlier had set out to do. That is, creating a better product or solving a problem through service; the kind that separates one from the horde! And this is precisely what serves as the raison d'être for accelerators.
There is no doubt that opportunities and advice received through accelerators are hard to find outside the programmes. Perhaps it boils down to the entrepreneurial mindset and the founders’ willingness to be coached! The larger goals and values must be coherent for a long-term successful business relationship between the two. Sounds like a two-way street.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)