Tech Word For The Week is a weekly series where we look to explain commonly used words in the tech ecosystem in a simple, engaging way.
One of the major aims of most startups in the first few months after their launch is to get into an accelerator program. This goal is worthwhile and commendable, as it will help them avoid pitfalls and grow at an incredibly faster rate.
What is an accelerator?
An accelerator prompts the growth of a startup by providing the tools, resources, skills and experience it needs to fulfil its potential. Like a sprint, a startup accelerator is fast and intense.
The aim of accelerators is to compress what would have been years of trial and error into an intense period of training, mentorship and financing. The way it works is that a small number of founders are brought together in a classroom (or platform) and they learn together through a combination of mentoring, networking and peer-to-peer learning.
It gives startups the opportunity to test out their business model in a safe space so they can spot weaknesses and adjust things as they go along. At the end of the programme, most startups are investment-ready.
Most accelerator programs typically run between three to six months. Some also give a seed investment to be used to fine-tune the product, fund research, marketing or hire top talent. The accelerator in return for these things asks for a small share of the startup share.
Is an accelerator the same as an incubator?
People confuse accelerators and incubators but they are different. So what’s the difference?
Accelerators aim to fast-track the growth and scale startups while incubators focus primarily on stimulating innovation (they incubate disruptive ideas). Incubators function as a preparation for accelerators.
Accelerators require startups to demonstrate growth potential, have a minimum viable product and existing traction meanwhile startups that are still in the idea stage can be admitted to an incubator. Accelerators often ask for a small equity stake in the startup while most incubators rarely ask for shares.
Pros of a Startup Accelerator
There are several advantages to enrolling in a startup accelerator. They are beneficial because they offer your startup:
Growth Potential: The ultimate goal of an accelerator program is to scale the startup. Dedicated and focused work time, expert training and investment opportunities make it happen in less time.
Constructive feedback: Accelerator programmes offer one-on-one meetings with proven startup founders, top business executives and industry leaders. With their experience growing startups, gaining investors, and entering markets they can easily point out what the startup should keep doing and what not to do.
Networking opportunities: Accelerator programs are set up in a way that different startups work alongside each other in coworking spaces and workshops. So startup founders can network with themselves.
Mentorship: This is a vital takeaway most startups get at the end of the programme to carry them from zero to scale. Personal access to be guided by successful entrepreneurs (who are mostly the accelerator's alumni).
Seed investments: Participants often get funding from the programme. They also pitch investors on the Demo day which usually happens at the end of the program.
Prestige: An accelerator is an endorsement and a badge of honour in the eyes of investors. Participation in a top programme validates the startup’s idea and shows the team has the skill, drive, and training to succeed.
Cons of a Startup Accelerator
There are a few disadvantages associated with startup accelerators. Carefully consider them to be sure they don’t act as impediments to your startup goal. Here are some of them
- Loss of equity: Most startup accelerators request and take equity from the startups in their programme. This can be tricky as the startup is still in its formative years and it's still too early days to be divesting shares.
- Distractions: Sometimes, excessive meetings and social events can get in the way of hard work and focus. Fortunately, not every accelerator has a demanding list of required sessions.
- An Accelerator prompts the growth of a startup by providing the tools, resources, skills and experience it needs to fulfil its potential.
- Accelerators require startups to demonstrate growth potential, have a minimum viable product and existing traction.