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How Startup Accelerators Work

startup accelerators

The world of startups is exciting, but knowing how to build a new tech company, manage competing demands, raise funds, keep up with bookkeeping, and everything else that goes into a new startup can be a lot to handle. If you are a hopeful entrepreneur looking to break into the startup community, a startup accelerator might be perfect for your new venture.

What is a Startup Accelerator?

Startup accelerators are organizations built to help startups succeed. Most accelerators take on new companies in classes, and that cohort works together in a shared space while taking classes and connecting with advisors that have the experience to help their business succeed.

Many accelerators offer a work space and a modest stipend that allows the business founder to leave their current job and focus on the new business full-time. The founder then has a fixed window of time to build and market their product to a point they can raise funds, hire a team, and press forward toward the coveted “unicorn” status.

In exchange for the workspace, stipend, and access to the accelerator’s resources and community, the startup typically has to give a percentage of ownership to the accelerator or its managers. If the company makes it big and becomes a valuable enterprise, the accelerator gets a share of the profits.

What are the Best Startup Accelerators?

There are many startup accelerators out there, but the most well known accelerators are clustered around Silicon Valley, New York City, and other startup hubs like Denver, Austin, and Portland.

The most famous startup accelerator is arguably Y Combinator. With an impressive list of alumni including Dropbox, Stripe, Gusto, Airbnb, Reddit, Weebly, Twitch, Coinbase, and about 1,200 more, it’s alumni are now worth an astonishing $65 billion.

Other top tier accelerators include Techstars, AngelPad, Amplify, The Alchemist Accelerator, Surge Ventures, MuckerLab, StartX, Surge, Dreamit, Mass Challenge, Healthbox, Bootup World and a handful of others.

How Can I Join a Startup Accelerator?

Joining a startup accelerator is a lot more complicated than walking in the door and saying hello. Many of these programs are incredibly competitive and offer admission to only a small, top tier group of applicants in each cohort.

In fact, applying is such a big process that Techstars put together an application toolkit to help. It is a good idea to visit the incubator in person before applying so you can meet people. These include: current members and the people who run the program. This will help you find out if the local area is a good fit for you.

If it all looks good, most require an online application. Sometimes these applications are very in-depth, so have a good understanding of your business plan before you apply.

Is a Startup Accelerator Right for You?

Just because you can join an accelerator does not mean it is right for every founder and every company. Here are some reasons you may want to consider skipping an accelerator. You could go with a more traditional bootstrapped startup or seed funded startup route.

  • You have business experience. Accelerators are designed to help inexperienced technical founders learn how to manage the business side of a company. If you already know how to handle all of that, you may not get a big benefit.
  • You are already on track for success. If you are already doing well, an accelerator may help you get there faster; but it may not be worth it. In exchange for their help, you could be giving away millions of dollars in equity without an equally valuable benefit.
  • You want to keep control – With any type of equity investment, you lose a bit of control over the company. Eventually, you can lose control completely in an accelerator if you don’t play your cards right.

Startup Accelerators are Awesome for Some Startups

Some startups like the previously mentioned Dropbox have seen huge success after participating in the Y Combinator program. However, there are many stories you have not heard from failed ventures. Accelerators offer an amazing opportunity for founders to do many things. It helps them: focus on their new business, learn from experienced experts, and network with amazing individuals.

If it seems to make sense for your business, it doesn’t hurt to go visit and apply.

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Personal Finance Expert
Eric Rosenberg is a personal finance expert. He received an MBA in Finance from the University of Denver in 2010. Since graduating he has been blogging about financial tips and tricks to help people understand money better. He is a debt master, insurance expert and currently writes for most of the top financial publications on the planet.

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