Analysis About Startup Accelerator Business Model

The role of startup accelerators is increasing in startup communities throughout the world. A startup accelerator is also called a seed accelerator. It is a business program. Accelerators support startup companies through financing, mentorship, and education. The accelerators have the potential to improve the outcomes of startups and to spill these benefits into the wider startup community. You must be wondering What is an accelerator? how do startup accelerators work? how do startup accelerators make money? we are going to answer all those questions in this article.

Startup Accelerator Business Model
History of Startup Accelerators
Characteristics of An Accelerator Program
How do Startup Accelerators Work
Processes of An Accelerator ProgramEfficiency of Accelerators

Startup Accelerator Business Model

Startups need to submit an application to join an accelerator. Once the application approved, the Accelerator will give services and resources such as advising hours, shared co-working space, guest speakers, and a negotiated amount of capital. The average term period of a startup accelerator model is 3-4 months. Also, the ownership of the startup should be around 3-8%. The help of an accelerator ends with a demo day or graduation after startups present their work and move forward independently.

Biotech, tech hardware, and AI are the popular sectors of startup accelerator business model. Also, so many brands have got support from accelerators. Play Tech Center and the Silicon Valley accelerator Plug have assisted PayPal, Google, and Zoosk to convert their ideas into businesses. Y Combinator is another popular accelerator. They released Dropbox, Airbnb, and Reddit. A startup accelerator named Techstars has sponsored more than 21 startups.

History of Startup Accelerators

Y Combinator is the first startup accelerator. It was started in Cambridge in 2005. Later, Paul Graham moved this into Silicon Valley. After the success of this, startup accelerator programs started to grow swiftly across Europe and United States. It includes Seedcamp (2007), Techstars (2006), Startupbootcamp (2010), Tech Wildcatters (2011), and Boomtown Boulder (2014).

The popularity of startup accelerator programs increased in the US and Europe. Seedcamp, Startup Bootcamp, and Startup Wise Guys are the top-rated accelerator programs in Europe. In April 2012, Forbes presented an analysis of startup accelerators. According to that, there was a significant growth of corporate accelerator programs since 2010. Around one-third of startups received accelerator funding model through the accelerator program by 2015. Some large corporations have created their own accelerator programs. They focus on specific categories, but it follows similar principles.

Characteristics of An Accelerator Program

The startup accelerators are cohort-based, fixed-term, mentorship-driven, and it finishes in graduation. These are the 4 factors that make accelerators unique from other startup institutions such as incubators, seed-stage venture capitalists, angel investors. Accelerators can give useful resources to organizations at all stages of development. But most accelerator programs are focusing on pre-revenue. To qualify as an accelerator, it requires a number of characteristics. The characteristics of a startup accelerator are given below.

1. It is a fixed-term business program with a starting and an end.

2. It is a cohert of startups.

3. It includes a group of advisors to support the startup.

4. It is an educational program for the transferring of acquired knowledge.

5. It is a selection process, so the cohert of startups is considered as the best.


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How do Startup Accelerators Work

Accelerators provide two types of knowledge. Mentors pass the tacit knowledge from what they have learned over the years. And the acquired knowledge is transferred through training sessions, workshops, and other structured education. Startup accelerators offer acquired and tacit knowledge through the combination of structured education and mentors. It has efficiency for the transferring of the value it creates by forming a group of startups.

The accelerator chooses the best startups from a large number of applicants and they bring those startups together in such a way that corporations, investors, and others can meet them. It also chooses and brings a group of mentors who give knowledge, advice, and new contacts to startups for development. The accelerator provides a diverse network with a wide range of experience and knowledge.

This group works as a class at a university. That allows delivering one lesson to a group of startups at once instead of delivering lessons to individuals multiple times. It focuses on participants who forming an ecosystem around the accelerator and provides an opportunity for them to meet a group of startups at once instead of finding and meeting them all individually.

It is provided to overcome the lack of knowledge and networks of startups. Accelerators are mainly funded by corporations, government agencies, or investors to identify and support new innovations. The startups make returns in the form of investment returns, economic development, and new technologies.


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Processes of An Accelerator Program

An accelerator program mainly includes 6 processes:

accelerator business plan
Accelerator Business Plan

Apply and Get Accepted

After submitting applications, only 1% to 3%  of applicants get accepted from total applications. During this process, the startups can interact with the operator and discover more details about them. Startups don't have an obligation to join and accept the program, until they sign any paperwork.

Get Funded

Money is one of the major reasons that founding teams and entrepreneurs selecting the accelerator path. Accelerators provide seed money to the company. It is ranging from $10,000 to over $120,000. Although some have recently withdrawn the amount of funding they provide, they point to funding as a major obstacle to success. It will affect future fundraising activities.

Focus

A big advantage of this system is that it focuses on entrepreneurs. According to the Harvard Business Review, they are being dragged into the process for 3 to 6 months. This is an intense time, and participants are forced to focus and make progress.

Learn

Learning is a big part of the process. It includes opportunities such as seminars, workshops, and mentorship opportunities. While it can cover topics relevant to starting a venture, some of the most valuable are often in the pitching practice and the legal aspect.

Network

Entrepreneurs have ample opportunities to network with potential investors and other industry support providers, during the acceleration period. These connections are very valuable

Demo Day

The process ends in graduation or in a demo day, where every startup in cohort presents and pitches. This is the place for proving the time and experience invested by startups. Founders of startups usually include 15 to 20 slides on their pitch decks as part of the presentation.


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Efficiency of Accelerators

Accelerators bring the various groups of participants around their program and facilitate interactions between them very efficiently. They bring the best startups through running a selection process. The selection process includes an open and broad application process. The evaluation is done by respected individuals. The high quality of startup has an important value within the accelerator. It attracts investors.

Another major attraction of accelerators is the mentors. A mentor provides networks and tacit knowledge to the cohort. It makes mentors an important part of accelerators. Failure to ensure that mentors receive appropriate remuneration for giving their knowledge and time can lead to mentors losing interest quickly or failing to engage. The way of gathering startups together into one space and deal with them quickly in a fixed-term program, creating the same efficiency as a university collecting students into classes.

Mentors are able to address all startups simultaneously, so knowledge is effectively transmitted. Accelerators can provide a way to survey and filter out many innovators, such as startups, academics, or individuals. By choosing the best from the applicants, the accelerator makes a validated cohort of startups. It is valued by others, such as investors and mentors

The Accelerator experience is the fast, intense, and in-depth educational process aimed at shortening the years of worthwhile learning into a few months and accelerating the life cycle of innovative start-up companies. A real accelerator has very specific identifiers. If you can access them, they can give you a lot of benefits. Not everything is created equal. There are so many differences that exist between the successes of the graduates.


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Frequently Asked Questions

How do accelerators work?

Particle accelerators use electric fields to speed up and increase the energy of a beam of particles, which are steered and focused by magnetic fields. Electric fields spaced around the accelerator switch from positive to negative at a given frequency, creating radio waves that accelerate particles in bunches.

Are startup accelerators worth it?

Unique to the Middle East's accelerator industry are its ratio of non-profit to for-profit accelerators. Unlike other regions around the globe, whose accelerator programs tend to be comprised of 25% to 35% non-profits, about 50% of all accelerators in the Middle East are non-profit.

How do startup accelerators make money or how do accelerators make money?

The Accelerator would charge startups by offering desks for rent. In a way, the Accelerator is actually offering similar services to a co-working space. Alternatively, Accelerators make money through offerings of training and consultancy services for startups, in exchange for money or equity.

What is an accelerator?

A startup accelerator is an organization that offers mentorship, capital, and connections to investors and business partners. It's designed for select startups with promising MVPs and founders, as a way to rapidly scale growth.

what startup accelerators really do?

A tech startup accelerator is an organization created by experienced tech entrepreneurs to help early-stage tech companies develop their products, hone their business models, and most importantly connect with investors. Most accelerators take a percentage of all profits earned by the companies they help to launch.

list the best startup accelerators in India?

list of best accelerators for startups:

  • Cisco Launchpad.
  • GSF Accelerator.
  • Microsoft Accelerator.
  • Indian Angel Network.
  • iCreate.
  • Google Launchpad.
  • Amity Technology Incubator.
  • Angel Prime.

How do I start my own accelerator business?

  • Step 1: Found your own company. Or at least work at a startup.
  • Step 2: Participate in the community.
  • Step 3: Talk about the community.
  • Step 4: Invite the community in.
  • Step 5: Create a common space.
  • Step 6: Keep doing all of that stuff.
  • Step 7: Start an accelerator.




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