The process of starting a new company can be very challenging. It takes more than a great idea and a wallet filled with dreams to shake up markets and achieve the desired results. Startups need the ability to access capital guidance and other structural resources to flourish. However, sometimes these lifelines are difficult to locate, and that’s why nine of 10 startups collapse and die within three years.
Accelerators are intended to stop premature deaths.
Over the past decade, the number of accelerators operating worldwide has exploded. AngelList is a digital platform designed to connect promising startups to investors. Just one American accelerator operating in 2005. There are 578 accelerators, according to Scott Shane, professor of entrepreneurial studies at Case Western Reserve University and regularly a contributor to Small Business Trends. It’s not difficult to understand why the demand for accelerators has been increasing rapidly.
What is a Business Accelerator?
Accelerators are businesses that provide various assistance and financing opportunities for startups. They typically engage startups by enrolling them in months-long programs which provide guidance, office space, and supply chain support. Additionally, business accelerators offer the opportunity to invest capital and other resources in exchange for startup equity. Startups typically exit their accelerator program within three or four months. It implies that development projects are very time-sensitive and extremely intensive.
Accelerators have seen a surge in popularity because they’re created to offer the most beneficial of both worlds to investors and startups.
Since accelerators rigorously screen companies that participate, Investors don’t have to spend a lot of time sorting through a mess of junk to identify and evaluate great innovative companies. Instead, angel investors can invest in accelerators that take on startups’ shares. Accelerators also design their investments as real alternatives, which means that investors in the early stages can invest in the future should they wish to. But there is no obligation to invest further.
On the other hand, accelerators can also be a resource for new entrepreneurs. With the knowledge that these companies are managed by professionals who earn their living by helping small businesses overcome fundamental challenges and obstacles, there’s no better method to guarantee success in the entrepreneurial world than living in a co-living space with these experts. Startup owners also gain by interacting with peers from the business world and generating friendly competition to encourage growth. The only drawback to joining an accelerator for businesses is that entrepreneurs typically hand over their companies’ equity.
How are Accelerators Different from Incubators?
At first sight, accelerators seem like incubators which they are. However, there are some important distinctions.
An incubator is an organization that offers entrepreneurs a shared operation space. Incubators also provide new businesses through networking, mentorship resources, and access to shared equipment. The concept of an incubator for new businesses has been around for quite a while. However, they came to the forefront in the 1980s when numerous universities and colleges started to create incubators affiliated with schools to increase entrepreneurs and improve employment.
Due to the academic affiliation, A large portion of startup incubators is operated as non-profit organizations. They don’t typically ask for the ownership of an organization in exchange for access to funds or resources in the same way accelerators do. In the end, startups usually receive less capital access by entering an incubator than they expect through an accelerator.
Incubators are also more effective than accelerators in creating slow growth since incubators don’t typically place a time-stamp on their support programs. Accelerators typically sponsor intense boot camp-style programs lasting only a few months; startups can be able to work for years inside an incubator to grow.
The bottom line is every business is identical. Therefore, various startups will require different kinds of assistance to grow. It is why there’s no correct or incorrect answer to whether a business should go with the business accelerator or incubator. It’s simply an issue of sitting down and creating an idea of what you believe your business needs to be successful and then conducting some investigation. Also, do not be afraid to look around.