A startup accelerator, sometimes referred to as a seed accelerator, is a business program that supports early-stage, growth-driven companies through education, mentorship and financing. Startups typically enter accelerators for a fixed period of time and as part of a cohort of companies. While accelerator programs can provide beneficial resources to organizations at all stages of development, most focus on those that are pre-revenue.
Startups that want to join an accelerator submit an application and are often admitted in batches split up throughout the year. Once accepted, the startup accelerator will provide resources and services such as guest speakers, advising hours, a negotiated amount of capital and sometimes a shared coworking space. Term periods average around 3-4 months and require anywhere around 3-8% ownership of the startup. The assistance of an accelerator ends with a "graduation" or demo day, when startups present their work and proceed independently.
The most popular sectors for startup accelerators include tech hardware, AI and biotech and many big brand names have received early assistance from accelerators. Silicon Valley accelerator Plug and Play Tech Center helped Google, PayPal and Zoosk transform their ideas into businesses. Other well-known accelerators include Y Combinator, which launched Airbnb, Dropbox and Reddit, and Techstars, which has sponsored over 21 startups.
History of startup accelerators
The first independent startup accelerator was Y Combinator, which was originally started in Cambridge, Massachusetts but then moved to Silicon Valley. After this business model was proven successful, seed accelerator programs began growing rapidly across the United States and Europe. By 2015, it was observed that around one-third of startups that achieved funding went through an accelerator.
In addition to independent startup accelerators, large corporations have begun to create their own accelerator programs that follow similar principles but are usually focused on more specific categories.
Accelerators are also helping to expand startup activity beyond tech hubs such as Silicon Valley and the Boston-Washington corridor.
Startup accelerators vs alternatives
Startup accelerators are often confused with other forms of early-stage, institutional support like startup incubators, angel investors and venture capitalists. Accelerators tend to differentiate in that they are fixed-term, short-term, cohort-based and mentorship-driven.
Other components that are often solely associated with startup accelerators are competitive application processes, a seed capital investment in exchange for equity and education for the entire team rather than just the founder.
Pros and cons of startup accelerators
The benefits of being admitted into an accelerator are seed capital, an instant network of contacts, access to mentors, educational programming and higher odds of success. However, success is not guaranteed after graduation from the program. Accelerators are also becoming more popular, making the need to stand out during and after the process more crucial.