Business accelerators and incubators are crucial in supporting innovative ideas and driving technological development globally. In this article, I have highlighted the key benefits of joining any of these programs and how to get in.
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TLDR: Actionable Insights for Entrepreneurs
- Accelerators and incubators have contributed immensely to technological development globally in the last 20 years. Many prominent organizations like Canva and Airbnb were previously part of accelerator programs.
- The key difference between accelerators and incubators is the length and type of support provided.
- You get a lot of social credibility points for being an alumnus of a popular accelerator program. It tells potential investors you could be the next underdog billionaire.
What Is an Incubator?
Incubators and accelerators are designed to support start-ups but differ in their focus and length of support. Incubators usually work with pre-seed stage start-ups still developing their minimum viable product. They provide the support needed for idea validation, market research and product development.
What is An Accelerator program?
Accelerator programs work with startups looking to scale their new products rapidly. Although accelerator programs provide mentorship, there’s a greater focus on funding and market expansion.
Another key difference between incubators and accelerators is the length of support. Incubator programs typically have a longer and more flexible duration, ranging from several months to many years. However, accelerator programs range from three to six months. Also, accelerator programs typically make equity investments in their startups, whereas incubators offer non-financial support including exposure to potential investors.
Business Accelerators: Benefits of Joining One.
Being part of a business incubator or accelerator program has several benefits; beyond access to funding and mentorship.
Networking opportunities
These programs also have an extensive network of funders, mentors, advisers, and alumni you can leverage in the short and long term.
Education and Training
Business accelerators conduct workshops, seminars, and training sessions on diverse business development topics, including marketing, sales, product development, and finance.
Office Space and Facilities
You could also have access to office space and facilities which can minimize overhead expenses in those early days of running a startup.
Exposure and Publicity
Business accelerators usually hold demo days and conferences where startups can demonstrate their products or services to potential investors and customers.
Social Credibility
Being accepted into a reputable accelerator or incubator program can give your startup the social credibility it needs because it signals to potential investors that your business idea is worth paying attention to.
Structured Development and Accountability.
Accelerators and incubators have a structured program with milestones and timelines that can help startups stay focused. This is especially useful for early-stage businesses that may be lacking in direction. Lastly, you’d get a sense of community and peer support from other founders. You can collaborate and learn from other people in your cohort.
Business Accelerators: Y Combinator, Techstars, 500 Global
Although there are many incubator and accelerator programs, these are some of the most popular ones:
Y Combinator
Based in Silicon Valley, California, Y Combinator (“YC”) is one of the most prominent startup accelerators and venture capital firms in the world. It was founded in 2005 by Paul Graham, Jessica Livingston, Robert Tappan Morris, and Trevor Blackwell.
YC has a competitive application process. Thousands of startups apply for each batch, yet only a few make the cut.
YC invests $500,000 in every company on standard terms. Their $500K investment is made on 2 separate safes:
They invest $125,000 on a post-money safe in return for 7% of the company.
They also invest $375,000 on an uncapped safe with a Most Favored Nation (“MFN”) provision (the “MFN safe”). MFN clause ensures that the investor receives the same terms as the best deal offered to any other investor in the future.
Y Combinator has supported some of the most well-known tech businesses, including Dropbox, Airbnb, Reddit, Stripe and DoorDash. Its reputation, network, and financial support make it a highly competitive and sought-after program for early-stage businesses wanting to scale their ideas.
Airbnb participated in the Y Combinator accelerator program in 2009. YC provided Airbnb with the initial seed capital and mentorship it needed to grow, and today, the company is valued at over $100 billion.
Techstars
Techstars is another globally recognized startup accelerator and venture capital firm which was founded in 2006. Similar to YC, It offers a mentorship-driven approach to support early-stage startups. They provide financial investments (of varying amounts) and support in raising additional funding from other investors. They have over 4,000 companies in their portfolio and have generated over $ 25B in funding for Startups in Europe, Asia, Africa and the Middle East.
500 Global
Dave McClure and Christine Tsai launched 500 Global as 500 StartUps in 2010. The name “500 Startups” referred to their initial goal of investing in 500 early-stage startups, but they have since exceeded that figure. Over 5,000 founders representing over 2,800 companies in 80+ countries have received funding from 500 Global. Their portfolio includes 35+ companies worth more than $1 billion and 160+ companies worth more than $100 million. Portfolio companies include Canva, Reddit and Cars 24.
How to Get Into a Business Accelerator Program
Do Your Background Research
Determine whether you’d be a great fit for the accelerator program. Understand their areas of expertise, industry, track record, and the types of companies they normally support.
Understand How the Application Process Works
Some programs run several cohorts every year while others announce yearly calls for applications. Review the application requirements (and restrictions) and note the deadlines.
Develop a Strong Pitch Deck
Ensure your pitch deck communicates the business problem and your value proposition. Use market data to buttress your position and demonstrate how your business will solve the problem. Be clear on what you need and how you are going to use the funding or support provided to grow your business; providing information about milestones and key performance indicators.
Demonstrate Business Impact
Show evidence of customer validation, user growth, income, or other important metrics. You can also provide projected impact by extrapolating your current impact situation Ensure you are highlighting actionable metrics.
Have a Strong Team
Provide information about the expertise and experience of key members of your team to further strengthen your pitch deck. Accelerators often look for well-rounded teams with a mix of skills that can implement the business plan.
Lastly, It’s very important to proofread your application. Make sure it does not contain typos and is well-structured. Inconsistencies and typos can leave a bad impression on reviewers.
