Startup accelerator: Difference between revisions

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{{Short description|Company that invests in and supports startups}}

{{Use mdy dates|date=March 2023}}

'''Startup accelerators''', also known as '''seed accelerators''', are fixed-term, [[Cohort (educational group)|cohort-based]] programs, that include [[mentorship]] and educational components and culminate in a public [[sales pitch|pitch]] event or [[demo day]].<ref>{{citeCite journal |last=Cohen |first=Susan |year=2013 |title=What Do Accelerators Do? Insights from Incubators and Angels |journal=Innovations|year=2013 |volume=8 |issue=3–4 |pages=19–25 |doi=10.1162/inov_a_00184 |doi-access=free}}</ref> While traditional [[business incubator]]s are often government-funded, generally take no equity, and rarely provide [[funding]], accelerators can be either privately or publicly funded and cover a wide range of industries. Unlike [[business incubators]], the application process for seed accelerators is open to anyone but highly competitive.<ref name="accelerating-studies" /> There are specific accelerators, such as [[corporate accelerator]]s, which are often subsidiaries or programs of larger corporations that act like seed accelerators.<ref>{{citeCite web |last=Crichton |first=Danny |date=August 25, 2014 |title=Corporate Accelerators Are An Oxymoron |url=http://techcrunch.com/2014/08/25/corporate-accelerators-are-an-oxymoron/ |title=Corporate Accelerators Are An Oxymoron |last=Crichton |first=Danny |date=2014-08-25 |access-date=2015-06-June 17, 2015}}</ref>

==Distinctive qualities==

{{See also|Business incubator}}

The main differences between business incubators, startup studios,<ref>{{Cite web |last=Kronenberger |first=Craig |date=2021-02-February 23, 2021 |title=What Startup Model is Right for You? |url=https://medium.com/startup-studio-insider/startup-studios-vs-accelerators-82b8545aba0a |access-date=2021-03-March 23, 2021 |website=Medium |language=en}}</ref> and accelerators are:<ref name="miller">{{citeCite book |last=Miller |first=Paul |url=http://www.nesta.org.uk/library/documents/StartupFactoriesv18.pdf |title=The Startup Factories - The rise of accelerator programmes to support new technology ventures |last2=Bound, Kirsten |date=June 2011 |publisher=[[NESTA]] |___location=London, UK |page=3|url=http://www.nesta.org.uk/library/documents/StartupFactoriesv18.pdf|author2=Bound, Kirsten }}</ref>

# The application process is open to anyone but highly competitive. [[Y Combinator (company)|Y Combinator]] and [[TechStars]] have application acceptance rates between 1% and 3%.

# Seed [[equity investment|investment]] in [[Startup company|startups]] is usually made, in exchange for equity. Typically, the investment is between {{US$|20000}} to {{US$|50000}} in the US, or {{GBP|10000}} to {{GBP|50000}} in Europe.<ref name="accelerating-studies" />

# The focus is on small teams, not on individual founders. Accelerators generally consider that one person is insufficient to handle all the work associated with a startup.

# The startups must "graduate" by a given deadline, typically after 3 months. During this time, they receive intensive mentoring and training, and they are expected to iterate rapidly. Virtually all accelerators end their programs with a "demo day", where the startups present to investors.<ref name="gilani21">{{citeCite web |last=Gilani |first=Aziz |last2=Dettori, Gianluca |date=July 16, 2011 |title=Incubators in US and Europe - Speed and scale in capital formation |url=http://www.slideshare.net/dgiluz/accellerators-in-us-and-europe/21|publisher=Kauffman Fellow Program|access-date=14 September 2012|author2=Dettori14, Gianluca2012 |datepublisher=JulKauffman 16,Fellow Program 2011|page=21}}</ref>

# Startups are accepted and supported in cohort batches or classes (the accelerator isn't an on-demand resource<ref>{{citeCite web |last=Christiansen |first=Jed |title=Seed Accelerator Definition |url=http://www.seed-db.com/about/view?page=definition |access-date=14 September 14, 2012}}</ref>). The peer support and feedback that the classes provide is an important advantage. If the accelerator doesn't offer a common workspace, the teams will meet periodically.

The primary value to the [[entrepreneur]] is derived from the mentoring, connections, and the recognition of being chosen to be a part of the accelerator. The [[business model]] is based on generating [[Venture capital|venture-style returns]], not rent, or fees for services.

Seed accelerators do not necessarily need to include physical space, but many do. The process that startups go through in the accelerator can be separated into five distinct phases: awareness, application, program, demo day, and post demo day.<ref name="accelerating-studies">{{citeCite book |last=Lisa Barrehag |url=http://acceleratorstudy.com/ |title=Accelerating Success: A Study of Seed Accelerators and Their Defining Characteristics|date=May 2012|___location=Gothenburg, Sweden|url=http://acceleratorstudy.com/|author=Lisa Barrehag|author2last2=Alexander Fornell |author3last3=Gustav Larsson |author4last4=Viktor Mårdström |author5last5=Victor Westergård |author6last6=Samuel Wrackefeldt |access-date=14May September2012 2012|publisher=[[Chalmers University of Technology]] |___location=Gothenburg, Sweden |access-date=September 14, 2012}}</ref>

Accelerators provide enough funding to get a company to demo day, from which point the startup is on its own.<ref>{{Cite web |last=Kronenberger |first=Craig |date=2021-03-March 29, 2021 |title=What Startup Model is Right for You? |url=https://medium.com/startup-studio-insider/startup-studios-vs-accelerators-82b8545aba0a |access-date=May 7, 2021-05-07 |website=Medium |language=en}}</ref>

==History==

The first seed accelerator was [[Y Combinator (company)|Y Combinator]], started in Cambridge, Massachusetts, in 2005, and then later moved to Silicon Valley by [[Paul Graham (computer programmer)|Paul Graham]].<ref name="accelerating-studies" /> It was followed by [[TechStars]] (in 2006), [[Seedcamp]] (in 2007), [[AngelPad]] (in 2010), Startupbootcamp (in 2010), Tech Wildcatters (in 2011), several accelerators of [[SOSVentures|SOSV]], Boomtown Boulder (in 2014) and [[Antler (venture capital firm)|Antler]] (in 2017).<ref name="gilani4">{{citeCite web |last=Gilani |first=Aziz |last2=Dettori, Gianluca |date=July 16, 2011 |title=Incubators in US and Europe - Speed and scale in capital formation |url=http://www.slideshare.net/dgiluz/accellerators-in-us-and-europe/4|publisher=Kauffman Fellow Program|access-date=14 September 2012|author2=Dettori14, Gianluca2012 |datepublisher=JulKauffman 16,Fellow Program 2011|page=4}}</ref>

In Europe, the first accelerator program was started by Accelerace in 2009 in Denmark (strongly subsidised by the Danish government) followed shortly after by Startup Wise Guys in 2012 in Estonia.

With the growing popularity of seed accelerator programs in the US, Europe has seen an increase in accelerators to support a growing [[startup ecosystem]].<ref>{{citeCite web |last=Johnson, Bobbie |date=July 18, 2011 |title=Are Europe's startup accelerators speeding out of control? |url=http://gigaom.com/2011/07/18/are-europes-accelerators-speeding-out-of-control|title=Are Europe's startup accelerators speeding out of control?|publisher=[[GigaOM]]|date=July 18, 2011|author=Johnson, Bobbie}}</ref>

Forbes published an analysis of startup accelerators in April 2012.<ref name="forbes1">{{citeCite web |last=Tomio |first=Geron |date=April 30, 2012 |title=Top Startup Incubators And Accelerators |url=https://www.forbes.com/sites/tomiogeron/2012/04/30/top-tech-incubators-as-ranked-by-forbes-y-combinator-tops-with-7-billion-in-value/ |workwebsite=Forbes|date=30 April 2012|page=1}}</ref> Since 2010 there has been a substantial growth of [[Corporate Accelerator]] programs, which are sponsored by established organizations but follow similar principles.<ref>{{citeCite web |last=Heinemann |first=Florian |date=June 17, 2015 |title=Corporate Accelerator database |url=https://corporate-accelerators.net/database/index.html|date=17 June 2015}}</ref>

==Notable Accelerators Exits==

*[[AirBnB]] ([[Y Combinator]] 2008) went public in 2020 valued at $80b

*Segment ([[Y Combinator]] 2011) acquired by [[Twilio]] in 2020 for $3.2b

*[[Postmates]] ([[AngelPad]] 2010) acquired by [[Uber]] in 2020 for $4.4b

*[[Pipedrive]] ([[AngelPad]] 2011) acquired by [[Vista Equity Partners]] in 2020 for $1.5b

*[[Cruise Automation]] ([[Y Combinator]] 2014) acquired by [[General Motors]] in 2016 for $1b

*[[PillPack]] ([[Techstars]] 2014) acquired by [[Amazon (company)|Amazon]] in 2018 for $1b

*[[Pipedrive]] ([[AngelPad]] 2011) acquired by [[Vista Equity Partners]] in 2020 for $1.5b

*[[Postmates]] ([[AngelPad]] 2010) acquired by [[Uber]] in 2020 for $4.4b

*Segment ([[Y Combinator]] 2011) acquired by [[Twilio]] in 2020 for $3.2b

*[[SendGrid]] ([[Techstars]] 2010) went public in 2017 valued at $750m

*Vungle Inc. ([[AngelPad]] 2012) acquired by [[BlackRock]] in 2020 for $750m