The Accelerator

Seed accelerators, also known as startup accelerators, are fixed-term, cohort-based programs, that include mentorship and educational components and culminate in a public pitch event or demo day. While traditional business incubators are often government-funded, generally take no equity, and focus on biotech, financial technology (FinTech), medical technology (MedTech), clean tech or product-centric companies, accelerators can be either privately or publicly funded and focus on a wide range of industries. Unlike business incubators, the application process for seed accelerators is open to anyone, but highly competitive. There are specific types of seed accelerators, such as corporate accelerators, which are often subsidiaries or programs of larger corporations that act like seed accelerators.

Distinctive Qualities

The main differences between business incubators and accelerators are:

  1. The application process is open to anyone, but highly competitive. Y Combinator and TechStars have application acceptance rates between 1% and 3%. A seed investment in the startups is usually made, in exchange for equity. Typically, the investment is between US$20,000 and US$50,000 (or GB£10,000 and GB£50,000 in Europe)
  2. The focus is on small teams, not on individual founders. Accelerators consider that one person is insufficient to handle all the work associated with a startup.
  3. 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.
  4. Startups are accepted and supported in cohort batches or classes (the accelerator isn’t an on-demand resource). 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 style returns, not rent, or fees for services.

Seed accelerators do not necessarily need to include a 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.