What Is A Start-Up Accelerator?
If you’re a start-up looking to scale up, you might consider entering a start-up accelerator. But what are they, why might you use one – and how do you find one? We answer all of your questions in this guide to start-up accelerators.
What is a start-up accelerator?
A start-up accelerator is a short-term growth programme that delivers education, mentorship and financing for small businesses. They’re designed to achieve significant growth in a short period of time, meaning it’s usually an intensive programme for businesses with many years’ worth of learning packed into just a few months.
Start-up accelerators, sometimes also called seed accelerators, are becoming as prolific as start-ups themselves. The first accelerator programme was Y Combinator, which started in Cambridge, Massachusetts in 2005. This was swiftly followed by TechStars in 2006, Seedcamp in 2007 and both AngelPad and Startupbootcamp in 2010. The first accelerator in Europe was Accelerace in Denmark, which was founded in 2009.
Today, there are many accelerator programmes across Europe and within the UK. A 2019 government study found that £20-£30 million of UK and EU public funding is spent on start-up incubators and accelerators in the UK every year. Data shows that the most active accelerator in the UK is Startupbootcamp which, as of July 2021, had made 537 investments.
What does a start-up accelerator do?
There are four factors that make start-up accelerators unique. Typically a start-up accelerator is:
- Fixed-term, usually three to six months
- Focused on mentorships
- Concluded with a graduation or ‘demo day’
Want to know how start-up accelerators work? Think of a start-up accelerator as an intensive boot camp for small businesses. Every accelerator is different, but these four factors unite them all. Businesses join a programme alongside other similar companies for a set period, and receive support and guidance often in the form of seminars, workshops, practice pitches and one-to-one meetings with a business mentor who is successful in their own field.
The cohort component of accelerators allows companies to meet with other founders, allowing them to bounce ideas off one another and develop a network of like-minded people in similar verticals.
Finally, the demo day offers founders the opportunity to pitch their start-up to potential investors. Investment is a key outcome for many participants of accelerator programmes, with accelerators often offering seed money in exchange for equity in the company. In 2018, the average accelerator equity deal amounted to £28,500.
Start-up incubator vs accelerators
Although the two terms are often used interchangeably, start-up incubators and start-up accelerators are actually two different things, with different purposes.
As mentioned, accelerators are cohort-based programmes that help early-stage start-ups to jumpstart their growth through education, mentorship and expert guidance. Accelerators are fast-paced, usually cramming years’ worth of business learnings into an intensive 3-6 month programme, and they’re designed for small businesses that already have a minimum viable product (MVP) already in place and are looking to scale up.
Incubators, on the other hand, tend to help entrepreneurs develop their business ideas and build their company from the ground up. They don’t have the same time restrictions as accelerators and are usually open-ended programmes, often focused on solo business owners rather than companies with a team already on the ground.
Are start-up accelerators worth it?
If you’re serious about growing your business, an accelerator can help you to get there faster – and they can pay off, quite literally. Data shows that around 38% of accelerated start-ups raise Series A funding. That makes start-ups that participated in an accelerator nearly 50% more likely to raise a seed round than those that didn’t take part in such a programme.
Looking at the gender breakdown in equity, it seems that start-up accelerators are more worthwhile for male-led businesses than for females. In 2020, the average equity raised in male-led start-ups after taking part in an accelerator was 2.6 times higher than that raised by female-led start-ups. After an accelerator programme, businesses led by women raised an average equity of £35,800 whilst male-headed businesses raised £78,000.
The decision to participate in a start-up accelerator comes down to what your business goals are, as well as the industry you work in, and whether you think it’ll reap significant rewards for your business. Even if you don’t raise equity from the programme, it may be worth it for you if it equips you with valuable business insights and fast-tracks your growth.
How to find a start-up accelerator
Start-up accelerators are competitive. On average, 3,000 applications are made to a given programme, and 45-90 businesses are accepted.
What are accelerators looking for from your business? They want to know that you’re serious about growing your business, and about the programme. They’ll be looking for something special that differentiates your company or idea from others in your vertical, and that you have the foundations in place to make your business a success.
If that sounds like your business, you might be ready to apply for a programme. You can find a list of accelerators in Scotland on the Scottish Government website, and whilst there isn’t an official list for the rest of the UK, there is a comprehensive list here.
Ready to take your business to the next level? Whilst you research the right accelerator programmes for you, take a look at everything you need to know about preparing for a funding round, too, putting you in the best possible position to make the most of any start-up accelerator.