Accelerators and their role in the development of startups
Updated: Oct 4, 2022
Everyone who is stepping towards entrepreneurship needs a helping hand to make the idea happen. In this case accelerators and incubators are the first aid options. Let’s see how accelerators play a role in the development of startups.
A startup accelerator supports early-stage startups through education, mentorship, financing, and other perks. Startups enter accelerators for a fixed period of time (in SABAH.lab it’s usually 3 or 6 months) as part of cohorts. During this period of time, the participants get educated about entrepreneurship through training and workshops, hold meetings with mentors and get feedback, and get funding. The funding can be through both the acceleration center and investment network. Some accelerators may focus on specific industries, but mainly accelerators tend to be more general and accept startups from all industries.
The other helping hand to startups are incubators which usually provide a collaborative program for startup companies.
Accelerator vs incubator: How to define your need
Accelerators and incubators both strive for a common goal: which is to help in the development of startups. However, they work in different ways in order to achieve that goal. Incubators mainly are fee-based and provide open space and technical facilities. Also, incubators usually don’t set a fixed duration. Unlike incubators, accelerators are more growth-based, they set fixed amounts and create cohorts with a group of startups, also providing seed funding. However, both are selective and provide startup education and mentorship.
In order to define what you need for your startups, you have to understand the difference between them and know what they provide.
The most well-known startup accelerators
As the US is on the top of entrepreneurship, the culture of acceleration is the most developed in the US as well. Here is the list of most well-known startup accelerators:
Y Cominator - the pioneer of accelerators. Founded in 2005 and is the most well-known among all. Y Combinator launches new cohorts twice a year and helps its residents intensively in their development until Demo Day. Airbnb, Dropbox, Reddit, and Stripe are the most prominent success cases of Y Combinator.
TechStars - founded 1 year after Y Combinator and has helped launch more than 1,000 companies valued at over $8B in aggregate. It provides 20.000 USD as an investment for each startup in return of 6 %. Usually, their cohorts last for 3 months. Standout companies such as SendGrid, Outreach, SalesLoft, and ClassPass got their start as members of TechStars.
500 Startups - According to statistics, it’s the most active early-stage investor globally, providing 150,000 USD in exchange for 6 %. 500 Startups invested in more than 75 countries. It’s most well-known for successful exit strategies.
Plug and Play - Relying on the statistics of 2019, Plug and Play accelerated 1450 startups during 10 years. Famous startups such as Dropbox, and Paypal were participants of Plug and Play.