Launching a startup is exciting. But the journey from an idea to a thriving business is no cakewalk. For many, it feels like fumbling around in the dark. That's where startup accelerators come in—they're like a guiding light in the world of entrepreneurship.
What is a startup accelerator?
Joining an accelerator can be a game-changer. These intensive three- to-six-month programs provide mentorship, resources, and a small amount of funding—usually in exchange for equity in your company. Generally, accelerators will take about 3—10% of your company’s equity in exchange for providing funding, guidance, and networking opportunities with venture capitalists and other investors.
For most accelerators, you’ll need to have more than just an idea to apply. You’ll need a prototype and often the first iteration of your product or service with initial market traction. Once accepted to an accelerator, you’ll work with startup advisors and seasoned entrepreneurs who can help you refine your product, business model, and pitch—as well as connect you to investors—so you’ll have a better chance of raising a seed funding round.
Startup accelerator vs. incubator
While both accelerators and incubators are designed to help you build a successful business, there are some key differences between the two.
Accelerators are designed to help you accelerate the growth of an existing startup—usually in the seed-stage—that has a minimal viable product (MVP) and founding team in place. You’ll get actionable feedback to test and improve your product and business plan. Accelerators are often cohort-based, which means a set number of startups get accepted in a class and they all go through the structured programming together. Accelerators also usually provide funding for a stake in your company.
Incubators are generally less structured than accelerators and provide the environment and resources to help you develop and refine your pre-seed or early-stage startup idea so you can turn it into a business. Unlike an accelerator, you don’t need to be in product development or have an MVP, business plan, or founding team to apply to a startup incubator.
When should you join a startup accelerator?
While there’s no right answer, it can be most beneficial to join an accelerator once you have initial product-market fit and are getting ready for your first fundraising round. Accelerators can help you gain credibility, expand your network quickly, and gain access to experienced entrepreneurs who can provide valuable business and leadership mentoring.
Most accelerators have strong relationships with a wide range of investors and are structured to help you improve your product and business plan with the goal of getting funded. Many accelerators end with what’s called a “demo day” where you get to pitch to their network of investors in hopes of raising your first round. While Series A startups aren't excluded from joining accelerator programs, it’s less common to join after your company has already raised its first priced round.
How to apply to a startup accelerator
Getting accepted to a startup accelerator can be highly competitive and begins with a well-crafted application. Before you dive into the application process, make sure your startup aligns with the accelerator's criteria. Most look for an MVP and some evidence of market traction. Here are some tips to make your application stand out:
-
Identify the right accelerator: Research accelerators that align with your startup's industry and stage. Each has its own focus and expertise, so choose one that best fits your needs.
-
Highlight your unique value proposition: In your application, clearly articulate what sets your startup apart. Focus on your team's expertise, your product's uniqueness, and how the accelerator's resources can accelerate your growth.
-
Prepare a compelling pitch deck or video: Succinctly present your business model, market analysis, and vision. This is your chance to answer why your startup is the next big thing.
-
Showcase your team's strength: Emphasize how your team's background and skills uniquely position you to succeed in your target market. Paint the picture of why your team has the tenacity and know-how to make your startup succeed.
-
Be clear and concise: Avoid jargon and overly complex explanations. Your application should be easy to understand yet impactful, highlighting why your startup is an exciting investment opportunity.
Remember, the application process is not just about convincing the accelerator of your startup's potential; it's also an opportunity to reflect on your business strategy and goals. A well-prepared application not only increases your chances of getting accepted but also helps you clarify your vision and roadmap for your startup's future.
How do accelerators affect your company’s valuation?
The impact of joining a startup accelerator on your company's valuation is multifaceted, starting with equity dilution. Typically, accelerators ask for about 3-10% equity in exchange for their investment and support. So, while you gain access to invaluable resources, mentorship, and potential investor connections, you're also parting with a slice of your company. Equity dilution is a natural part of startup growth, but learning how to manage it is important since it can change both your financial stake in the company and how much control you have.
On the other hand, being part of a well-regarded accelerator can enhance your company's market valuation. An accelerator's endorsement often signals to potential investors that your startup is a worthwhile investment, which could lead to a higher valuation when you raise your first round. The growth and development you experience in the accelerator can also increase your business's intrinsic value—offsetting the initial equity loss and leading to increased investor demand and a higher valuation.
Explore a hundred top accelerators to find the right fit
You’ve probably heard of the big startup accelerator names like Y Combinator and Techstars. But there are hundreds of accelerator programs that specialize in different verticals around the globe and offer mentorship and resources to help you grow your business.
Join Carta’s Founder Studio for free to access our list of over 100 of the best startup accelerators across the U.S and in countries around the world. Whether you’re in St. Louis, Missouri, or Cairo, Egypt, or want to start a startup in the life sciences or fintech industries, there’s an accelerator for you. Plus, Founder Studio has exclusive resources, tools, and perks for early-stage founders to help you raise your first round, calculate how to split equity fairly with co-founders, and more.
