Start-ups and venture capitals go hand in hand, and awareness levels are high. However, in the start-up ecosystem, start-up accelerators play a pivot role in their success but have so far received little attention.
There is a common misconception that start-up accelerators are the same as angel investors, VC firms, and incubators.
Start-up accelerators have an essentially different KRA which helps them play a strategic role in improving the start-up’s outcome. The benefits of their expertise programs help to spill out the success to the larger start-up community.
Track records of start-ups in different sectors demonstrate that accelerators do help in improving performance. The accelerator’s performance is not all equal, and their performance varies between various programs.
Start-up accelerators support early-stage companies with their short and fixed-period training modules which are intense. Through a mix of educational training, mentorships, and funding, they accelerate the life cycle of young budding companies. The mentorship-driven programs compress years of learning into a few weeks.
One advantage of accelerators is that while they retain some of the attributes of incubators, angel investors, and venture capitalists, they are unique. Apart from financing, they carry out focused handholding programs which are fixed-term and culminates into the final demo stage—all of this in a few weeks or months.
The success story of Start-Up accelerators
The first accelerators were launched in 2005 in the US by Y Combinator, followed by TechStars in the next year. Both accelerators have evolved over the years and are considered among the top accelerator programs globally.
Between the 2005 -2015 period, more than 170 accelerators invested in about 5000 start-ups and raised approximately $20 billion in funding. These figures received a boost through additional VC funding of roughly $ 16 million. Industry estimates further increase in the next decade, taking the cue from start-ups that have grown into well-known companies such as Airbnb, Stripe, and Dropbox, among many others.
In April 2021, around ten technology start-ups graduated in the Tech Stars Hub71 accelerator program after making their final presentation on the annual Demo day in Abu Dhabi.
The start-ups were from various countries such as India, UAE, Singapore, Indonesia, Australia, and the UK. These start-ups were in diverse sectors like health care, Fintech, AI, and logistics. The start-up ventures have raised $ 120,000 from the TechStars and joined a select group of 2500 start-ups globally who have raised seed funding.
Some of these companies have already shown good traction with Assembler, an augmented reality platform boasting 24 million views and two million downloads. Another firm, Pax Credit, has facilitated Foreign exchange transactions worth $4.00 million. This platform allows international students to save money on university payments. There are others in the healthcare sector where $ 4.70 million pipeline funding is awaited from VC firms in Saudi Arabia and UAE.
Result-oriented Techstars Program
The innovative Techstars Hub71 accelerator program is an extensive 13-week intensive program that focuses on developing strategies, fundraising, execution, and building networks.
This program is run in partnership with Mubadala Investment Company. The support includes providing incentive programs and free office space for start-ups, insurance, and housing. However, only 2 percent of the 600 companies qualified for their accelerator program, showing how competitive it is out there in the start-up market.
Start-up accelerators have just one goal, and that is to help entrepreneurs succeed. A typical three-month accelerator program would involve providing the best mentors, an influential network of corporate partners, alumni, and investors. During this three-month intense crash, course accelerators plan the modules that involve fundraising, workshops, learnings from alumni success stories. This model has been successful in building great companies from start-ups all over the world.
In real-time, a three months program would typically see these kinds of activities:
Month 1 – Networking
The growth of the network is the main focus at this stage. Each program of, say, ten companies meet at least a hundred-odd mentors from the accelerator’s network. These mentors are experienced and well connected in their respective fields. After initial interactions, the programs match the start-ups with a couple of mentors and a mock board of advisers. This advisory team works through the program with the start-ups. When there is good synergy between the mentors and the start-ups, they often carry the relationship beyond the accelerator program. Mentors help start-ups in many areas such as product development, market research, marketing, fundraising, technology, hiring resources, business development, and legal.
Month 2- Execution
This month is all about the execution of the learnings of the first month. Founders of start-ups work closely with Program Managers and mentors and develop the product prototype that was decided in the beginning. This phase is crucial as it kickstarts the process, gets the first customer, and achieves that all-important first milestone. This is also the time to plan for the next phase of building up the product and gain traction. The focus on achieving success depends on the Key performance indicators (KPI’s) set out by the start-up for themselves.
Month 3- Raising Fund and Demo Day
The first two months have already set the platform where a lot of planning, brainstorming took place. The initial kickstart has taken place, with an exchange of ideas with mentors and Program Managers. Now the founders can take their story forward and explain it to the corporate partners.
This is a crucial stage for VC funding and preparation for showcasing one’s project on Demo Day. Telling the start-up story is not only about raising funds but also communicating to the stakeholders about the vision and goals of the start-ups.
A typical start-up accelerator program will never have the same activities for weeks. No two weeks are the same. Meetings with Program managers will be there, and the pace of work is so fast there is no time to procrastinate. From the initial stage, testing of the business to the professional stage happens quickly. There are constant challenges, and this intense activity is a catalyst for growth where one gets the advantage of having the support of professionals as their mentors.
Advantages of Start-up Accelerator Program
This program allows one to access the best of ideas, opinions, and opportunities that otherwise would not have been possible. The experts’ opinions and ideas help a start-up navigate better and take the tough and tricky decisions when faced with bottlenecks and failures.
No accelerator program is the same. There some common tools and stuff that everyone gets, such as
- Workshops with Mentors and industry experts who share their marketing, brand development, Technology, Hiring, and product development expertise.
- Adequate office hours, investors.
- Sharing of experience by entrepreneurs and how they built their company from scratch. The live sharing is more honest and interactive than perhaps reading their success story online.
- Intensive practice to raise the level of preparation for fundraising.
The final Take away
Accelerators have taken hold of the start-up market in recent years with their valuable contributions to a company’s performance. Their contribution to a start-up is so valuable, as seen from the numerous success stories, that many start-ups are desperate to get their services. Evidence suggests that companies who took the accelerator program went faster than those who did not. They could raise funds, get better customer traction, and also exited more quickly via acquisition.