Benefits of Taking Part in Startup Accelerator

“Ideas without action are like beautifully gift wrapped boxes with nothing inside’’ — Michael Josephson

Great ideas can change the world. Electricity, incandescent lamps, cars, computers, smartphones, and lots of other stuff we use in our life started as an idea. Hard work alone gave birth to these ideas.

For example, Thomas Edison made 10,000 experiments before he invented a lamp, and it cost $40,000 (about $850,000 in today’s money).

So we found three things in Edison’s example that one must do to bring an idea to life:

• Bring something new that is required by the people.
• Try hard and never give up.
• Find funds.

But if you have an idea only, if you are at the beginning, what should you do? How do you find a way to incarnate your idea?

Where can the funds be found?
Here comes startup accelerators.

Startup Accelerator

Startup accelerators are fixed-term, cohort-based programs that include mentorship and educational components and culminate in a public pitch event or demo day. Usually, traditional business incubators are government-funded, take no equity, and their main focuses are biotech, medical technology, clean tech or product-centric companies. Startup accelerators can be either privately or publicly funded and focus on a wide range of industries.

Y Combinator

The first seed accelerator was Y Combinator, started in Cambridge, Massachusetts, in 2005, and then later moved to Silicon Valley by Paul Graham. After it more and more startup accelerators all over the world were created. Y Combinator’s program consists of weekly dinners where guests come to speak to the startup founders and where founders can meet individually with Y Combinator partners, talk to them, and hear their advice during office hours. Some of the better-known companies were in Y Combinator- Scribd, Reddit, Airbnb, Dropbox, Disqus, and Stripe.

The application process is open to anyone but highly competitive. For example, Y Combinator has an application acceptance rate lower than 3%.

Team

The best team for startup accelerators consists of a CEO, a Designer, and a Developer. This squad allows a startup to spend funds on marketing and promotion of the product instead of spending it on a salary for designers and developers that aren’t on the team. Usually, all teammates work for equity. But it isn’t a surprise when someone or even everyone except the CEO work for salary without an equity. Sometimes the CEO of a startup has a salary. It depends of funding.

Startup accelerators prefers small teams instead of individuals because it isn’t easy to handle all the work in startup alone.

Deadline and The Demo Day

All startups have deadlines in startup accelerators. Usually the deadline is a couple of months. During this period of time they study and train. All participants are expected to evolve fast and gain more knowledge to be able to handle their startups successfully. What is the deadline? The deadline is a “Demo Day” where startups are represented to the investors. Startups are accepted and supported in classes or cohort batches. A very important advantage is feedback and peer support that are provided by the classes. And if the accelerator doesn’t provide a common workspace, the teams meet periodically. What do participants get? Recognition of being chosen and of being a part of the startup accelerator along with connections and mentoring.

Phases and Investments by Accelerators

There are five phases that startups go through in accelerator: awareness, application, program, demo day, and post demo day.

All startup accelerators can exchange funds on equity in startups. Usually they buy 5%-7% of equity. For example, Y Combinator invests $120,000 in exchange for 7% equity. This is why accelerators are interested in startups and their success.

Startup accelerators are businesses that helps other businesses to develop. It is a business that gets money when one of its startups gets money. This is what startup accelerators do. So don’t hesitate if you have a chance to take part in one!

Written by: Artem Fedin on May 5, 2015.

Originally published at 111Minutes Blog.