Which makes you wonder, who's the next year-old Harvard dropout who's going to change the world? In global technology hubs from California's Silicon Valley to Bangalore, India, investors are searching for the next disruptive idea in technology, and the search often begins at tech startup accelerators.
A tech startup accelerator is an organization created by experienced tech entrepreneurs to help early-stage tech companies develop their product, hone their business model, and — most importantly — connect with investors. At high-profile tech startup accelerators like Y Combinator and Techstars, dozens of aspiring Bill Gates and Mark Zuckerbergs huddle with tech industry veterans and business mentors to take ideas from the "rough concept" stage to "market ready.
Competition is stiff at the world's top accelerators. Young companies have to apply for coveted residences that last three to five months. If chosen, the lucky entrepreneurs receive thousands of dollars in seed money, expert guidance, a free place to work, and a chance to present their finished concepts to eager investors during "Demo Day.
Of course, tech startup accelerators don't provide all of these services out of the goodness of their hearts. Most accelerators take a percentage of all profits earned by the companies they help to launch. Even if the accelerator only receives a 6 percent stake in a startup, it can add up quickly when the young company is scooped up by Twitter or Yahoo!
Nevertheless, the perks that accelerators offer to startups make entrepreneurs want to use these companies as opposed to going directly to a venture capitalist, where they might get funding but nothing else. There are five major areas in which tech startup accelerators can help take a company from idea to launch.
The first is a physical space to work. Most tech startup accelerators offer free office space to projects that they have chosen to fund. The typical model is an open co-working space, in which team members from several different projects share offices, conference rooms, workbenches, WiFi and coffee machines.
The second critical service offered by tech accelerators is seed money. Most accelerators award tens of thousands of dollars upfront to each team of entrepreneurs. That not only helps to cover early-stage business expenses, but also travel and living expenses for the three-month residency.
The third important service that accelerators provide is business and management consulting. As we said, it takes more than a great idea to launch a successful business. People who launch startup accelerators are typically veteran tech entrepreneurs who understand how to position a product or service in the market.
Is it a consumer-facing application or something that would be even more valuable as a business-to-business service? And since software geeks aren't always the best business managers, accelerators can match inexperienced engineers with the right management teams [source: Mitra ]. The fourth critical service offered by tech startup accelerators is feedback and guidance on the technology itself. Accelerators double as "hackerspaces," collaborative workspaces where engineers and creative problem-solvers can break down a good idea and rebuild it into something even better.
A lot of tech startup accelerators focus on specific types of technology — cloud computing , social media apps, health care technology — and provide high levels of expertise in that space. The last — and certainly not least — service offered by tech startup accelerators is providing critical connections to investors. Established accelerators are backed by teams of angel investors and venture capital firms that invest big money in the most promising business ideas. The tech startup accelerator process almost sounds like the premise of a reality TV show — "Big Brother" meets "Shark Tank.
The lucky teams move out to a new city and new environment, work grueling hours side by side in a shared space, and dream about their "Demo Day" debut in front of deep-pocketed investors. To better understand each step in the tech startup accelerator process, let's use the example of Y Combinator , a model for Silicon Valley accelerators. You might also need help from your accountants to help build a basic business plan and some financial forecasting.
Related: If you want to learn how to build a business plan you can read more here. Several startups and small businesses approach startup accelerators because they provide the funds required to launch their operations.
However, the provision of finance can usually be in exchange for equity or per cent of ownership in the company. Before accepting the funds, you need to think twice about the proportion of the company you are willing to give up. This share of your business might constitute a more significant proportion as your business grows over time, and may affect your future fundraising rounds as well.
Your Accounting firm if you have one should be able to guide you on share structures , alternatively try and find an accountant nearby or an accountant in London.
Once the registration completes, the entrepreneur has to dedicate his attention entirely towards the implementation of the business idea and work out growth strategies for a specified period. The accelerator will usually also provide you with the physical space required to work on your business idea as well. The surging popularity of this support programme is mainly because of the free mentorship and learning opportunities they provide. These accelerators provide invaluable opportunities for socializing with other entrepreneurs and experts in the industry.
You may come across many investors who are seeking investment opportunities as well. If you want to secure the interest of investors in your business, then you should speak to your accountants to learn how to present your business to attract investors, alternatively find an accounting firm to help you prepare for the due diligence process. These meetings can be excellent opportunities to build up a strong network, as these connections can prove to be extremely valuable for your fundraising rounds and business growth at some point in your business journey.
Startup owners are then expected to present their pitch decks in front of hundreds of investors, business strategists, media partners and other individuals who attend. As startups only have a few minutes to present their pitch decks, entrepreneurs usually add up slides which cover the exciting aspects of the business idea. They can include anything related to the future financial projections, business model differentiation and market opportunities. Business experts believe that these programmes provide founders with long-lasting connections that will prove to be very useful in the long-run.
You will find thousands of business success stories of which most of them owe their success to hard work, persistence and consistency. There are many startup founders and angel investors around the globe that have enjoyed business exits in millions without seeking any support from startup accelerators and incubators.
This option entirely rests upon you whether you should take it or not. However, if you do decide to pursue an accelerator programme, you must keep the following considerations in mind:.
If you still have doubts about joining an accelerator and find the whole process confusing and not fit for your routine, you can still seek business advisory and business support services by speaking to our in-house accountants.
Related: If you plan to raise seed funding on your own then you should read our step-by-step guide on how you can raise funding for your business. Clear house accountants are specialist Accountants in London who have trained a competitive startup accountant team to help startups prepare for growth by helping them with setting an effective business structure. Joining this alumni is something to be proud of, and many say these connections lead to lifelong relationships.
Many of your future VC introductions could come from this group. Attending an accelerator program is not a mandatory prerequisite for launching or growing a successful startup.
In fact, many of the most prominent entrepreneurs and angel investors that have enjoyed the biggest exits have not participated in them. In addition to incubators, there are other ways to benefit from many of these resources and advantages without committing to the furious pace of an accelerator and their terms. If you do decide to join an accelerator, make sure you understand the value and gamble, and what connections and interests the program organizers really have.
Do they really have investors that will be a good match for your startup, or not? What percentage go on to receive large funding rounds after demo day? If you do find a good match, then check out these top 10 successful startup accelerators based on real exits. A true accelerator has a very specific group of identifiers. They can offer many benefits, if you can get in. Not all are created equal though. Even among the best, there are massive differences between the success of their graduates.
Take your time to evaluate them and your ability to commit, as well as your alternatives. This is a BETA experience. You may opt-out by clicking here. More From Forbes. Nov 8, , pm EST.
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