Business Accelerator – Meaning, Need, and How it Works

What is Business Accelerator?

Business accelerators are the organizations that offer companies a wide range of support services and opportunities to acquire funds for the new companies (startups). They enroll the companies in months-long programs under which they offer mentorship, office space, and supply chain resources. Further, the business accelerators program offers the companies access to capital and investment in return for equity in the company. The development of the project is time-sensitive and very intensive. The time frame of an accelerator program is of three or four months.

Why do we Need Business Accelerator?

To start new companies or startups is very difficult. The founders looking for the right start seek the help of business accelerators. Business accelerator gives the entrepreneur good opportunities. These help the founders to grow their business and improve the chances to attract good venture capital firms to invest in the startup at some point.

The main reason for the popularity of the business accelerator program is that the design of these programs provides the best of both worlds for startups and investors.

How do Business Accelerator Works?

The accelerators strictly scrutinize the participating businesses; therefore, the investors do not need to waste their time tracking and evaluating the new startups. Instead, they can invest in the accelerators that take the equity in startups themselves. The accelerators are structured in such a way that the early-stage investors get the right to invest further if they want to. It is not an obligation for the investor.

On the other hand, the accelerators are like gold mines of resources for owners of a startup. Keeping in mind that these organizations are run by the experts that help businesses to overcome the basic hurdles, there is no better way to guarantee the success of the enterprise than by sharing the workspace with these experts. The owners get a chance to blend with their peers and generate healthy competition that helps to boost development. But, there is a drawback of joining an accelerator program. The owners of the startups have to hand over the part of the equity in their companies to the accelerator organizations.

Business Accelerator

Difference between Business Accelerator and Incubator

At an initial glimpse, the accelerators and incubators sound very similar, but there are a couple of differences.

An incubator is an organization that helps startups by providing shared operation space. These also support the young enterprises by providing networking opportunities, mentoring services, and access to shared equipment. This concept has been around for many years, but it gains popularity in the 1980s. Many colleges and universities started launching school-affiliated incubators to boost entrepreneurship and employment.

These business incubators are run as nonprofit organizations. The incubators generally don’t take the equity in the company in return for the funds and resources in the way that accelerators take. As a result, the startup receives less access to the resources (funds and capital) by taking the help of incubators than they could expect to receive by taking the help of accelerators.

Incubators are better than accelerators for encouraging slow growth because there is no time frame in their programs. Where accelerators have boot camp-style short-term programs which last only a few months, the incubators spend years working with a startup to establish the growth of the company.

To know more about the differences between business accelerators and incubators, refer to our article: Business Accelerator and Incubator.

Conclusion

There is no wrong or right decision when it comes to choosing an accelerator or an incubator. It depends upon the needs and requirements of the company. The startups should do thorough research and then choose according to the need of their company.



Sanjay Borad

Sanjay Bulaki Borad

Sanjay Borad is the founder & CEO of eFinanceManagement. He is passionate about keeping and making things simple and easy. Running this blog since 2009 and trying to explain "Financial Management Concepts in Layman's Terms".

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