What Do Accelerators Do? Insights from Incubators and Angels

Abstract

What do accelerators do? Broadly speaking, they help ventures define and build their initial products, identify promising customer segments, and secure resources, including capital and employees. More specifically, accelerator programs are pro- grams of limited-duration—lasting about three months—that help cohorts of startups with the new venture process. They usually provide a small amount of seed capital, plus working space. They also offer a plethora of networking oppor- tunities, with both peer ventures and mentors, who might be successful entrepre- neurs, program graduates, venture capitalists, angel investors, or even corporate executives. Finally, most programs end with a grand event, a “demo day” where ventures pitch to a large audience of qualified investors. You may think this all sounds familiar. After all, don’t incubators and angel investors help nascent ventures? Accelerators certainly are similar to incubators and angel investors. Like them, accelerators aim to help nascent ventures during the formation stage. Thus we might expect that many of the activities provided by accelerators would also be provided by angels and incubators. But accelerators dif- fer in several ways. Perhaps the most fundamental difference is the limited dura- tion of accelerator programs as compared to the continuous nature of incubators and angel investments. This one small difference leads to many other differences, as I discuss in more detail below. (See table 1 for a summary of the differences between incubators, angel investors, and accelerators.)