How Tech Startup Accelerators Work

Investors across the globe search for disruptive technology-based ideas to get better returns on their investments. Often, their search starts with technology-based startup accelerators. Experienced tech entrepreneurs gather together to create an organization referred to as a tech startup accelerator. Their goal is to assist early-stage tech firms to develop new ideas & products. They also help these firms to fine-tune their business model as well as connect with potential investors.

Examples of tech startup

A good number of aspiring tech experts try to huddle with business mentors & industry veterans at high-profile accelerators. The objective is to gather new ideas right from the starting concept stage to that of being market-ready. A few successful web startup examples of this type include Plated, Reddit, Dropbox & Airbnb.

Earning profits

The top accelerators of the world do face stiff competition. Young firms are required to make applications for coveted residences which last about 3-5 months. The fortunate entrepreneurs, if chosen, may receive dollars in thousands in seed money. Besides this, they avail a free place, expert guidance along with a chance to showcase their work on ‘Demo Day’. However, such services are not offered by the startup accelerator free of cost. A few charge some percentage from the revenue earned by their assisted startups. Although the accelerator might receive just 6% stake, if the startup gets scooped up by Yahoo! or Twitter, they earn big.

What is offered by a tech startup?

Startup accelerators may help the firm in five major areas, ranging from idea conception to final launch.

1. They provide physical space to carry out day-to-day tasks. Open co-working space is the typical model opted for. In this type, team members belonging to different projects get to share conference rooms, offices, coffee machines WiFi, and workbenches.

2. Seed money is the other service provided by tech accelerators. They award upfront money in thousands of dollars to every entrepreneurial team. It helps to cover the startup’s initial expenses including living & travel expenses for 3-month residency.

3. They offer management & business consulting. For a startup to achieve success, it requires much more than planning. Experienced tech entrepreneurs are the ones who generally launch a startup accelerator. They have ample knowledge to place their service or product the correct way in the market. This can perhaps be a B2B service or consumer-facing application. The fact is that the software geeks lack management abilities. The accelerators have the necessary resources & knowledge to provide appropriate management teams to help the inexperienced engineers.

4. The accelerators also offer valuable guidance & feedback about the technology. Hence, they double as ‘hackerspaces’. They create collaborative workspaces allowing creative problem-solvers & engineers to come up with a feasible concept. The latter is expected to rebuild the concept to something better. Most accelerators tend to focus on a particular technology like social media apps, cloud computing, healthcare technology, etc. They offer expertise & resources as required.

5. The tech startup also offers investors critical connections. Venture capital firms & angel investors provide support to the established accelerators. They invest huge amounts in promising business concepts.

Pros of startup accelerator

Grabbing a spot at a tech startup can be compared with winning a lottery. It allows the young entrepreneurs an opportunity to mingle with the icons & to get a decent amount. The startup can enjoy availing generous seed capital combined with an instant mentor & collaborator network. Also, there is direct access to the VCs with deep pockets who are eager to invest in winning ideas. This way, young tech companies can benefit immensely & grow big to become the next tech giant.