06 Dec
How Startup Accelerators work?
How does a Startup Accelerator work for startups?
Startup accelerators (also known as Seed accelerators) are increasingly becoming popular among entrepreneurs. With the help of startup accelerators, entrepreneurs can now quickly get their hands on the funds, resources, connections and skills required to make their business idea a success. Resources such as competitive accountants, marketing advisers, lawyers etc.
The key question for someone new in business however remains:
- What is a startup accelerator?
- How do they function?
- What is the reason behind its soaring popularity?
After extensive research, our in-house accountants have curated this article to help you understand everything you need to know about a startup accelerator.
As per a report by Gov.uk, there were 163 active accelerators in the UK supporting a total of 3,660 new businesses per year.
If you want to take a quick decision but are confused about whether a startup accelerator is a viable option or not, you may speak to our startup accountants. Our accountants will analyze the nature of your business and its requirements, and guide you whether your business will be better off with or without an accelerator.
What is a startup accelerator? And why are they becoming so popular?
Startup accelerators, aka seed accelerators, are a type of a business support programme that provides funds, training and mentorship to startups to help them pass successfully through the early stages of business growth. The startups become a member of the accelerators, with other companies of similar nature, for a fixed period.
These accelerators provide fruitful support and guidance to startups at every stage of their business growth cycle. The primary focus is on the businesses that are struggling to introduce a stream of revenue into their business accounts at the very initial stage.
As the trend of self-employment is continually rising in the UK, no wonder startup accelerators are becoming popular amongst new entrepreneurs. The credit primarily goes to four benefits that these programmes offer.
- Startup accelerators are mentorship-driven
- These programs offer fixed terms for every startup
- These accelerators are cohort-based, meaning that they take businesses providing similar services on board
- These programs end up in a graduation
Learn about the Startup Accelerator programme
Before you learn about the programme and register for it, you need to set up your business legal structure and get your company officially registered.
Related: Learn how you can set up your company by reading our startup guide.
Application process:
Though several business owners might be in favour of utilizing these support programmes for the expertise and other benefits, the chances of getting accepted into the programme are slim with an acceptance rate of only 1-3%.
You can search and apply for accelerators online. You don’t need to worry about the requirements of the process as you can always read and download the instructions posted on their websites. Once you apply to the programme, you’ll be in touch with the management during the entire application process and will get all the relevant guidance from them. 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.
Financial support:
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.
The focus period:
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. According to a review carried out by HBR (Harvard Business Review), this period might extend from 3-6 months.
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.
You’ll be attending multiple workshops and seminars that discuss many topics of business, ranging from how to launch your business effectively to legal obligations of the company and more.
Networking opportunity:
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.
Demo day and pitch decks:
Once the training and mentorship are complete, accelerators will arrange a ‘demo day’ for you, this also marks the completion of the programme. 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 15-20 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.
Are accelerators suitable for you?
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:
- You have no issues in receiving small seed funding round.
- You have no other personal commitments to meet and have 100% of your time to sacrifice for your business idea.
- You have nothing better to do for the next 3-6 months.
- You like to work in a highly competitive and thriving business environment and can handle work pressure well.
- You have no business expertise
- You have never run or set up a business before
- You have other founding members in your business team.
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. Contact us to learn more.