Some of the most influential names in the world of tech and innovation have been a part of them.
Companies like Dropbox, DoorDash, Instacart, Plated, Udemy, Canva, Postmates, Airbnb, and more.
Today we’re looking at Startup Accelerators.
To find the most promising startups, provide them with an intense level of mentorship, grab some equity, and send them out the door with the best chance for future success.
And, I must say, they’re pretty darn good at it.
According to Y Combinator’s Top Companies List for 2019 (the world’s biggest startup accelerator), there were 102 startups in their portfolio valued at or above $150M.
The combined valuation of companies on that list? $155+ BILLION.
But what else should you know about accelerators?
What other accelerators should you have your eye on…and what can be learned from what they’re doing? I cover all that and more in my latest Angel Insights post.
While accelerators and incubators both work with startups to facilitate growth, they have different goals and ways of doing things. Here are the major differences:
Stage of Company
One of the biggest differences between the two is that incubators work with startups in the developmental stage, ones without an established business plan.
Accelerators, on the other hand, work with startups that are still early-stage, but have worked through the developmental stage and have an established business model.
The goal isn’t to just give them a foundation, but rather accelerate their speed to market.
Incubators are usually publically run, non-profit organizations, whereas accelerators can be either private or public and are always for-profit.
The two make money very differently. Incubators make money through rent, fees, or services. Accelerators go for venture-style returns, investing in a startup for future gains.
Incubators are usually only open to select startups that meet certain criteria. Accelerators are open to all but are incredibly competitive.
With accelerators, the assistance isn’t on-demand but rather a temporary and intensive course of around three months. An accelerator program usually ends in a Demo Day where the startup team pitches their improved business to new investors.
Accelerators are a much more directed fast-track program for established businesses that are ready to get bigger investors and scale rapidly.
Top Accelerator Programs and Their Biggest Successes
Here are some of the biggest accelerator programs in the world based on the number of exits and the success of their startup proteges.
Y Combinator is the creator of the startup accelerator. They launched in Boston in 2005 before relocating to Silicon Valley.
Twice a year, Y Combinator takes in a new class of startups. The accelerator invests around $150,000 in each class. Over three months they provide training to prepare the startups for Demo Day where they pitch to investors.
Over the years, Y Combinator has invested in over 3,000 startups, almost 300 of which have exited.
Notable exits include Twitch, Reddit, Dropbox, and WePay. Airbnb is another Y Combinator alum that is about to go public at the end of 2020 in a mega-IPO.
500 Startups is an accelerator program and venture capital firm. In addition to investing over $454 million across 4 main funds and 15 thematic funds, it has successful seed accelerator programs.
The programs emphasize digital marketing, customer acquisition, fundraising, and lean startup practices. Through events, conferences, and partnerships, 500 Startups help founders take their companies to the next level.
500 Startups has made over 2,000 investments and facilitated around 250 exits. Startups that have gone through the accelerator program include Talkdesk, Shippo, Mejuri, and RapidAPI.
Techstars is a Boulder, Colorado-based accelerator program. Since 2006 the company has made over 3,000 investments that created around 250 exits.
Much like Y Combinator, the accelerator program is extremely competitive, with only around 1% of applicants being accepted.
In addition to its accelerator program, Techstars is the name behind Startup Week, Startup Weekend, and Startup Digest.
Notable graduates of Techstar’s accelerator program include Uber, Twilio, SendGrid, and GeoSpock.
A Unique Advantage For Angel Investors
Startups that have gone through an accelerator program have already been put through the wringer. The accelerator process is all about iterating, working out the kinks, and getting the company ready for that next round of investing.
They’re like Ivy League grads — they have passed a strenuous application process, studied with some of the best educators in the world, and graduated to go on to bigger and better things.
Keep an eye out for accelerator grads and don’t miss the chance to invest in them should an opportunity present itself. These can be some of the least-risky and highest-potential opportunities out there. And as with any startup opportunity –– you must do your due diligence.