Venture capital is often referred to as an apprenticeship business because so much important learning comes from day-to-day experiences. Yet, as an article published by the Business Development Bank of Canada (BDC) explains, you can shortcut the learning process by learning from experts: “Your learning curve can be shorter—and your results better—if you learn from pros who’ve already mastered key … ... read more
Top Accelerators to Launch Your Startup
What do Airbnb, ClassPass, and Reddit all have in common?
Their success was catapulted by accelerators. The payoffs of accelerators can be enormous. As strategic advisor and entrepreneur Ian Hathaway explained in Harvard Business Review, “The accelerator experience is a process of intense, rapid, and immersive education aimed at accelerating the life cycle of young innovative companies, compressing years’ worth of learning-by-doing into just a few months.”
But just like not all venture capital dollars are equal, the impact a startup accelerators can provide a promising startup can be very different. They range in terms of deal terms, quality and type of content, and access to key partners, mentors, and other investors. Here’s a look at the top startup accelerators right now.
Many consider Y Combinator to be the pioneer among startup accelerators. Started in 2005, Y Combinator now funds a new cohort of startups twice a year, investing $125k in each startup in exchange for 7% equity. Y Combinator works “intensively” with the startup for three months leading up to Demo Day when startups present their businesses to an invite-only audience. Y Combinator’s tech darling alumns include Airbnb, Dropbox, Stripe, and Reddit.
Y Combinator prides itself on being a group of hackers. As a result, according to Y Combinator, “the most important thing we do is work with startups on their ideas.” The website explains,
We’re hackers ourselves, and we’ve spent a lot of time figuring out how to make things people want. So we can usually see fairly quickly the direction in which a small idea should be expanded, or the point at which to begin attacking a large but vague one…The questions at this stage range from apparently minor (what to call the company) to frighteningly ambitious (the long-term plan for world domination). Over the course of three months we usually manage to help founders come up with initial answers to all of them.
Standout companies SendGrid, Outreach, SalesLoft, and ClassPass all got their start as members of Techstars accelerators. Founded a year after Y Combinator in 2006, Techstars has helped launch more than 1,000 companies valued at over $8B in aggregate. Techstars contributes $20,000 in return for 6% equity until the company raises a priced equity financing of $250k or more. The program is three months long and centered around mentorship and access to the Techstars network.
Techstars runs approximately 50 accelerators, all over the world, during any given year. These include several different vertical programs such as its Farm to Fork Accelerator, which offers startups exposure to FoodTech and AgTech investors. Other accelerators are sponsored by marquee corporate partners such as Colliers and its Proptech Accelerator. Regardless of the accelerator, Techstars has one goal: to help entrepreneurs succeed. The website explains,
We surround companies with the best mentors and an unrivaled network of corporate partners, investors, and alumni. We provide funding and fundraising opportunities, workshops and curated resources, not to mention countless moments where you can learn from your peers. It’s a proven model that’s helped build thousands of successful companies, all over the world.
500 Startups is the most active early-stage investors in the world. According to PitchBook, it is the most active VC globally in terms of exits, as well as the most active global VC by deal counts. Its Rolodex is impressive: more than 2,400 startups invested in across more than 75 countries.
500 Startups runs a series of different accelerators. Its Flagship San Francisco Accelerator celebrated its 10-year anniversary last year. The program is four months, during which 500 Startups invests $150,000 investment in participating companies in exchange for 6% equity.
500 Startups has launched several other accelerators in addition to its flagship one. Some focus on specific geographies. For example, its 500 LatAm Accelerator is for Spanish-speaking founders who participate in a 16-week program in Mexico City. Others focus on specific stages. For example, its 500 Seoul Pre-Series A Program is focused on early-stage startups that are pre-product-market-fit. It’s “an intensive 3-week long program that focuses on product optimization, building monetization strategies, and a marketing funnel.” Still, others focus on specific problems. In 2020, its Kobe Accelerator focused on startups tackling challenges related to COVID-19.
Plug and Play boasts an elite group of alumni, including Dropbox, Paypal, and LendingClub. In 2019, it accelerated a remarkable 1,450 startups. Together, its portfolio companies have raised more than $9 billion dollars. Investments vary from approximately $25k to $500k. And it is stage agnostic, investing in companies from seed to Series C and beyond. Like many other accelerators, Plug and Play offers accelerators focused on different sectors, such as insurtech, enterprise tech, cybersecurity, real estate and construction, and even fashion for good.
What differentiates Plug and Play from many others is that it doesn’t take equity. Its website explains, “Stop giving equity to accelerators. We do not ask participating startups to give up any ownership. We would much rather invest in your next round of funding fairly.”
The Alchemist Accelerator calls itself the “world’s best accelerator for startups that monetize from enterprises.” With its all-star class of alumni, it seems to be living up to that title. Alums include Berkeley-based machine learning startup, Wise.io, which was acquired by General Electric, real-time collaboration software, Assemblage, which was acquired by Cisco, and cloud security company Mobilespan, which was acquired by Dropbox. To date, the Alchemist Accelerator has incubated more than 300 startups, representing $1.2B in total funding. The Alchemist only accepts about 25 teams per class, offering them $36k or more in funding. The average ask is 5.0% of equity, but that ask is often relaxed for later-stage companies.
What’s truly unique about the Alchemist Accelerator is that it is designed by experienced enterprise entrepreneurs. It has over 3,000 faculty and mentors, and over 5,000 venture investors who have experience helping startups monetize from the enterprise. It also offers its portfolio companies access to large enterprises that engage in partnerships with participants including through pilots and investments. And because it is designed by experienced enterprise entrepreneurs, the program is also significantly longer than other accelerator programs, lasting six months.
SOSV is a multi-stage venture capital investor that runs a series of accelerators, investing in about 150 companies each year. Its accelerator programs span three to six months. Standout startups like Storyful, True Made Foods, and Getaround all got their start in SOSV accelerators. To date, SOSV has funded 1000 portfolio companies. It invests in its accelerator participants through a convertible instrument called an Accelerator Contract for Equity (ACE) similar to a SAFE.
What’s really unique about SOSV is that it is focused on helping startups create real products, not just digital ones. SOSV has created a series of different accelerator programs. HAX is the world’s first accelerator program for hardware, robotics, and connected devices. And its Food-X accelerator is focused on helping food entrepreneurs bring their products and services to market. To support entrepreneurs building real products, SOSV has a global staff of engineers, designers, and scientists to help accelerate product development, as well as fully outfitted laboratory and maker spaces, which participants have access to.
Accelerators can catapult startups to success. But it’s important to choose carefully. Startups have different objectives—for some, it’s to gain knowledge, for others, it’s to find product-market-fit, and for others, it’s to develop relationships. Whatever your objectives are, it’s important to find the accelerator that aligns best with where you want to go.