Five reasons why new tech businesses need business accelerators

With a strong performing world economy, we are finding ourselves in a position where there is a space for investments into new, perhaps more risky businesses. This gives rise to start-ups or spin-offs of established companies, often in the tech field. These, however, face challenges that may be difficult to overcome without any help from the outside.

Before diving into the reasons why a start-up should choose to co-operate with a business accelerator, let’s first define what a business accelerator is and how it differentiates from a business incubator. The distinction between these two is often blurry and creates confusion.

A business accelerator is an organization that offers a number of support and funding services for start-ups and spin-offs, in exchange for a share of the equity. Projects in accelerators are time-sensitive and develop rapidly. It is a common practice for companies to ‘graduate’ from an accelerator in three to six months.

Business accelerators bring the best of both worlds together. They bring start-ups the access to investors, and they filter out only the best projects to present to investors so that they do not have to go through a vast amount of starting companies to find their ‘future Amazon’.

So how do accelerators differ from the incubators? There is one major distinction between the two — the length of the co-operation with start-ups. While incubators promote a longer co-operation with their start-ups, accelerators work in a more condensed and faster way. This means, that in a safe incubator environment a start-up or a spinoff can stay even for several years, slowly evolving. In an accelerator, however, this period lasts months rather than years and the process is more rapid. That is why accelerators often go for the more developed projects and it is often harder to get in.

Now that we have the difference between accelerators and incubators laid out, let’s have a look at why new companies need to work with one. Here are the five reasons why a new business should work with an accelerator.

1. Credibility

One of the most important people you will be dealing with as a starting company is investors. Investors have a vast amount of companies reaching out to them asking for investments and they have to be very selective.

Accelerators help them to pick the best investment opportunities out there. If you manage to get into an accelerator, they will accelerate your exposure to investors and you will increase your chances.

“Accelerators decrease the investors’ risks”

2. Network Creation

Accelerators operate as a networking place for all different types of stakeholders. Entering this environment creates new opportunities.

Accelerators also create an ecosystem of support, starting with law firms, regulatory experts, CFOs, patent experts, and any other professionals a starting business might need for a successful take-off. Some of the accelerators are focused on particular industries, which further narrows down the scope and increases expertise in this field.

3. Platform onboarding

When your start-up is in a platform business, where you are facilitating service provision for example between multiple parties, one of the biggest challenges is to get all the parties onboard so that they can start getting the benefit out of it. Accelerators can help by previously mentioned networking, but also by increasing your visibility within your potential market.

4. Business Process Engineering

Maybe you have a perfect team of coders and designers, but you lack the necessary knowledge to build a strong foundation for a business. Establishing as a credible and functioning entity and at the same time forming strategic partnerships with strong players can be exhausting and can take the focus off your core business. Let the accelerator help you to enhance your growth by setting good business process foundations.

5. Building the first demo

Maybe, however, you have a perfect team of lawyers that understand the legal requirements of your solution and a strong business team that can lay a good foundation, but you are missing the delivery of the idea. To get a sufficient investment to continue, you will need to build a functioning demo to show how your product can add value. You can find help in an accelerator. If the accelerator does not have the people themselves, they have partners that can help you deliver and get the funding you need.

Each accelerator is different, has different focus, capabilities, and skills concentrated within. Technology focused accelerators even split further and focus on particular technologies based on their skillset.

Starting companies should go niche and try to narrow down the focus as much as possible, to get the deepest expertise within their field.

Search for what works best for you, but definitely make sure you find yourself a strong partner for your take-off.