Industry Analysis - August 10, 2022

Accelerating Startup Success

Accelerator programs provide mentors, guidance, resources, and funding to startups, usually in exchange for equity. They foster groups of promising startups — called cohorts — for a specific period of time that can range from months to years. In the U.S. alone, there are more than 980 accelerators programs that vary in focus across startup industries, size, quality, and more. Top accelerator programs such as Techstars and Y Combinator are very difficult to get into, with acceptance rates of 1% to 3%.

Not all accelerator programs are created equal and some have bigger portfolios than others. And as online startup investing has developed, we’ve seen many startups participate in accelerator programs that seek funding from retail investors. In this Chart of the Week, we look at the most commonly seen accelerator programs that crowdfunded companies have participated in. 

All Regulation Crowdfunding and Regulation A raises between Jan. 2021 to Jul. 2022.

Techstars and Y Combinator are the two top accelerators globally. And they are also the most common accelerators among startups raising capital online. This is a notable trend as Y Combinator has accelerated successful companies such as Airbnb, Dropbox, and Reddit while Techstars had a massive fund of $11.5 billion as of 2021.

Not all accelerator programs are standalone entities. Google, Microsoft, and Johnson & Johnson all run their own internal accelerator programs and have specific criteria for the startups they accept. For example, JLABS focuses on startups with scientific discoveries, while Google for Startups focuses on creating a diverse community of entrepreneurs and small businesses without taking equity in the companies.

For investors, seeing that a startup was part of an accelerator program can be an indication of future success. Data shows that 59.3% of all companies in accelerator programs go on to raise more funding, which is crucial for the success of a startup. There are also indicators that accelerated startups are more likely to perform better in terms of revenue. However, just being in an accelerator program is not enough. Investors should consider the reputation of the program in question to determine if it increases the investment potential of a startup. Techstars’ high reputation, for example, is partially based on how often startups from its program have achieved successful exits. It has an average exit rate of more than 10% — that’s a significant increase over the 2% seen from most startups with seed funding. 

The bottom line is that accelerator programs can give a huge advantage to startups in their early stages. And investors looking to identify promising startups can use participation in high quality accelerator programs as a guidepost in their due diligence.

Note: All data on online startup investing used for the Chart of the Week comes from the KingsCrowd database and represents a snapshot of the crowdfunding market.

About: Yasmin Sharbaf

Yasmin is passionate about the intersection of business, art, and science. Prior to KingsCrowd, Yasmin worked on a cryptocurrency investing research project for Wellesley College Investment Office where she assessed the risks and rewards for university endowment investment into cryptocurrency. She has also previously worked in a neuroscience lab studying language and memory of songbirds. Yasmin’s dream is to make investing and financial education accessible to everyone. In her free time, Yasmin enjoys going on adventures, learning new languages, and exploring different cultures. Yasmin studied Neuroscience and Studio Art at Wellesley College.

View more articles by Yasmin

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