A startup accelerator (or incubator) is a school where aspiring Internet entrepreneurs turn their vision for an online business into a reality.
Say you have a great idea for a new online product or service, but you don't have much money or experience to start your own business. An accelerator brings together the talented people, the training, and the cash to get your business off the ground.
An accelerator is essentially a boot camp for budding entrepreneurs, getting them as quickly as possible from their idea to "the action" of making the idea real. Here's how they work in more detail (be sure, also, to watch the informative PBS video at the end of this article).
Suppose you have a great idea and are looking to raise capital to turn your idea into a reality. The cost of setting up a company on the Internet has come down so far, so fast that it doesn't take much money to start your own business anymore. But, still, let's say it takes more money than you have.
Not to worry---there are a lot of deep-pocketed individuals out there (known as "angel investors") who may be willing to take a chance on you and your idea, if it's a sound one.
However, both you and they know that most new businesses fail, whether online or traditional brick-and-mortar establishments.
In the past, an investor might have suggested you go back to school to get an MBA and return when you have some expertise in the business side of things. That's the old way, and it's way too slow.
The new online world operates at such a fast pace that you don't have the luxury anymore of taking a year or two off to get up to speed with your skill set and education. By then, the world will have moved on, and someone else will have developed your idea.
So, to increase both their own odds of success and yours, some angels---as well as other types of investors, entrepreneurs, and technology experts---have gotten together and founded a new type of company called an "accelerator" or "incubator."
Accelerators/incubators do three things:
- They bring talented people with big ideas together with each other and with investors
- They provide a very small initial investment in you and your idea ("seed funding")
- They provide a crash course in online business and marketing for entrepreneurs who have the ideas and the talent, but who lack an MBA or hands-on business experience
Here is our list of the 10 best startup accelerators. Our ranking is based on market presence and track record, as well as more intangible "coolness" factors.
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The most prestigious of all startup accelerators is Y Combinator.
A pioneer in the accelerator-model of startup funding, Y Combinator has funded and trained over 460 startups. Several of these companies have developed into some of the hottest new names online, including Dropbox, Posterous, Reddit, Scribd, Songkick, and Weebly.
The company was founded in 2005 by Internet entrepreneur and commentator, Paul Graham. Graham is widely known as the founder of the commercial-website company, Viaweb, which he sold to Yahoo in 1998. He is also admired for his essays, including the widely discussed 2005 "How to Start a Startup."
Y Combinator provides seed funding (the earliest phase of venture funding) in return for a small percentage of a company. Then, they help provide the management team with the expertise they will need to make a go of it.
The company holds two, very large, three-month training sessions each year in Silicon Valley, for more than 80 companies each.
TechStars is one of the largest and most sought-after startup accelerators in the world, providing seed funding from over 75 top venture capital firms and angel investors.
They get thousands of applications every year. Statistics show that getting into a TechStar program is harder than getting into an Ivy League school.
Their 100+ alumni include a large number of familiar names, such as DailyBurn, Ignightr, Occipital, Onswipe, Order.in, and Socialthing.
The company was founded in 2006 by David Cohen, a Boulder, CO, based entrepreneur.
TechStars operates annual programs in five cities: Boston, Boulder, New York, San Antonio, and Seattle. Each program includes about 10 companies, for a total of about 50 companies per year.
Founded in 2010 by Thomas Korte and six other ex-Google employees, AngelPad has funded and mentored about 50 startups to date.
The company provides semi-annual, 10-week mentorship programs in their San Francisco office.
Each program enlists about 15 carefully selected companies (out of hundreds of applicants), and covers the various aspects of taking a startup from the initial idea to reality, including market fit, customer acquisition, and fundraising.
Programs also address more mundane issues like incorporation, immigration visas, and setting up books.
Companies that have participated in the AngelPad program include LendFriend, SourceNinja, and tapviva.
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Watch the following fascinating interview with AngelPad founder, Thomas Korte:
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London-based Seedcamp is Europe's leading company providing seed funding and mentoring programs for startups.
Founded in 2007, Seedcamp provides companies with accesses to a network of over 2,000 mentors, and has helped to launch over 70 of Europe's most promising startups.
About 20 companies are selected by Seedcamp every year to receive investments of around €50,000, in return for an 8%--10% stake in the company.
Seedcamp's single-day mentoring events have been held all around Europe---including Barcelona, Berlin, Ljubljana, London, Prague, and Stockholm---as well as in New York and Tel Aviv. The next event, in October of 2012, is scheduled for Budapest.
Blackbox Ventures is a Silicon Valley--based startup accelerator founded in 2011 by Fadi Bishara, Bjoern Lasse Herrmann, Max Marmer, and others. The company, which grew out of the widely read "Startup Genome Report," specializes in helping non--U.S. based companies bring their products to the global market.
Blackbox Ventures brings together 12 founders of new companies from around the world for two-week, intensive workshops called "Blackbox Connect."
Blackbox Connect events are held in Blackbox Mansion in Atherton, CA, a year-round live+work space for entrepreneurs visiting the Silicon Valley area. There, the participants interact with some of Silicon Valley's best investors, thought leaders, and industry experts.
You can see why Blackbox Ventures has been called an "incubator in a mansion."
500 Startups was founded in 2010 by Dave McClure, a prominent Silicon Valley--based angel investor and the founder of such companies as Aslan Computing and Simply Hired. Dave's blog, 500 Hats, is one of the most-read blogs on venture-capital finance.
500 Startups is a hybrid between an accelerator/incubator and a seed fund. They adhere to the "lean startup movement," designed to make venture capital more efficient and more scientific. Their emphasis is on usable design, customer-focused metrics, and online distribution.
The company has a network of over 175 experienced startup mentors worldwide, and provides funding ranging from $10K to $250K.
To date, 500 Startups has invested in over 350 ventures, including Bombfell, Mindsnacks, Ordr.in, 955 Dreams, Red Tricycle, Storytree, and Wowzer.
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Watch this amusing video clip of founders talking about their experience with 500 Startups. Our favorite quote: Q: "Why 500 Startups?" A: "Pissing Michael Harrington off."
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DreamIt Ventures was founded in 2008 by a small group of angel investors.
Unlike most other startup accelerators, DreamIt concentrates on one-on-one mentoring, connecting individual founders with a support network of mentors and potential investors.
This means that founders must live and work in a DreamIt location---either New York or Philadelphia---for the duration of their program, which is about three and a half months in length. A new special program for entrepreneurs based in Israel---DreamIt Israel---is under development.
DreamIt's portfolio includes such companies as CloudMine, Dejamor, ecquire, and Weesh.
Dogpatch Labs was created by Polaris Venture Partners in 2008. They currently have four labs, located in Cambridge, MA, Dublin, Ireland, New York, and Palo Alto.
The founders who are accepted by Dogpatch Labs will enter a community for sharing ideas and referrals, networking, and just hanging out. They will share free office space---desks, bandwidth, coffee, and snacks---with other like-minded entrepreneurs, usually for about six months. You might call it a free semester in a frat house for geeks!
Dogpatch Labs subscribes to the philosophy of open-source entrepreneurship. This means that all entrepreneurs benefit when ideas are shared freely and openly, especially in the early stages of concept development.
Over 100 companies are currently enrolled with Dogpatch Labs, including Social Times, Songkick, and The Start Project. More than 300 additional alumni have graduated, including Instagram and Ordr.in.
Entrepreneurs Roundtable Accelerator (ERA) is a New York--based accelerator founded in 2011 by Murat Aktihanoglu and two cofounders.
ERA is a spinoff from Aktihanoglu's Entrepreneurs Roundtable (ER), a global nonprofit organization active in the U.S., India, Japan, and Turkey, with the sole aim of helping entrepreneurs become successful.
ER consists of a group of more than 200 all-star, experienced entrepreneurs, operating executives, technologists, and investors, including such names as Esther Dyson, Charlie Federman, Howard L. Morgan, Jeff Stewart, Jos White, and Fred Wilson.
The ERA program provides 10 startups with $25K in investment capital, plus three months of free collaborative office space in the heart of Times Square. The 10 companies accepted (out of hundreds of applications) will have access to the ER network, as well as free business and legal support from ERA's staff.
ERA's portfolio includes Bespoke Post, CaterCow, Parking Panda, Pictorious!, and Pricing Engine.
KickLabs (short for "Kickstart Labs") is a San Francisco--based accelerator founded in 2009 by Transmedia Capital--partner, Chris Redlitz.
KickLabs is like an ordinary accelerator/incubator in that it provides access to advisors and mentors, as well as providers of special services that startups need, including banking, human resources, marketing, and public relations.
However, KickLabs typically works with startups that are farther along in development---ready to start acquiring customers and generating revenue. Kicklabs helps to match them with investors, and provides access to brand and technology partners.
As such, KickLabs does not directly compete with traditional, seed-fund accelerator/incubator programs. Rather, companies that have already completed a traditional program may then move on to KickLabs as a next step.
Kicklabs companies include ContextLogic, Everyme, Livefyre, Metricly, RealGravity, and Tout.
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Watch this interesting and informative PBS video about startup accelerators:
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Acknowledgment: The Editors would like to thank Oliver M. Barham for drawing our attention to the growing importance of startup accelerators, both in the business world and as a model for practical education.