Accelerators are a relatively new phenomenon in the world of entrepreneurship. However, there is often confusion about accelerators’ structure and their impact on founders. A recent study aims to shed some light on what accelerators are and how they contribute to entrepreneurship ecosystems.
The report highlights key differences among accelerators and other entrepreneurship supporters, such as incubators and angel investors. According to the authors, an accelerator is defined as: “a fixed-term, cohort-based program, including mentorship and educational components, that culminates in a public pitch event or demo day.”
Source: Cohen and Hochberg
Accelerators differ from incubators mainly in the competitive nature of their selection processes and their focus on mentorship. Compared to incubators, accelerators also have a very short time to engage with clients. Ideally, this can lead to either quicker growth or faster failure. (A fast failure can be beneficial if entrepreneurs shift to a different, higher potential venture.) Lastly, accelerators group entrepreneurs in each of their cycles into cohorts or classes. This fosters a communal identity among founders in the same cohort and allows the accelerator to focus its marketing and outreach around specific and predictable events.
Accelerators often make investments in the companies they support. This can cause them to be confused with angel investors. Angel investors are individuals who invest significant sums of money into early-stage companies. Like accelerators, they are highly selective, but they do not tend to work with companies in cohorts and only interact with entrepreneurs as the investor deems necessary.
Even though accelerators are relatively new, their popularity seems to indicate that they are filling needs that aren’t addressed by angel investors and incubators. These three types of organizations are often the most common sources of support for early-stage companies and will likely continue to be across many local entrepreneurship ecosystems.
For the full report by by Susan G. Cohen and Yael V. Hochberg, please click here.
Contributed by Haley Goodman.