How accelerators benefit from startups

One of the common misconceptions about accelerator-startup relationship is that it’s more beneficial for the startups to get the help, advice, training and support they need. However, there are many benefits to the accelerator as well — that you’d be better off knowing in order to perfect your business pitch to the accelerator’s decision makers. Read on to find out more about them.

Accelerators and startups share a mutually beneficial relationship — don’t let anyone convince you otherwise. The moment you believe your startup is at the mercy of an accelerator admission and you can’t offer them equal benefits in return, get out of there and do your research to understand how accelerator programmes work. Then tailor your pitch to not just highlight your potential and strength, but also how it would be beneficial to them in the long run.

Startup accelerators are developed to mainly support innovative companies in their early stages, through education, mentorship and financing. As suggested by its name, accelerators provide an intense period of immense learning, shortening years’ worth of learning from experiences into just a few months.

The increase in number of startups and support for them have grown hand in hand over the last few years. Traditionally, startups pitched their business ideas to investors in order to get the funding required to put the business idea into action. However, larger corporations have realised the potential of startups for their own growth and devised the concept of accelerators to tap into it.

In fact, accelerators have received much popularity as they provide hands-on experience and learning, which is very beneficial for companies in their early stages to jump start their progress and increase their chances of success early on. According to Brad Feld, cofounder of TechStars, “learning-by-doing is vital to the process of scaling ventures, and the point of accelerators is to accelerate that process.”

Nevertheless, startups are equally beneficial to accelerator programmes, even though those benefits are not always highlighted due to the limited supply of seats and huge demand by hundreds of startups.

Be that as it may, there are no free lunches in this world, certainly not in the realm of business. So if accelerators are offering programmes that help put the startup on the fast track, there inevitably are great profitable reasons for them to do so. One of them is gaining a stake in the startups by investing in them, usually around 10-20%, in the hopes that the startup reaches the sought-after unicorn status later on, providing the accelerator with a hefty profit.

There are two main types of companies that offer accelerator programmes: one, a large corporation such as Google, IBM and Microsoft; and two, standalone accelerators established with the sole purpose of providing the programmes to startups. None of them operate out of charity, even though the concept of helping new business grow and help strengthen the economy does wonders for their reputation to.

Those offered by larger corporations are often without demanding any share of the startup ownership. However, they benefit from the talent, innovative and creative ideas, as well as training opportunities for their current staff when you share their office space, to understand where the market and technology is heading. Plus, they can incorporate those ideas and practices into their business functions to maintain their leading positions. It’s always better to have an inside track, but that’s not all — if your startup becomes bigger, they already have a relationship with you wherein they understand your process and requirements better, to be able to have you as their client.

Accelerator programmes also divide their risks, as not every startup they take on is guaranteed to succeed. They usually take in 10-12 startups per batch and run between 1-3 batches per year. TechStars, a US-based accelerator company, recently announced their second batch in MENA, in partnership with GINCO, a UAE-based family investment office. The MENA region is showing a strong growth rate for startup funding and accelerator programmes, attracting many foreign institutions into the region. Notable ones include 500 Startups MISK Accelerator, BRINC, TechStars, Plug & Play in partnership with Abu Dhabi Global Markets (ADGM) and StartupBootcamp.

It’s also beneficial to keep abreast of industry news and trends within funding. Accelerator programmes’ intakes are public knowledge, which you can study and track to know which programme is best suited for your venture. Companies such as MAGNiTT also produce monthly, quarterly, bi-annual and yearly reports that present analysis of funding data in the industry. Their 2018 MENA Venture Investment report showed that 2017 saw e-commerce companies leading the amount and number of deals, whereas 2018 showed FinTech startups take the lead position.

We’ve spoken a lot about the benefits of the accelerator-startup relation to the programme provider; however, there are numerous benefits to the startup as well — from increasing the likelihood of successful seed and funding rounds, to invaluable network connections and learnings. So while you should take the pitch to get selected in a programme very seriously, understanding the motives and benefits of the acceleration providing entity can help you give solid arguments and nail your pitch on the demo day. Lastly, remember that it is always a win-win relationship, so never go into the pitch believing you don’t have much to offer, your idea, spirit, skills, and drive got you this far­­ — let your potential shine for the future.