How Accelerators Can Add Value to Startups

For accelerators that do not offer investment, it is especially important to clarify the value-add to companies and entrepreneurs so that it can still attract the top startups.

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According to the latest Global Accelerator Report, there were over 579 accelerators operating worldwide, deploying more than US$206 million into thousands of startups per year, but with the recent uptick in entrepreneurship activity, that number could grow significantly.

Latin America is a growing market for accelerators, and in Chile alone there are more than 80 programs supporting entrepreneurs, ranging from accelerators to competitions for equity-free grants.

While Y Combinator in Silicon Valley piloted accelerator programs, Start-Up Chile arguably acts as the regional role model for Latin America. Just as the launch of YC triggered an explosion of accelerators in the US, dozens – if not hundreds – of programs have cropped up across Latin America in the nine years since Start-Up Chile debuted.

However, not all accelerators are created equal. And with so many available options, it has become increasingly more challenging to attract the top startups to apply. For accelerators who do not offer any money, it is especially important to clarify the value-add to companies and entrepreneurs so that the program can continue to attract the best deal flow.

Below are five ways accelerators can help their startups, whether they invest in them or not.

  1. Stick to a single industry

Don’t try to be a jack-of-all-trades. Up to 80% of accelerator participants consider mentorship to be the most important support that an accelerator can provide. However, founders’ most frequent complaint is that their mentors could have added more value if they had the industry experience to advise more specifically on niche topics. For accelerators working with limited resources, try to provide the best possible mentorship and network within a single area rather than finding less-experienced mentors across many industries.

  1. Create a local and international mentor network

While it is impossible to compete directly with Y Combinator in network strength, local accelerators in Latin America can build wide communities to help startups even as they start to grow and scale. Beyond the tight network of dedicated mentors, accelerator programs should look for partners at home and abroad who might be willing to step up to advise a startup in their industry on an ad hoc basis. Many people would be willing to be on-call for the occasional meeting with an exciting startup in their area of expertise, especially if the time commitment is minimal.

  1. Manage an active and accessible alumni database

As in the case of a VC, an accelerator’s portfolio speaks to its success, creating a virtuous cycle that brings in better startups who attract more investment. These successful founders may often be the best resource an accelerator can provide to its newest generation of young companies. Most of these entrepreneurs would be happy to help out, so create a database to share their contact information (of those that are willing!) with the accelerator’s internal network.

New applicants may want to reach out to previous participants to hear about their experience before joining the program. Maintain an active group of a few supportive alumni who would be willing to take any questions if necessary.

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  1. Go beyond the Demo Day

Accelerators often make income by taking equity in startups and helping them grow to find follow-on funding. However, investors are so swamped with Demo Days and startup events that they attend few of these events – unless they are already connected to the accelerator.

Instead of throwing pitches blindly at investors, try a more hands-on strategy. Organize one-on-one meetings between investors and startups that might interest them, or even lead an investment round through a crowdfunding platform.

  1. Be entrepreneur-friendly

This point probably goes without saying, but we’ve seen a surprising number of cases of accelerators that take lots of equity without providing investment or adding value, as well as programs that end up wasting entrepreneurs’ time rather than helping them grow. Accelerators play a significant role in building up a local ecosystem from the ground up, but it is important to remember that without startups, there would be no ecosystem – or accelerators. To align incentives, everyone’s end goal should be to create startups that scale and build great products for their clients.

Accelerators are more than just a source of pre-seed capital for early startups; they are also educational programs that provide a network and other intangible resources to founders. Even accelerators that do not provide capital can support entrepreneurs in other ways, through creative financing, personalized training, and a curated network. The result of this added value? Better deal flow, higher success rates, and more follow-on investment – a win both for the startups and the accelerator.

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