In 2019, the Brazilian startups ecosystem surpassed the mark of 12 thousand companies spread throughout the country. By approaching innovative business models and high scalability, the startups represent both an interesting potential to the national economy and an alternative for young entrepreneurs with a good idea to start their business with low capital.
In general, there is a system that provides support so that these companies can develop, move the economy and optimize their business model in a sustainable and elaborate way. In the following post, we will understand what an Accelerator Program is and how they can impact the development of a startup. Check it out!
What is an Accelerator Program and how it works
An Accelerator Program is nothing more than a development opportunity for new startups, offered by a business accelerator or a government initiative.
The benefits vary according to each program, as does the duration. However, the general idea is to support the initial idea to become a scalable business model, leveraging the company. This support can be in different ways. Usually there is financial support involved, but the main highlight of Accelerator Programs is the entire entrepreneurial infrastructure it covers.
Through the program, the startup founders have access to mentoring from experienced entrepreneurs, go through business modeling, learn business management, develop good financial planning, develop a marketing strategy and have access to a very important network. All this with the purpose that the startup has good results in the future, which facilitates raising investments and making partnerships, for example.
It is very common that good ideas end up not bringing effective results. This is due to the founders’ lack of ability to structure a commercial and sustainable business model. That’s why this part of the program is fundamental for the young entrepreneur to be able to develop a look at the market, and not only at the solution he is developing.
How to participate in an Accelerator Program
Each Accelerator Program has a different selection process, as well as distinct criteria dedicated to selecting which startups will participate in the round.
Some programs select only companies with a validated business model in order to focus on the strategic contribution and leverage the company’s profits. Others make the entire incubation and modeling system available, helping entrepreneurs from scratch.
The ideal is that you make a previous research about the programs, find out when the rounds open and what the participation criteria are. Another tip is to raise the benefits that they seek to offer entrepreneurs and if that matches what you are looking for.
Investments and Aid in Accelerator Programs
The investments offered vary greatly according to the Accelerator Program. Some accelerators show an initial contribution, between R$ 20.000,00 to R$ 150.000,00, together with a monthly grant so that the founders have how to pay their bills in the initial periods of the startups, that is, while they are in development process and generating little revenue.
There are accelerators that usually associate the value of the investment to the equity, that is, to the percentage of your company’s profit share that it will have in return, as well as the duration of the contract. For example, if you want a contribution of $ 25,000, the accelerator receives 2% of profit share. Otherwise, if you want $ 50,000, the accelerator will receive 5%.
In addition, an Accelerator Program usually presents a physical infrastructure as part of the benefits, such as access to a coworking, discount on virtual tools for A/B testing, validation, hosting, website development, HR support and accounting, among other features that decrease start-up operating costs.
It is important to remember that there are other ways to raise investment without opting for an Accelerator Program. You can choose to bring capital to the company through an angel investor, for example, or through other existing models in the market. Besides, if your focus is only on mentoring, there are programs specifically designed for that, which do not involve financial capital and profit sharing, just the help of more experienced entrepreneurs in the market.
What are the advantages and disadvantages of an Accelerator Program?
The main advantage that an Accelerator Program offers is leverage. Through the accelerator, the entrepreneur can take several shortcuts. After all, building a network takes years. Besides that, the vision of a mentor with more market experience about his business model contributes to avoid problems that an entrepreneur who is starting up might face due to lack of experience.
On the other hand, the great disadvantage of an Accelerator Program is the counterpart your company needs to show to be accelerated. In private initiative programs, the startup proposes partnership as a bargaining chip with the accelerator, making it a partner in your business.
It is required that any system of partnership is made with care to avoid problems of communication and direction of the company in the future. That is why, when choosing the Accelerator Program you want to participate, understand in depth how the partnership will work and choose an accelerator that shares values close to what you want to build. An interesting tip is to ask a lawyer or someone from law school (teacher, coordinator or even a veteran colleague) to read the contract calmly and clear your doubts, so that you make a conscious decision and don’t regret it later.
Do want to know more about modeling and accelerator programs? Learn how a business accelerator works and keep studying the subject!