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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2022 Annual Theme: Stakeholder Capitalism
Market-Based Solutions to Vital Economic Issues
Jul 1, 2013

What Do Accelerators Do? Insights from Incubators and Angels


What do accelerators do? Broadly speaking, they help ventures define and build
their initial products, identify promising customer segments, and secure resources,
including capital and employees. More specifically, accelerator programs are programs
of limited-duration—lasting about three months—that help cohorts of
startups with the new venture process. They usually provide a small amount of
seed capital, plus working space. They also offer a plethora of networking opportunities,
with both peer ventures and mentors, who might be successful entrepreneurs,
program graduates, venture capitalists, angel investors, or even corporate
executives. Finally, most programs end with a grand event, a “demo day” where
ventures pitch to a large audience of qualified investors.

You may think this all sounds familiar. After all, don’t incubators and angel
investors help nascent ventures? Accelerators certainly are similar to incubators
and angel investors. Like them, accelerators aim to help nascent ventures during
the formation stage. Thus we might expect that many of the activities provided by
accelerators would also be provided by angels and incubators. But accelerators differ
in several ways. Perhaps the most fundamental difference is the limited duration
of accelerator programs as compared to the continuous nature of incubators
and angel investments. This one small difference leads to many other differences,
as I discuss in more detail below. (See table 1 for a summary of the differences
between incubators, angel investors, and accelerators.)

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