Business accelerators are popping up all over the country, providing start-up money, advice and space to refine ideas.
Accelerators aim to help entrepreneurs quickly develop their concepts into marketable products. The 12 week time limit for participating in an accelerator program is fairly common. That’s in contrast to a business incubator, which usually keeps companies afloat longer.
The accelerator now covers a large area of the US, including major East Coast and West Coast technology hubs. Examples include TechStars, which operates in Boston, Boulder, New York, Seattle, and San Antonio; Excelerate Labs, based in Chicago; and Kicklabs in San Francisco.
Mobile app developers are among the many individuals and companies participating in the accelerator. Deborah Tillett, president and executive director of Baltimore’s Emerging Technology Center, which houses Hurry Baltimoresaid that the fast mobile app development cycle worked well with the accelerator’s three-month timeframe.
“You can finish a decent product very fast and go to an Apple store” or another outlet,” he said.
The first class of four companies graduated from AccelerateBaltimore, one of many business accelerators around the country, in July. Two companies develop mobile apps: Kithlyapplications for organizing social activities, andNewsUpan app that discovers user interests and rewards points for reading suggested news items.
Andrew Schuster, chief executive of NewsUp.me, said his company initially was with the Emerging Technology Center incubator and then signed up with AccelerateBaltimore. Once accepted, companies are given capital and access to mentors.
AccelerateBaltimore Company received $25,000 in seed funding. For mentors, NewsUp worked with Chris Brandenburg, co-founder and chief technology officer of Millennial Media, a mobile advertising platform company, and Michael Teitelbaum, managing partner at Right Source Marketing, a marketing consulting firm.
“The experience they have is the best thing we could ask for,” said Schuster.
How it works
Accelerators offer a mix of money and mentorship. In return, the accelerator may receive a small equity stake in the company, usually 10 percent or less. There may also be a requirement to maintain the company in the accelerator’s geographic area for a certain period of time. AccelerateBaltimore, for example, originally included a 5 year residency requirement. However, the program no longer has a residency requirement.
Accelerator applicants need to have an idea they can execute quickly. Tillett said a company would not be a good fit for an accelerator if it couldn’t put the idea into action within a few months and make good use of the accelerator’s capital.
“It’s important that they can do what they say they’re going to do in a short amount of time and money makes all the difference,” he said.
A company having a working prototype is a plus, as it gets a head start once the accelerator clock starts ticking. “We like companies that have a prototype — maybe not the final product but it works and they can test it and now they want to polish their business model and start getting customers and users,” said Matt Menietti, director of operations at Capital Innovatoraccelerator St. Louis.
Capital Innovator recently launched its third class. The 12-week sessions have five to six participants each. Companies each receive $50,000 in funding, mentoring, office space, and free hosting. They also have the opportunity to invite investors when the program reaches its peak on Demo Day.
Accelerators, in return for funding and supporting the company, receive a 5 to 10 percent equity stake. There are no residency requirements.
Menietta said Capital Innovators took a holistic approach by bringing companies through this program. Participants can take advantage of marketing, accounting and legal services. Marketing partners working with the accelerator help participants with their branding, website, messaging and differentiation, he adds. Accounting firms work with companies to set up accounting systems.
Capital Innovators company including mobile app developers including IDC Projectthat makes location-based social games.
Managing Expectations
Startup entrepreneurs need to have realistic expectations as they approach the accelerator. Accelerators provide funding and mentoring support, but launching a business remains a daunting task. Tillett said the assignment involved “a lot of pieces and pieces” including patent issues, licensing agreements, and, of course, seeking additional financing.
“On any given day one of those can fall off the cart and you have to put it back on,” he said. “The increase in expectations is important.”
Accelerator companies must also pay attention to marketing. In the early days of mobile apps, any product could grab a customer’s attention. But as the market matures and thousands of apps hit app stores, businesses need to determine if any customers want the product and develop a plan to reach them.
“The adoption and traction was huge,” said Tillett.
Meanwhile, accelerators look for applicants they believe will get the most out of their program. Capital Innovators aims to select companies that “really understand the value of the program”, according to Menietti. “This is not just seed funding. It’s networking… and connecting with other companies.”
Schuster also cites networking with peers as one of the main advantages of accelerators. “Working with other companies — there are four in the program — and being able to collaborate and talk to other entrepreneurs and share information is a huge benefit,” he says.
In early October, AccelerateBaltimore began an outreach process that will eventually fill six slots in its upcoming class. Tillett said the accelerator plans to reach out to colleges and universities, and spread the word internationally as well. “We’re going to be very aggressive this time,” he said.
Photo: Corbis Images
John Moore has written about business and technology for over 20 years. His articles have appeared on Baseline, CIO Insight, Federal Computer Week, Government Health IT And Technology Goals. Areas of focus include cloud computing, health information technology, systems integration, and virtualization. He is a frequent contributor Digital Innovation Gazette.
