As the global economy grows, so does the rate of entrepreneurs and their need for seed capital and expert business advice. This need has spawned a new market niche, that of business accelerator companies, which is a rapidly growing sector that has grown more than 200 percent since 2010.
Although the number of accelerators has increased dramatically, there continues to be more of a demand for them than there is a supply to meet it. Accelerators typically offer a three-month program wherein the selected applicants learn how to obtain start-up capital as well as how to translate their dream into a successful business. In exchange for this training, accelerators are granted a percentage of the start-up’s equity, usually less than 10 percent.
As with all sectors, business accelerators have levels of success and expertise; the better the success rate, the higher the equity exchange will be. Many accelerators are not concerned if some classes produce no profitable ventures since the occasional dynamo will compensate for it.
A major factor in the success rate of an accelerator is the quality of their network of connections and investors. An entrepreneur who wants to enroll with an accelerator should thoroughly investigate their background and success rate just as he or she would any potential business partner.
One criticism of accelerators is that they sell the proverbial “pot of gold” but actually do not significantly increase the rate of success. Since this program is in its infancy, there is no statistical data to prove the point either way. However, since cash flow is usually very limited during the start-up phase of a business, hiring a consultant for advice may be out of the question. Accelerators provide up front expertise with no cash expenditure, so the long-term benefit may well be worth the equity exchange.
Read more at the Wall Street Journal.