In the startup and venture capital world, terms like incubator, angel investor, and accelerator can often be difficult to distinguish from one another. If we look at accelerators, what are the characteristics that differentiates it from the angel investor or incubator? In this article, I will try to illuminate some of the key characteristics that makes up an accelerator.

The first thing that you will quickly find when doing some basic research on accelerators, is the fixed time frame that accelerators work with startups (Usually 3-6 months). This stems from the very nature of an accelerator, which is of course to accelerate the growth of a startup. Usually, this acceleration process culminates in a so-called Demo Day, where startups have a chance to pitch to investors.

So now that we’ve learned about accelerators characteristic fixed short term time frame, what is it that accelerators provide startups with during this 3-6 month period? In short, accelerators supply Mentorship, education, and networking channels (I.e. market access). These are the main strengths that accelerators pull on.  Capital can also be a tool for accelerators, but not to the same extend as for Angel investors.

Keep in mind though, that this does not mean that all accelerators follow the same model. With the enormous growth in the number of accelerators[1] over the past 10 years, a diversification in how accelerators operate is unavoidable. This can be minor tweaks to the mentor relationship, the program time frame, or perhaps different views on capitals role in the accelerations progress. Today many accelerators also specialize themselves, to being able to most effectively service a specific area, in order to survive in the rising competition in the accelerator market. This will of course also affect the concrete operation process of an accelerator. 

All right, let’s zoom back out to take a view on the general characteristics of accelerators, and why accelerators operate the way they do. The focus on mentorship, education, and network channels has the purpose of generating years of experience and results, in a matter of months. It is maturing the startup that is in focus. This is why capital plays a minor to no role at all, in the relationship between startups and accelerators. In other words, accelerators aim at transforming a startup into an actual company. The accelerator speeds up the scaling of the company, allowing it be ready for bigger rounds of investments further on.

If you are the kind of startup that already has an established identity, concrete goal set, relatively developed product, and some market traction, but simply need some cash to fire up the scaling of your company, then perhaps VC funding or equity based crowdfunding is more the kind of help you need.

Does this mean that VC’s can ONLY provide capital and accelerators can ONLY provide support and mentoring? No, but whether the focus lies on capital support or mentoring support, is where the key differentiating factor between VC’s and accelerators lie. So, for a startup to choose the accelerator path, is in short to decide that mentor support, education, and networking channels, is more rewarding for the startup at the current stage, than capital would be.