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How Tech Startup Accelerators Work


Lebanese entrepreneurs from different Internet startup companies work in the offices of accelerator Seeqnce in Beirut. The setup for startup accelerators is similar the world over.
Lebanese entrepreneurs from different Internet startup companies work in the offices of accelerator Seeqnce in Beirut. The setup for startup accelerators is similar the world over.
JOSEPH EID/AFP/Getty Images

At 20 years old, Bill Gates dropped out of Harvard to launch Microsoft. Mark Zuckerberg, also 20 years old, dropped out of Harvard after launching Facebook. Which makes you wonder, who's the next 20-year-old Harvard dropout who's going to change the world?

In global technology hubs from California's Silicon Valley to Bangalore, India, investors are searching for the next disruptive idea in technology, and the search often begins at tech startup accelerators. A tech startup accelerator is an organization created by experienced tech entrepreneurs to help early-stage tech companies develop their product, hone their business model, and — most importantly — connect with investors.

At high-profile tech startup accelerators like Y Combinator and Techstars, dozens of aspiring Bill Gates and Mark Zuckerbergs huddle with tech industry veterans and business mentors to take ideas from the "rough concept" stage to "market ready." Examples of successful Web startups that were born at business accelerators include Airbnb, Dropbox, Reddit and Plated.

Competition is stiff at the world's top accelerators. Young companies have to apply for coveted residences that last three to five months. If chosen, the lucky entrepreneurs receive thousands of dollars in seed money, expert guidance, a free place to work, and a chance to present their finished concepts to eager investors during "Demo Day."

Of course, tech startup accelerators don't provide all of these services out of the goodness of their hearts. Most accelerators take a percentage of all profits earned by the companies they help to launch. Even if the accelerator only receives a 6 percent stake in a startup, it can add up quickly when the young company is scooped up by Twitter or Yahoo! for tens of millions of dollars.

Nevertheless, the perks that accelerators offer to startups make entrepreneurs want to use these companies as opposed to going directly to a venture capitalist, where they might get funding but nothing else.


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