All entrepreneurs are risk takers. They invest their time and talent to create something new — whether it's a product, a service, or a disruptive process. Risk is an inherent aspect of every kind of growth. In order to move forward, we have to leave the comfort of the present behind and set out on a new path.
Investing in a startup company also involves risk. There is always a possibility that the startup might fail and the investment won't come to fruition. But there is also the potential for great financial reward. And that is why many investors are willing to take this risk — with the hopes of someday finding themselves on the ground level of a wildly successful new venture. There are several ways to approach startup investment, including angel investing, venture capital (VC) funds, and investing in an accelerator program.
Smart investors look for the opportunities that will allow them to diversify their investments, which helps to minimize the risks of investing and maximize the rewards. While there are several choices investors have when it comes to where they can put their money, some involve more risk than others. In the startup space, there are several different ways to invest. You can invest in one particular company, putting all of your eggs into one high-risk basket. Or, you can invest in a startup accelerator. This investment gives you the ability to support a number of early-stage companies and in turn both diversifies your capital and provides a greater chance of success. By investing in an accelerator program, you can achieve maximum impact with minimal risk.
What is an Accelerator?
As outlined by Forbes, an accelerator program,
“[Offers] a physical space to set up your office, making it easy to work with you directly. Since space within the same building is also being used by other start-ups, this is a great place to exchange ideas and grow together... [Offers] advice, small seed funding, and exposure to other investors through their own networks.”
Often times the terms incubators and accelerators are used interchangeably when they are in fact two different animals altogether. Whereas incubators have less structure and may go on for years, an accelerator helps startup companies grow during a specific, highly-focused time frame, and often selects participants in exchange for a share of equity. SparkLabKC was developed to reflect the structure and best practices of several successful accelerator programs in the U.S. and abroad.
An article from Business News Daily states that accelerators work to make the business development process faster for the startups. This means that investors have the ability to observe and interact with each startup team within the structure of the program, and to contribute to and track their progress thoroughly over a shorter period of time. This is just one of the many benefits of investing in an accelerator rather than investing in a singular startup.
Why Should You Invest?
Investing in an accelerator provides the same opportunities as angel or VC investing, but includes many more benefits. Accelerator investors are able to offer mentorship and hands-on advice, benefit from the networking and development opportunities offered by the accelerator, and gain exposure to a wide variety of innovative people who have an infectious passion for the work that they do. In addition, they have access to multiple early-stage companies and are free to make additional investments in those they find most promising.
One of our previous blogs details these benefits, stating,
“Even if several [startups] fail, you still have a stake in those that succeed. By putting your money into an accelerator, you tie your investment to 10 completely different yet entirely original ideas/products, which spreads your risk and exponentially increases your chances of a return.”
By placing investments in a multitude of startups in an accelerator program, investors are greatly increasing their chance for reward. Another benefit of accelerator investing is the structure and assistance provided, which help investors avoid deal-flow complications. It can be difficult for angel or venture capitalist investors to find the companies that are the best fit for their investment, and even more difficult to draw up the paperwork and finalize the deal. With an accelerator program, processes and paperwork are already in place and investors benefit from the expertise of the accelerator team.
Impacting the Future
Your investment in an accelerator program makes a big difference. Supporting a community of entrepreneurs has a ripple effect on our community, providing opportunities for small businesses to create jobs and contribute to a thriving and innovative ecosystem. Investing in an accelerator program is a valuable way to increase your chances for success while making a positive impact on your community!