Accelerator Programs vs. Angel Investment – Which Is Best For Your Business?
With more and more business investment programs emerging, it can be a daunting time for founders looking for funding. Just where, when and how do you jump in and which funding solution is going to be right for your business. Here’s some good news before we get stuck into the article: venture capital investment in startup companies is at its highest level in history with over $148 billion being pumped into new businesses last year alone.
For businesses that have already made some traction and have got past the proof of concept phase, it’s a great time to look for investors. In this article, we’ll shine the spotlight on accelerator funds and angel groups and give you the lowdown on each so you have a better idea of where to start.
What Is An Accelerator Fund?
Accelerators, as their name suggests, are designed to boost your business to new heights by giving you the education, low-cost office space, mentorship and resources that your business needs, all packed into a very short timeframe. Essentially, the primary goal of an accelerator is to transform the process of starting a business into a program that can be repeated time and time again. These programs typically last for approximately three months and are a great way to fast-track your business to the investment stage.
The goal of every accelerator program is to prepare the company for demo day. This is when you will pitch your business to a network of accredited investors. No two accelerator programs are ever the same and each will produce different results. However, the one thing they all have in common is that they involve an intensive program of immersive education where founders will receive years of valuable education compressed into a matter of months. That may sound daunting to some and exciting to others and they come with a number of pros and cons.
One of the biggest advantages is that the best accelerators have established relationships with a large network of investors. By joining an accelerator program you will have access to investors and experienced founders you may not otherwise be exposed to. It is also one of the fastest ways to find out whether your business is destined for success or failure. It is important to note that another goal of the accelerator is to test whether the business is viable. Another advantage is that Accelerators typically have a bunch of companies in them which provides a great opportunity to network with and learn from other founders and people in the program.
Downsides include the time you will be required to participate in meetings and communications with mentors, which can be draining at a time when you are hustling to make a sale or develop your product. For this reason, it makes sense to carefully select a program that promises to deliver the most value for the time you put in. Plus, not all accelerators can provide the same value for all companies, so do your research on past companies that have come through their program.
What Is Angel Investment?
Angel investors are typically high net worth individuals who provide funding to startups during the early stages of establishing the business. They provide smaller pots of money, usually between $25,000 and $50,000 and often invest alongside seed venture capital funding programs.
But it’s not just cold hard cash that angels have to contribute. They often have solid industry knowledge and access to a network of contacts that they can pass onto founders. Investment can be made as part of a syndicate or by an individual and you may be approached by a number of investors depending on how promising your venture is to them. The benefits of using a syndicate are that you will have access to a broader range of management experience and skills. However, too many people could also introduce obstacles and red tape that you may want to avoid.
Unlike an accelerator program, angel investment and interaction is not limited to a set timeframe and can be an ongoing initiative. Of course, funding and experience don’t come for free and you will need to give up an agreed amount of equity to your investor.
Many businesses graduate from an accelerator program and then go on to attract investment from angels and other venture capitalists, while others pitch for angel investment without partaking in an accelerator beforehand. Which you choose will depend on the maturity and success of your business and whether you require mentoring and assistance before you embark on your first funding round.