In the world of startups and entrepreneurship, there are many different supporting parties one can turn to. At the beginning of this process, the different options for funding, advice, guidance, and ownership can be overwhelming. Falling under all of the aforementioned, jargoned obstacles is finding a partnering institution to help aid development. Whether pursuing the B2C or B2B sector, finding support is essential. Often times though, it can be difficult to navigate. With so many different types of development and investment firms, it’s difficult to truly understand the differences between each one. For instance, two commonly confused types are “company builder” and “company accelerator.” Below, The StartupVC outlines the key differences between these two entities. Moreover, we provide an outline on the benefits of each one.
Why look into a company builder or company accelerator?
Before understanding the essential differences and similarities between a company builder and a company accelerator, it’s important to know why a startup or entrepreneur should pursue one. The startup industry can be very exciting, but also very challenging. Hardly ever does a startup and its entrepreneur have all the resources, tools, and experience necessary to be successful and growing indefinitely. Taking into account these initial hurdles in the beginning stages of a company, entrepreneurs pursue private and/or public institutions and organizations for help.
Private and public firms can help grow the startup, provide it access to seed funding, bestow managerial and operational advice and guidance, and connect the company to beneficial partners. With both monetary and intellectual investments accruing in the name of the startup, this makes the entity more attractive to other investors. This is one of the main reasons a startup should seek out either a company builder or accelerator in its early stages. A formal monetary and intellectual backing from an established firm bodes well in the face of other investors, potential partners, banks, and even possible employees.
Moreover, beyond appearing more attractive to any budding parties, many startups need these resources to start and continue their operations. The initial months of production and operation for a startup can be difficult financially. Without the support of a company builder or company accelerator, many startups wouldn’t have the means to even continue operations. The initial funding allows the company to continue function until operations start turning a profit.
What is a company builder?
A company builder is the latest form of entrepreneurial funding and support. The key point of difference between company builders and other organizational startup resources is that they focus on in-house efforts. This means that the firm doesn’t accept outside applications for startups and entrepreneurs. Rather, it focuses on using internal resources, tools, and ideas to create its own startups.
What is a company accelerator?
Another type of startup support system is a company accelerator. These organizations focus on placing startups into month-long mentorship programs. The hope being to educate them quickly on how to run and expand the startup in a compressed timeline so as to get it up and running sooner. Moreover, in these programs, the startups have access to operational and supply chain resources. This helps the startup get its footing in the initial stages of operations before it has to sort out such heavy matters on its own.
Key differences
With some insight into both types of support, it can be difficult to identify how they differentiate from each other. To help paint a clearer picture, outlined below are some fundamental differences between company builders and company accelerators.
- Company builders work with and support their startups throughout the entirety of their value chain and foreseen future. Meanwhile, company accelerators focus on working with startups in its initial stages, and then “graduate” the entity from the program.
- Company builders do not accept outside applications from startups. They use internal ideas and intelligence to create new startups. Company accelerators navigate through thousands of applications from different startups hoping to be accepted into the program.
- Company builders are focused on prolonged growth over the lifetime of the venture. Conversely, company accelerators aim to accelerate the learning curve, experience, and path to profits as quickly as possible.
- Company builders use only internal monetary and intellectual resources. Whereas company accelerators are using financial investments from outside investors to fund the startups and the mentoring programs they run.
- Ventures under a company builder have access to resources, supply chain tools, and operational aid for the entirety of its life. Startups in accelerator programs have access to these tools for a limited amount of time.
- Company builders are actively overseeing the growth, obstacles, and changes occurring in its ventures. Accelerators are less hands on, even though they work with the startup for a shorter amount of time.
- By being a part of a company builder, the venture has access to cross-functional teams, ideas, and resources. This can jumpstart and inspire many different ideas and solutions to any problems that arise. Startups in company accelerator programs are operating independently from the other ventures in the program.
Benefits of a company builder
Given the handful of differences between the two systems, it’s no surprise that each has its own set of distinct benefits and possible setbacks. Company builders, while a newer model, are proven to be very successful and encourage growth. Typically, startup success rates are fairly low. However, company builders have proven to be effective in increasing this percentage. The success rate of startup efforts from company builders is significantly higher than that of startups operating independently. This includes startups that pursue support from accelerators or other startup support systems.
In addition to higher success rates, company builders serve as a platform to fall back on in difficult times. When economies and individual markets are experiencing stagnant growth, or even shrinkage, this can be detrimental to startups. Without sufficient resources, a startup might not survive difficult financial and economic times. Moreover, in times of recession, plans for fast, accelerated growth often do not work. A strategy focused on long-term growth better serves startups and prove to be more successful in uncertain economies. Company builders have the distinct advantage of offering both plentiful resources and long-term growth plans for its startup ventures.
Benefits of a company accelerator
Company accelerators offer distinct benefits as well. While the timeline is a lot shorter, accelerators still offer valuable input and resources for the startup in its initial stages. Mentorship and educational workshops and classes give entrepreneurs and startups a formalized manner of learning how to operate successfully. This helps startups avoid common, and possibly detrimental, mistakes when they enter the market as independent entities. Moreover, while accelerators aren’t investing in the startup for its entire life, they do give ample opportunities to meet and connect with partnering investors. These individuals could turn into a startup’s biggest supporting investor, both financially and mentorship-wise.
While an accelerated growth strategy can have its setbacks, it also has benefits. The accelerator program allows startups to skip through stages of uncertainty and mistakes. Getting right to profit maximizing stages is very attractive and effective for startups that graduate from these programs. Additionally, accelerators often times open the door to future customers for participating startups. Mandatory presentations and demo days for the startups are very common in accelerator programs. Potential customers bases attend these events to see the latest startups and what they do. This gives the startups exclusive, face-to-face access to their future target market; an invaluable opportunity.
Learn more about startup support entities
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