Investments can be risky. How do you know which startups will succeed and which will fail? Many venture capitalists (VCs) turn to accelerator programs to ensure the highest returns on their investments.
More and more investors are using accelerator programs to help them identify the most promising startups with less risk. These programs first started in 2005. Now, there are more than 7,000 accelerator programs around the world. If you’re looking for the highest ROI on your investments, an accelerator program might be the answer.
What’s an Accelerator Program?
An accelerator program is essentially a training seminar for startups. Instead of investing in startups individually with separate terms, VCs can invest in multiple startups at once and support them as a group over a set period of time. It’s designed to educate startup entrepreneurs and condense years’ worth of on-the-job learning into a few months.
Four distinct factors make an accelerator program:
- Fixed-term
- Collaboration-based
- Mentorship-driven
- A graduation
When you start an accelerator program, you choose several startups to be a part of the “cohort.” Over a set period—typically between three to six months—the startups work onsite to build their businesses. You provide them with a workspace, guidance and mentorship, and some funding to get started (with Road2 it is potentially up to 100k). In return, you receive a small equity stake in the company (typically around 8%).
After the accelerator program ends, the startup entrepreneurs graduate and head out into the world to make a name for themselves.
Benefits of Investing in an Accelerator Program
The best way for VCs to maximize their ROI is by investing in an accelerator program. They offer several major benefits that will drastically increase your investment returns and foster success in the future.
Scout the Best Startups
Identifying promising startups for investment is a time-consuming task that doesn’t suit VCs’ busy schedules. Accelerator programs are great funnel to attract emerging startups. Instead of taking the time to research the market, early-stage startups will come to you!
Once you’ve accumulated a group of startups for your program, you’ll get to work in close proximity with them to learn which shows the most promise. We view the Road2 accelerator programs as active due diligence on the teams to enable us to pick the best.
When you find one you believe in, you’ll have the first shot for additional investments.
Gather Insights into Emerging Trends
Startups are always at the cutting edge of trends. They’re the first to identify and resolve the most current issues. With an accelerator program, you can stay in touch with emerging trends and get in at the ground floor. You can then use these next-gen technologies and methodologies to make your own business more competitive.
If there’s a particular problem that impacts your company, investing in an accelerator program specifically for that issue is a great way to find solutions. One of the startups in your program could identify innovative ways to overcome your problems that will help immensely in the future.
Diversify Your Investment Portfolio
Not every startup is a winner, but it’s impossible to tell exactly which will succeed and which will fail. Investing large sums of money into a single startup is risky. Accelerator programs let you invest small sums into several startups, decreasing your risk. Even if 90% of the startups in your accelerator program fail, the remaining 10% will bring more than enough returns to cover your losses. As the saying goes, you’re not putting all your eggs into one basket.
Accelerator programs also allow VCs to invest in several industries, further reducing risk. One industry might slow down, but it’s highly unlikely for several to falter at once. The more diversified your portfolio is, the less risk you experience.
Maximize ROI by Investing in an Accelerator Program
At Road2, we work harder and smarter, we use best in class AI tools empowered by NVIDIA to help founders build inspiring businesses and to enable investors to gain access to fund the most exciting and innovative projects.
We are here to secure long-term yields by investing in the most promising projects. In parallel, in everything we do, we never lose sight of our corporate responsibility to also assist underrepresented entrepreneurs in their passage into the technology & innovative leadership.
Our programs are not theoretical and are created to solve real, immediate, business needs we define with our selected partners. Joining our investment community means joining a passionate and impactful group of leaders supporting the most breakthrough startups in Haifa and effectively accessing both public and private funding. Seeing the unique potential, Israel’s Innovation Authority created a tailored program to finance many of our acceleration programs creating a PPP (private-public-partnership) that is the only one of its kind in Israel.
Get on board with our goal to transform Haifa into the global innovative leader in these main areas: Sustainable Energy, Digital Health, Smart Mobility, Industry 4.0, Games, and Cooperative Economy.
