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Summary

This is the first article in a series on seed and venture accelerators, describing what they are, their potential impacts on the incubation industry and possible ways incubators can benefit from the accelerator model.

What are the new seed or venture accelerators?

by Dinah Adkins

June 2011

When Paul Graham launched Y Combinator in 2005, he set off the spark that created an explosion of so-called seed or venture accelerators that has excited the investing world and affected the environments in which many business incubators operate. Graham initiated a movement of investor groups that make relatively small investments (when compared with most venture capital or even seed investments) but do so in up to 40 companies a year – more than formal VC firms back in a decade. "We are mass-producing the start-up," Graham reported to Inc. magazine in June 2009.

The model has been called "spray and pray" because Y Combinator and most of its clones generally invest only $5,000 to $8,000 per founder – and no more than $18,000 to $25,000 per company – primarily in mobile apps, cloud computing, social media, gaming and entertainment, and Web services. In addition to making highly selective, small investments in multiple companies, these venture accelerators also usually bring would-be entrepreneurs together for 90-day boot camps. Mentors and serial entrepreneurs give boot camp participants an immersion course in developing their products, presenting to customers, and preparing to pitch to additional investors. (See "Common traits of incubators and accelerators" for a comparison of the attributes of seed accelerators versus business incubators.)

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Keywords: business plan – incubator, economic development, for-profit incubators, special focus incubator, technology incubator, venture capital

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