Startups are growing every year. This means investors have a lot of options when choosing which one to support. A research by Challenger, Gray, and Christmas states that in the last quarter of 2016, 7.4 percent of job seekers in the United States started their own businesses. That’s a 4.8 percent increase from the last quarter of 2015.
The rise of accelerators could very well be one of the reasons why startup businesses are growing in popularity. Gust and Fundacity’s Global Accelerator Report 2015 reveals that more than $191 million was invested into over 8,800 startups across the world. Among all the regions, the United States and Canada were responsible for 47 percent of the investments made which helped accelerate 33.6 percent of the startups.
Even better news for startups is that there are 467 startup accelerators who are ready to provide support, Entrepreneur says.
A Direct Correlation
A Global Accelerator Learning Initiative study cites that “high-performing programs had smaller applicant pools on average.” As more accelerators are beginning to open their doors, more entrepreneurs are encouraged to create startups.
This, however, is a double-edged sword. On the flip side, the boom in entrepreneurial ventures also pushed the number of accelerator programs higher than ever. But not all accelerator programs are created equally. “The best [accelerator] programs have a substantial impact. The worst programs can probably cause damage,” notes Dave McClure, founder of famed Silicon Valley accelerator 500 Startups.
Startups Venture Capital says that the best and most successful accelerators, thanks to the saturation in the market, could then look into funding fewer businesses with more money. The sheer number of accelerators may, ironically, increase the exclusivity of the scene.
Exclusivity is already one of the main problems with accelerators. Accelerators have notoriously very low acceptance rates. The top dogs, like TechStars, have acceptance rates ranging from one to five percent. Apart from having to meet the demands of the accelerators, entrepreneurs also have to compete with hundreds and even thousands of other applicants to get accelerated.
Before investing in a startup, accelerators let applicants through an arduous screening process. In some accelerator firms, startups are required to have reached a certain development stage first, Business New Daily reports.
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This poses a problem for both the accelerators and the startups. As the acceptance rate grows lower, the number and quality of startups could go down as well. In the long run, accelerators could get less equity with the number of startups they support.
One way for accelerators to solve this major problem is providing an easier application process—which could easily backfire and lower the quality of their pool. Another is the Public Accelerator-Incubator (PAI) model by Digital Arts Media Network (OTCMKTS:DATI) which provides an alternative solution for both startups and accelerators.
A Slice of the PAI
DATI’s PAI model is a hybrid of accelerators and incubators. It offers budding entrepreneurs yet another avenue for growth aside from accelerators. Aside from being the maker of the PAI model, DATI also is the only one who offers the service. While PAI doesn’t provide traditional mentoring like accelerators do, it does give startups a better chance of propelling into a bigger enterprise because of the capital that pours in from the investors.
The PAI models open a lot of opportunities for startups in terms of acquiring more capital. Angel investors are individuals who invest in early-stage developing companies or startup businesses. They face the same problem; they have to wait up to 10 years before their investment matures to liquidity. The long maturity phase scares off angel investors as it would be hard to predict the value of a startup a decade after the initial investment.
Under the PAI model, angel investors can have access to liquidity in as early as two years. Aside from the early access, angel investors don’t have to worry about their initial investment diluting into a smaller share.
Being an angel investor in one of DATI’s supported startups means having access to the public company’s equity, which provides liquidity–an exit. Seeing as DATI’s shares are showing signs of high buying potential and growth, angel investors are more likely to get the most out of their initial investments in private startups that are on the DATI platform. DATI’s equity also gives investors diversification; making them a part of those tech startups in DATI’s portfolio that have shown signs of becoming a bigger entity in the future.
The growing number of startups is causing quite the competition for accelerator applicants. Seeing as the competition is fierce, getting accommodated by top accelerators grow less likely. Luckily, innovators such as DATI are there to supplement startups with the financial support they need to kickstart an enterprise.