Startup accelerators usually rely on major companies or financial institutions to sponsor their everyday operations. While this traditional business model may work out for a certain period of time, it is not sustainable in the long run. Sooner or later, a startup will join the accelerator and offer a product that is in direct competition with the companies sponsoring the operations. All of a sudden, there is a major decision to be made, which is where decentralized solutions can play an important role.
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Startup Accelerators: Crowdfunding and Third-Party Investors vs. Sponsorships
For a brand new startup accelerator, there is no easier way to get up and running than by securing a few major sponsorship deals. Especially when those sponsorships belong to large players in the telecom or financial ecosystems, such as a mobile provider or a financial institution.
It is also in the best interest of the people providing the sponsorship that these startup accelerators are successful, as they can bring a lot of potentially interesting projects to the table. The main goal of an accelerator is to find interesting technological innovations and guide aspiring entrepreneurs in running successful businesses.
Financing the daily operations of a startup accelerator costs quite a bit of money. The premises needs to be rented, staff needs to be paid, and basic costs such as electricity and water need to be covered. It can take quite some time until a startup accelerator becomes somewhat self-sustainable, or even profitable, all the while sponsorships are renewed every year.
But there is a downside to this seemingly easy lifestyle for startup accelerators, as these sponsorships can stifle innovative projects. Any project that is in direct competition with the services offered by sponsors could get shot down in the early stages, even if its business model is viable. Those who have the money are in control of the accelerator’s future, and sponsors can easily pull the plug on these deals whenever they see fit.
As more accelerators realize they are in a very precarious position, the journey to find alternative means of funding will begin. Crowdfunding has proven to be quite a popular solution for French startup accelerator Numa, as they recently managed to raise a total of $1.1 million USD.
Crowdfunding isn’t the only option; crowdfunding campaigns can be either a big hit or a big miss. Selling company equity to third-party investors is another viable alternative to securing sponsorship deals. Startup accelerators have become hot commodities in recent years, as there is a huge demand for technological innovations across all sectors, especially the financial ecosystem.
Bitcoin Could Play A Major Role in the [Near] Future
While startup accelerators look for alternative ways to secure funding, one option gets overlooked by most. Bitcoin, a decentralized peer-to-peer digital currency, lends itself perfectly to providing a way to fund operations in a non-traditional way.
By resorting to crowdfunding platforms, which are always centralized in the traditional ecosystem, companies still rely on someone else to hold their funds for as long as the campaign runs. On the other hand, if a startup accelerator — or any other company — decides to raise funds in Bitcoin directly, there would be no need for third-party fund control.
Many companies will not see the benefit in using Bitcoin as an alternative way of securing funds, as mainstream adoption will take years to achieve. However, Bitcoin payments can be sent anywhere, at any given time, and it’s virtually free, which never hurts. Furthermore, startup accelerators attract bright minds, which may be using either Bitcoin or blockchain technology in their own projects already.
Additionally, Bitcoin allows anyone in the world to become an investor in any type of company accepting the virtual currency as a payment method. Doing so would be beneficial to the company, as their shareholders would be decentralized and spread out all over the world. In fact, one could go as far as saying this will immediately help establish a global presence, which is very important to startup accelerators.
What are your thoughts on using Bitcoin as a way to secure funding for companies? Let us know in the comments below!
Images courtesy of Numa, Shutterstock, Delano