By Angus Loten Matt Harrigan recently bolted legs onto dozens of makeshift worktables. Within two weeks, the 15,000-square-foot space at a sprawling midtown office next to Grand Central Terminal in New York City will host 18 tech startups in a year-long program that includes advice from seasoned entrepreneurs and others on business strategies, raising capital, connecting with investors, and protecting intellectual property.The goal, according to Mr. Harrigan of Grand Central Tech, a new so-called startup accelerator program, is to turn the risky, fledgling ventures into fast-growing, moneymaking companies.Competition among startup accelerator programs is intensifying as a flood of new players enter the field, including real-estate firm Milstein Properties, sponsor of Grand Central Tech, and more recently, even the U.S. Small Business Administration. Today there are an estimated 300 to 2,000 accelerator and incubator programs world-wide.Typically, such programs allow early-stage "seed" investors to spread their capital around and make bets on the companies that seem most likely to succeed down the road, either by going public or being acquired by a large competitor.Most follow a standard model: Select about a dozen or so promising startups a year; give each $10,000 to $25,000 in seed capital in exchange for a stake of 5% to 8%, usually in the form of equity; bring the startups together for mentoring over the course of an on-site multiweek program; host a demo day whereby they pitch themselves to venture capitalists and others.The accelerator boom follows the high-profile success of Y Combinator, a Silicon Valley, Calif., program that started in 2005, and whose "graduates" include Airbnb and Dropbox, both with multibillion-dollar valuations. The program has funded more than 500 startups since inception. Susan Cohen, a University of Richmond researcher who tracks accelerators, says the surge in the number of programs is partly the result of technology, which is making it easier and cheaper than ever to launch a business.Now, some of the programs are vying for participants by offering entrepreneurs free office space, professional services—such as access to lawyers, marketers or other officials from high-profile firms—or other incentives to sign up, including waiving the typical equity stake. Others are putting their training and mentoring services online, making them available to founders who aren't ready to commit to a multiweek, on-site program.For founders, "at the end of the day, it's about getting access to mentors or an existing ecosystem that's going to give your startup an advantage over others," says Aziz Gilani, director of the Mercury Fund, a Houston-based venture-capital firm. The firm invests in early-stage companies, most of which went through accelerator or university-based programs.Overall, only about 4% of startups that have participated in an accelerator program since at least 2005 were sold or had an initial public offering that brought their investors a return, according to a recent study by Mrs. Cohen and Yael Hochberg, a researcher at the Massachusetts Institute of Technology.Some programs outside of traditional hubs like Silicon Valley, New York or Boston, lack the access to high-profile mentors or investors needed to attract viable startups—with critics likening them to "puppy mills" that offer little value for entrepreneurs. Many new programs have failed to generate enough buzz, or capital, to stay afloat.The cost of launching an accelerator varies from roughly $250,000 to $750,000 per class, depending on the size and the amount of seed capital provided to each startup. Common sources of funding include angel investors, venture funds, corporations, governments and universities—or the founders' own savings. Some programs charge participating startups "training fees" or seek corporate sponsorships to generate extra revenue.Just 18% of the 25 accelerator programs surveyed in June 2013 by one early-stage investing group, Village Capital and Aspen Network of Development Entrepreneurs, said they had "stable and secure" sources of income. The rest said they were "strapped for cash" and relied on outside funding, the survey found. Angela Benton, who started NewMe, an accelerator program in San Francisco, in 2011, says not all startup founders can "drop everything and move to Silicon Valley for 12 weeks," because some have other obligations like work or family. Thus, her program last year began experimenting with charging fees for a series of online training sessions, which budding entrepreneurs can take at their own pace from any location.By offering online services, the program is able to reach more entrepreneurs, across the U.S. and globally, boosting revenue this year by 35%, she says. So far, of the more than 200 startups that have taken the program, 71% are still active and NewMe's equity portfolio of 39 startups have raised nearly $17 million in capital.Last month, the federal government announced a $2.5 million plan to award $50,000 apiece to about 50 accelerator programs to help finance operations. The goal is to support programs outside of startup hubs like San Francisco or New York, or that target women and minority entrepreneurs."It's meant to help pay for things like tables and chairs and Wi-Fi connections, all the everyday things you need to run an accelerator," says Kim Peyser, a special adviser in the innovation office of the Small Business Administration, the agency running the program.Critics say the plan is likely to divert funding from the agency's long-standing services, such as Small Business Development Centers and SCORE, which already provide training and mentoring to entrepreneurs. At a House Small Business Committee hearing in April, New York Democratic Rep. Nydia Velasquez questioned the need for government funding in an industry that has attracted billions of dollars in private-sector investments. Ms. Peyser says no funds are being diverted from existing SBA programs, and that the program seeks to fill gaps in underserved markets.Grand Central Tech doesn't plan to take an equity stake in its startups, hoping instead to turn them into rent-paying tenants of Milstein Properties, which is providing the first year of workspace for free.From April to May, it received nearly 500 applications for just 18 spots, including startups in financial tech, clean tech, telecommunications and other industries. In addition to workspace, the program also pairs startups with recent graduates from select New York City high schools to work as technology and marketing interns, with a chance to join new companies on the ground floor.But Mr. Harrigan acknowledges he hasn't yet figured out how the new program will "incentivize companies to stick around" to become rent-paying tenants in its midtown space, once occupied by Facebook, after that first rent-free year. Write to Angus Loten at angus.loten@wsj.com