accelerator

Expert Tips on How to Get Into an Accelerator

accelerator

What You Need to Know About Getting Into an Accelerator

Spending a couple of months in an accelerator can be an excellent way for a fledgling startup to make serious headway and begin to consistently grow. Not only do the investors who head accelerators provide access to funding, mentoring and valuable business connections, these programs are located within shared workspaces where founders can network and form long-term relationships with other smart entrepreneurs. There’s one caveat: Some of the best accelerators are tough to get into.

Take some advice on how to do it from Jason van den Brand,co-founder and CEO of online mortgage refinancing startup Lenda, which graduated from one of the planet’s hottest accelerators, Silicon Valley-based 500 Startups last year. Since then the company raised its first round of funding, has been growing 40 percent month over month since December and recently passed the $40 million mark in loans financed through the platform. Here’s how he says you can improve your chances for getting into a hot accelerator, as well as what you need to do if you succeed.

1. Make sure your business idea is a big one.

The bigger the better. Lenda, for example, is attacking a $10 trillion vertical-the kind of number which definitely will turn an investor’s head. “Having that kind of market size behind your idea is really, really helpful, versus having an idea on the back of a napkin,” he says.

2. Have a minimum viable product (MVP) in place.

You need a product that actually works. While it will never be perfect and you’ll always be iterating, what you want to grow in an accelerator should be something customers are touching and giving you feedback about. “You’re out there talking to your customers, trying to find out how to make that product better, and trying to find ultimate product-market fit,” he says.

3. Execute to the point where you’re getting traction.

You prove it with numbers. How many customers have you worked with? How many people are visiting your site? What’s your revenue? Are your numbers growing month over month? “‘Month over month’ is the big hairy metric that all of these incubators, accelerators and VCs are looking for, so the higher that percentage of growth the better,” he says.

4. Build a team.

While exceptions certainly exist, it’s rare to see a solo founder going into an accelerator. At a minimum you’ll need someone on the team who is a domain expert and another with strong technical skills. And it has to be a full-time gig for everyone involved. “You can’t be part-time going into it, so if you have another job you’re going to have to quit,” he says. “If you have multiple ideas and you’re not sure which one to go with, you’re going to have to pick and decide and work on one.”

5. Network heavily.

500 Startups states right on its website that a positive referral from mentors and founders who have already gone through the program is the best way to get noticed. It’s going to be the same thing with any other accelerator out there.

6. Nail your interview.

You have applied to an accelerator and have been offered the opportunity to pitch. The best way to sell your idea is to know your business inside out, including your vision, roadmap and every kind of metric you may be asked about. “How many people have visited your site? What are the conversions through each step of the funnel? What’s the cost to acquire a customer if you are using any kind of paid channels? What is an estimate of the lifetime value of your customer?” he suggests asking yourself. “You need to do a lot of the heavy lifting before you apply.”

7. Once accepted, make friends within the accelerator.

The other founders and team members you will meet are incredibly bright people who possess a wealth of information and experience. Plus, these people understand the difficult and often lonely road of entrepreneurship better than anyone else.

8. Be honest with yourself and everyone else.

When you tell your mentors everything about your business-even what’s going wrong-they can help you fix it.

9. Prioritize growth.

You want more users and revenue every month. When your month-over-month numbers are high you’re in a better position to offer excellent theatre during your demo day at the end of the program.

10. Close your fundraising round as soon as possible.

Van den Brand suggests allotting six months to complete your fundraising, but aim to do it in the first month. “Be ultra-efficient with your time and batch meetings together,” he says. “Start at 9 a.m., finish at 6 p.m. and talk to six people in the same day. The faster you fundraise, the faster you can get back to building and growing.”

11. Transition the CEO role.

Taking money from investors brings with it a huge fiduciary responsibility. It sounds counterintuitive, but at this point you need less hands-on time in the business and more time finding the top talent who can help you deliver.

12. Keep growing.

This is your final-and unending-responsibility. “You have keep the business growing so you can get to your next round, which will be sooner than you think,” he says. “Time flies when you’re building your own company. Those things what you must to know how to get into an accelerator.

Business Incubator

Is Joining a Business Incubator or Accelerator Always a Good Thing?

Business Incubator

Subtitled: Many Concepts  of Incubators  and  Accelerators  

The  research  methodology  section  describes  the  research steps,  the  sources  of empirical  data and  the  type  of data  analysis  to  be  performed.  The  Results  section summarizes some of the negative experiences of entre-preneurs  who  have  been  part  of  business  incubation programs and provides some reflections about the dif-ferences in these experiences  in incubator-like and ac-celerator-like  environments.  

Finally,  the  Conclusion provides  some final  reflections and  summarizes some of  the most  typical  downsides of  being  part of  an  in-cubator or accelerator. Key Insights from the LiteratureAccording  to  Gunter  (2012),  startups  tend  to  be  the most  rapid  job  creators.  Either  startups  move  up  by rapidly expanding their innovation to become economically successful, or  they  rapidly  go  out  of  business. 

Very  often,  startups  develop  radically  innovative products  and,  eventually,  disrupt  existing  markets. However,  startups  who  seek  to  do  things  differently face  several  challenges  and  uncertainties  associated with  the  shaping of  a viable  business model,  reaching out  to  early  buyers,  setting  up  durable  partnerships and  sustainable  operations,  etc.  

To  deal  with  these challenges  and  uncertainties,  startups  usually  benefit from all available resources including  existing  regional and national business incubation programs. Incubation vs accelerators In order  to establish  a successful  business, entrepren-eurs  are  often  looking  for  business  programs  that could help the growth  of their business. In fact, incubators and accelerators are meant to  boost  the success-ful  development  of  newly  created  firms by  increasing the likelihood  of their  survival and growth.  Incubators and accelerators should  enable a  smooth start  and fu-ture  growth  for  startups. 

 However, many  concepts  of incubators  and  accelerators  have  been  put  forward, which  sometimes  confuses  both  scholars  and  practi-tioners. The  original  concept  of  an  incubator  has  changed since the first private incubator was established in New York  in  1959  (Hausberg  &  Korreck, 2018).  Since  then, many  different  forms  of  entrepreneurship  support have emerged, one of which is the accelerator. The first seed accelerator was  Y Combinator in 2005, which  was followed  by TechStars  in  2006. Many  others  have fol-lowed  their  lead, but  Y Combinator  and  TechStars re-main two of the top accelerators in the world today. Such programs are now commonplace, but there  is  still confusion regarding  the  terms incubator  and accelerat-or.  

For  example,  many  startup  programs  that  describe themselves using  the same  term do not  share common characteristics. Thus, in order to make  a  distinction between  these  two terms, it is necessary to answer the following questions:• What does an incubator or accelerator offer?• Who is an incubator or accelerator targeting? Characteristics of an incubatorThe goal of incubators can differ depending on the type. 

There  is,  therefore,  a  distinction  between  the  classic business incubator and a typical accelerator. “Accelerat-ors  usually  are  fixed-term,  cohort-based  programs providing  education,  monitoring,  and  mentoring  to start-up  teams  (usually  not  single  entrepreneurs)  and connecting them with  experienced entrepreneurs,  ven-ture  capitalists,  angel  investors  and  corporate  execut-ives  and  preparing  them  for  public  pitch  events  in which  graduates  pitch  to  potential  investors”  (Haus-berg & Korreck, 2018).

The risks associated with selecting and joining an incub-ator or acceleratorA critical assessment of  the effectiveness of an incubat-or  or accelerator can  guide entrepreneurs  to make  the right  decisions  about  engaging  with  specific  business support  programs.  Many  entrepreneurs  are  novices who  lack competencies, working  capital, and  potential for  funding.  Entrepreneurs  make  decisions  based  on what  they  perceive,  and  startups  often want  to  be ac-cepted into a well-established program without consid-ering  if  it  is  the  right  program  to  be  in.  According  to Bliemel  and  co-authors  (2016),  entrepreneurs  usually apply  to  join  an  accelerator  because  they  need  seed funding,  incubation  services,  and  partnership  net-works. 

They emphasized that, for example, when entre-preneurs  are  only  seeking  mentorship,  an  accelerator program  could be  detrimental to  them since  there are many  risks  associated  with  an  accelerator.  Miller  & Bound (2011) articulated several criticisms of accelerat-or models:•  After graduating  an accelerator,  startups are  still  fra-gile and in need of support.• The equity taken  by accelerators becomes problemat-ic for further funding. Startups fear “Rich guys launch-ing  ‘startup  accelerators’  so  they  can  rip  off  new start-up founders” (Miller & Bound, 2011).• Because of the increasing number of  accelerators and their  tendency to  invest  in  early-stage  firms,  B-grade companies will not receive investment.• “If  accelerators  continue to  grow and start producing thousands of small  companies, we can expect to  see a bottleneck  developing and  in  the  event  of  a  crash in confidence in the sector” (Miller & Bound, 2011).

•  Accelerators  will  become  “startup  schools”  who  will encourage  learning  through  educational  returns rather than building real businesses.

 •  Accelerators build small  companies that  do not  have quite global  ambitions. These  are  companies that  are building something that will become a feature of a lar-ger service, rather than aiming to become a large com-pany in its own right.

•  Accelerators are  making  entrepreneurship so  access-ible that they start draining talent from larger techno-logy firms. Yu  (2015)  argues  that  founders  with  promising  ideas avoid joining  accelerators and instead  choose different ways  of progressing.  For  most of  them,  an accelerator without  a  well-established  value  ecosystem  and  net-work  is worthless. On  the other  hand, the  best startup exit  for  an  accelerator  or  for-profit  incubator  comes when the startup is acquired. In this sense, an accelerat-or is just another type of incubator, whose goal is to in-crease  the  startups’  survival  chances  (Hausberg  & Korreck,  2018).  

But  there remains  a  lot  of  definitional uncertainty.  As  Mian  and  co-authors  (2016)  emphas-ized,  the  definition  of  accelerators  cannot  be  general-ized due to idiosyncrasies  in their  relations  to political, economic, social, and geographic conditions. The summary of the risks associated with the possibility of  startups  joining  business  incubation  programs demonstrates the  need for  more  systematic studies  fo-cusing  on  the potential  downsides of business  incuba-tion  practices.  The  next  section  describes  the methodology  adopted  to  answer  our  initial  research question,  starting with  the hypothesis  that it  is not  al-ways beneficial for new ventures to join business incub-ation programs. Research MethodologyFor this study, we adopted an explorative qualitative re-search  approach  using  multiple  semi-structured  inter-views  with  startup  founders,  complemented  by informal  discussions  with serial  entrepreneurs. 

We  de-signed  the questions  around  issues  related  to some  of the  negative  experiences  of going  through  specific  in-cubation/acceleration  programs and  how  such experi-ences  affected  the  future  of  specific  ventures. 

Business Incubation

The Importance of Knowing Business Incubators

Business Incubation

Subtitle: What is the Importance of Business Incubation?

Business Incubation is the name given to the process, wherein an individual or an organization supports the establishment and growth of a start-up. Those supporting the start-up or new companies are called business incubators

These business incubators see the growth potential and weigh the opportunity before supporting or funneling funds into any start-up. The selection of a start-up involves a high level of research before any decision is taken to support or fund a start-up. In a nutshell, we can say the goal of incubation is to increase the success chances of business.

Over the years, experts have defined Business Incubation in their own way. The underlying concept, however, remains the same. According to Sherman and Chappel, a business incubator is an “economic development tool primarily designed to help create and new businesses in a community.” Further, Sherman and Chappel note that the business incubator support emerging businesses with several services, such as assistance in building management teams, developing business and marketing plans, funds, professional services, shared equipment and more.

Importance of Business Incubation

There is no dearth of start-ups that work on a brilliant idea with a huge scope of scaling. However, these companies have little knowledge about management, and therefore, burn cash rapidly. Business incubators help the start-ups to manage finances and ensure proper utilization of the money. Managing a business at a very local level play a significant role in making the foundation strong and scale it. Business incubators essentially perform the same function.

There are various business incubators that target businesses that want to establish themselves formally in the market. Such businesses with great growth potential might require various types of support such as planning, training and development, research support and so on.

Stages of Business Incubation

The whole process of business incubation is broadly divided into three categories:

  • Physical Facility Support

This refers to the incubation service provided within the physical facility.

  • Networking Facilities

After the physical facility, business incubators help the start-up with networking facilities so as to grow the business.

  • Support Services

Once the business is up and running, the incubators offer various support services to the businesses in order to run the business smoothly.

Incubators – Who are They?

Incubators are usually a partnership or collaboration between one more pro-business organization. These organizations can be:

  • Economic development organizations
  • Government entities
  • Local colleges and universities
  • For-profit ventures
  • Trade associations
  • Services Offered by Business Incubators

Start-ups usually have a rich idea but lack the resources to execute it. Thus, they require business incubators to perform significant roles or fill the gap. Following are the most common services offered by the business incubators:

  • Help a start-up to start basic operations and financial management.
  • They offer marketing and PR assistance to new companies to set up a brand name.
  • Business incubators have a strong network of influential people, and therefore, they can connect the business with the same to grow.
  • Incubators also provide assistance and resources for conducting market research.
  • They also help the start-ups in sorting their accounting books.
  • Incubators bring credibility to the company. This helps the company to get loans and credit facilities from financial institutions.

Often the start-ups do not know how to create an effective presentation to impress angel investors, venture capital and other investors. Business incubators, with plenty of experience behind them, help these companies with the presentations as well.

Business incubators also act as mentors and advisors and assist the start-ups in all sorts of business-related issues.

Types of Business Incubator

Majorly there are four types of incubators prevailing in the market today. These are:

  1. Corporate Incubators

Objective – to enhance the entrepreneurial spirit and help the start-up to keep up with others in the industry

Targets – usually target internal and external projects related to the activity of the company

Challenges – conflicts between the management regarding the objectives and management-related decisions.

  1. Private Investors’ Incubators

Objective – assist the potential business model and then reap benefits by selling the shares.

Targets – technology-intensive start-ups.

Challenges – quality and durability of the project.

  1. Academic Incubators

Objective – offering new sources of finance, supporting the entrepreneurial spirit and civic responsibility.

Targets – external projects and the projects internal to the institution before the creation of a company.

  1. Local Economic Development Incubators

Objective – economic development, supporting SMEs and specific groups for the overall upliftment of the society.

Targets – small, handicraft, locally sourced business companies.

Challenges – conflicts, governance risk, management quality, red-tapism, long hours of negotiation.

There are other types of incubators as well, including Seed Accelerator (focusing on early startups), Public/Social Incubator (focusing on the public good), Kitchen Incubator (focusing on the food industry), Medical Incubator (focusing on medical devices & biomaterials) and Virtual Business Incubators (online business incubators).

Whether you’re thinking about starting your own business or need to reignite that fire, you’re probably searching for the right advice. You need advice that you are likely to be able to actually incorporate into your schedule.

Get started on the right foot.

Before getting too far ahead of yourself, make sure that you start your small business on the right foot. It won’t guarantee that your business will thrive, but it will reduce the chances of it failing. So, how exactly can you get your business started the right way?

  • Be passionate about what you do. This is going to keep you pushing forward during any rough patches.
  • Start your business while you still have a full-time job so you’ll have money to survive until your business takes off. Set aside some cash so that you don’t have to borrow as much.
  • Don’t go it alone. Entrepreneurs have this mindset that they have to do everything on their own. That’s not the case. You’re going to need support from your friends and family, and advice from mentors.
  • Build traction. Start building a customer base before officially launching.
  • Write your business plan. Your business plan is going to guide you throughout the entire life of your business.
  • Do your homework. Conduct market research to better understand your industry and target audience. Become an expert on your industry, products and services.
  • Bring in the pros. For example, if you’re not an accountant, hire a CPA to handle this area of your business. Don’t waste dollars trying to save pennies doing jobs you aren’t qualified for.
  • Get the money lined up. Start looking for ways to fund your business, such as through peer-to-peer lenders or investors, before you’re in a real cash crunch.
  • Become a professional. Start by getting business cards, a business phone number and an email address. Always treat people in a courteous and professional manner.
  • Get your legal and tax issues in order. You’ll save yourself a ton of time, money and headaches down the road if you get your legal and tax responsibilities right from the get-go. Those things the most importance of knowing business incubators.

Business Incubators Programs Have Different Approches

Subtitle: How Qualified The Program Managers are in Selecting The Right Startups at the Right Stage

Business incubation programs have different approaches to the selection of startup clients. The success or failure of a startup in a business incubation program depends on how qualified the program managers are in selecting the right startups at the right stage. Four out of the eight startups mentioned that their business incubation programs did not perform formal due diligence because of two main reasons: 

They were newly established or the program managers simply believed that the product was in line with the program’s focus and competencies. None of those four startups received feedback or were evaluated by the program. It could be assumed, therefore, that incubation programs acted in their own self-interest when attracting new tenants and raising public awareness of their programs. This is especially applicable to university-based business incubation programs, which are more supportive and more inclusive in nature. SE4, who was co-founder of an incubation program, pointed out that demo days are only for community, to show that the program is still operating. 

Overall, entrepreneurs should be conscious that incubation programs are not always necessarily acting in the best interest of startups. Moreover, an incubation program’s admission process should be seen as an indicator of how seriously managers are taking a startup into consideration. Without due diligence on by both the programs and the startups, startups are at risk of becoming part of a program that is not necessarily valuable to them.

Services and offerings: General workshops, courses, and lectures about entrepreneurship were not found to be valuable

One out of the eight startups mentioned that general workshops and lectures about entrepreneurship were not found to be valuable. Startup B emphasized that it was a waste of time to participate in general workshops when the company needed financial resources to develop a minimum viable product (MVP). Without a functional prototype, startup B was unable to demonstrate their proof-of-concept. Despite spending one year in a university-based incubation program, startup B has not succeeded in developing a functional prototype. Thus, startups who are involved in the program can spend a lot of time working on secondary tasks, instead of focusing on primary ones. According to SE3, business incubation programs “keep startups busy with stuff which they don’t really need to do like presentations, instead of helping them with securing first customers.”

Services and offerings: Startups received low commitment from program mentors and advisors

Four out of the eight startups emphasized that they received low commitment from program mentors and advisors. Startup F gave an example in which the lawyer of their incubation program suggested not to file a patent application in China despite the company’s plans to expand globally and build a pilot plant in Hong Kong. Startup E has not received any support from mentors and advisors and wished there was someone to keep them accountable. Startup D, as with start-up E, has been left on its own. Startup H failed to leverage a sound marketing strategy and expected advisors to help them earlier in the process. SE2, who has also passed through a university-based business incubation program, indicated that some of the mentors were professors and a variety of mentors would have been more appropriate. SE4 mentioned that some entrepreneurs do not get appropriate help from incubation programs because that help is untargeted, as service providers are not interested in startup results.

Services and offerings: The incubation program did not meet the company’s initial expectations

Business incubation programs promise startups a variety of services. However, according to SE1, the quality of these services, and even their availability, might be in doubt. Such a situation happened to startup D and startup B. Startup D complained that the program managers promised to help with further product development, but their company never subsequently received such help. Startup B was totally disappointed with their program, as it provided only physical space and general workshops while the company expected to get help with acceleration, mentoring, legal advice, investors, and networking. Startup B was even willing to pay for services if the program was able to provide what they needed. Accordingly, startups should make sure in advance that business incubation programs will provide what they promised and what was expected from them based on the initial formal or informal agreements.

Services and offerings: Tangible services such as access to manufacturing capabilities were not provided or were limited

One of the reasons why startups join a business incubation program is access to office space. However, other tangible services such as manufacturing and prototyping capabilities are no less important. Startup F joined a program because of the potential access to prototyping labs. They emphasized that renting a lab can cost a fortune. Startup F developed a kit to test marijuana oils, but because they did not have access to a workshop, it became impossible to produce the kits. Startup A emphasized that existing manufacturing firms require a continuous production supply and are not interested in signing contracts with startups. In addition, startup A was not allowed to use the resources of the university incubation program for commercial purposes. Thus, it could not achieve a competitive advantage based on early prototyping. Startup C also noticed that startups who have physical products face difficulties in getting into contact with potential manufacturers. Startup G wished that the program facilities had a workshop, where they could test their product.

Network: Startups did not efficiently use the office space provided by the incubation program

The purpose of startups sharing the same office space is the opportunity to build relationships with peers. Startup H emphasized that sharing an environment with people who are going through the same challenges is very valuable. In fact, startup H established a partnership with another startup that was part of their incubation space – something that would not have been possible if they were not using the same physical space. In addition, startup H mentioned that, at a certain moment of time, the attendance of startup teams in the office space dropped down significantly, which reduced opportunities for collaboration. Startup B felt frustrated that only 2 or 3 startups out of 15 used the office space on a regular basis. Startup E also noticed that attendance of the startup teams diminished over time. After all, the entrepreneurs themselves started to question if there was a difference between using the incubation office space and working at home.

Network: The incubation program’s network was not aligned to the startup’s product

As was emphasized in the literature review, incubation programs provide more generic network resources and offer less idiosyncratic network resources, because it is not practical for a program to even try to address each potential startup’s every need. Accordingly, three out of the eight startups who joined a more general incubation program (i.e., with no specific sector of focus) stated that the program cannot help them with connections to strategic partners. Startup F needed access to pharmaceutical and chemical manufacturing industries in order to secure access to a valuable supply chain. Since the program network was not in line with their product, the startup had to build its own network. Startup A needed access to manufacturers and distributors in order to start commercial production. Since the incubation program did not provide the necessary connections, startup A considered finding a business angel with the right competencies and knowledge in the field. Startup D needed access to the automation industry in order to test a product and meet potential customers. However, the incubation program was more focused on the healthcare industry than automation. Startup D spent 10 months in an incubation space without any luck establishing the necessary partnerships in order to commercialize the product or even test it at a customer’s site. According to Mas-Verdú and co-authors (2015), business incubation environments are insufficient on their own and have to be aligned with other businesses characteristics such as technology, size (number of employees), and sector. In general, generic network resources are valuable only for those startups that do not know how to pursue their business idea. Startups who are looking for strategic partners in order to commercialize their product should join sector-based incubation programs.

Network: Startups were unaware of the business incubation program’s ecosystem

Sa and co-authors (2012) stressed that entrepreneurs cannot fully benefit from an incubator’s resources when those resources are not well coordinated. Two out of the eight startups mentioned that they were unaware of the ecosystem of the business incubation program. Both startups were part of a university-based program. Startup F found out about some of the existing resources, but only by accident. Meanwhile, startup E mentioned that the services provided by the program were not very well advertised. Startups who were unaware of the existing program resources started looking for resources outside of the incubation environment, which is a time-consuming process. Therefore, business incubation programs must make sure that their startups are informed about available resources.

Financial resources: Business incubation programs did not provide direct or indirect access to investment

To cross the valley of death, startups can use the resources of the business incubation environment to secure initial funding. Startup D had a proof-of-concept and was ready for investors. However, none of the investors from the incubation program’s network were willing to invest in it. After a few unsuccessful attempts to find investors, the incubation program stopped trying to help with investment search despite earlier assurances from the incubation program managers that startup D would receive funding from their investor network. Startup B was not ready for initial funding but needed seed money in order to finalize their prototype. The rest of the interviewed startups either were not ready for investors or they succeeded in attracting investors by themselves. According to Rijnsoever and co-authors (2016), non-incubated startups who have access to the same investors raise as much funding as incubated startups. Accordingly, being part of a business incubation space does not necessarily mean that a startup will receive funding or be connected to potential investors.

Equity: Equity taken by the business incubation program made startups unattractive to potential investors

Different business incubation spaces operate under different business models. Most of them are looking to promote regional growth, while others are focusing on generating financial returns from equity. Startup D joined an incubation space with high hopes of securing investors, potential customers, and product development in exchange for 38% equity. The incubation program did not help with product development and customers, but it was ready to charge the startup for other services. Startup D did not use any of the services, because the services were not good enough and were not worth paying for. As it appears, the incubation program adopted a for-profit property development model to charge a fee for services offered. However, the startup did not receive any investment through the program. The program only provided office space and connections to investors. In fact, most of the startups in this program received an investment from other institutions operating in the region and the program managers only advised startup D to approach them directly. On the other hand, the funding institutions were running government-initiated incubation programs that filled the gap of financing when nobody wants to invest in early-stage startups. Those government-initiated programs seemed to provide better, free, or much cheaper, mentoring and consultancy for startups.

On the other hand, SE3, who was involved in a government-led incubation program, mentioned that the program focused on taking startups at the point where they are ready for investment. SE3’s company never needed an investment because they used bootstrapping. According to SE3, the best exit strategy for incubation programs is when their client startups are acquired.

IP Protection: Participation in a business incubation program puts intellectual property at risk

Participating in an incubation program can put a startup’s intellectual property (IP) at risk because multiple entrepreneurs share office space, workshops, laboratories, and mentors. Startup F emphasized that their product and IP can be very easily exposed to third parties as everyone can access the incubation program lab and office facility. Since most incubation programs do not provide legal services and obtaining a patent is expensive, startups bear the risk of IP exposure. On the other hand, it is typically not the responsibility of the incubation program to protect their startup’s intellectual property.

Post-incubation: Following incubation, startups looked to join another business incubation program or sought business angels

Usually, startups go through several incubation programs to build or acquire necessary resources for their businesses. After spending some time at a university-based early stage incubation program in Ontario, Canada, startup E applied to join another one, because they were looking for more dedicated hands-on mentoring and business support focusing on growth. Startup B, in Denmark, applied to join a university-based incubator but the application was rejected because the program was for students only. As a result, startup B applied to a regional investment agency in order to receive funding. Startup A is considering finding a business angel who will help with distributors and manufacturers. Accordingly, when an incubation program provides idiosyncratic resources or limits access to complementary assets, startups start to look for those resources in other programs or try to find business angels. Therefore, startups should understand that graduation from an incubation program does not necessarily mean that they will be ready for the market or able to grow and scale-up.

Conclusion

This section summarizes the key insights gathered from our research and analysis. In addition, it focuses on results that can be used to improve an entrepreneur’s understanding of incubation programs. The analysis of the empirical observations resulted in the articulation of the following downsides of being part of a specific incubation program.

Equity dilution can lead a startup to bankruptcy. Startups who have diluted too much equity to an incubator or accelerator will struggle to convince investors to invest in them later. Every time a startup issues new shares, the existing shareholder’s equity decreases.

Startups can face low commitment from incubation program stakeholders such as business mentors, advisors, and external partners. External service providers are usually not interested in startups’ results.

Putting IP at risk. Startups who join an incubation program are risking exposing their product or idea to third parties that have similar access to the incubation facilities. Half of the interviewed incubation programs do not provide legal advice nor IP consultancy.

Young and inexperienced incubation programs do not do enough due diligence since, most often, their main goal is to fill spots and enhance their regional reputation.

Startups can be unaware of the business and innovation ecosystem of the incubation program. Some programs do not do a good job in advertising the expertise and knowledge of their networks. 

General workshops, lectures, and courses provided by incubation programs are time-consuming and not necessarily useful. Startups spend a lot of time working on secondary tasks instead of focusing on primary ones. For instance, an interviewed startup spent 12 months in an incubator and was not been able to build a functional prototype during that time period.

Incubation program networks may not align with a startup’s product. The majority of the incubation programs provided only general network resources.

Incubation programs do not usually provide seed money, investment, or connections to investors. In fact, being part of an incubation program does not guarantee any investment.

The collaboration opportunities significantly decrease when an incubation space is underutilized and only a few startups use the office facility.

Prior to joining an incubator or accelerator, startups should consider whether or not they would need specialized facilities/equipment. Most of the interviewed founders participated in incubation programs that did not have specialized facilities/equipment.

Startups may go through multiple incubation programs to acquire or build necessary resources. Therefore, startups who have not received necessary help or resources in a specific incubation program consider joining other programs or finding business angels with the right competencies for the startup’s context.

Finally, consider the differences between incubator-like and accelerator-like programs in the way they refer to startups that have used multiple incubation programs. The general tendency for startups using multiple incubation programs is to move from early-stage incubation to more dedicated acceleration programs. As a rule, university-based programs are focusing on early incubation offering young entrepreneurs the opportunity the experience of being an entrepreneur. In this sense, we should be careful when comparing the performance of incubators because their missions could be quite different. On the other hand, acceleration programs tend to focus on growth objectives and stronger investment exposure and opportunities. Even though early-stage incubators also claim to offer funding-related networking opportunities, their focus seems to be on the quality of the entrepreneurial experience and the validation of the viability of the emerging business opportunities.

In conclusion, it is not always a good thing for a startup to join an incubator or accelerator. Or, rather, there are multiple aspects of business incubation practices that could affect negatively early-stage companies, and founders of new ventures should be very careful when selecting a specific incubation program. The answer, of course, cannot be considered in black and white terms since the focus of the selection process should be on the interference of the multiple factors that could potentially affect the future of a startup in terms of operations, market potential, external funding, etc.

We believe that the analysis provided here will enhance the awareness of both researchers and practitioners about the potential negative impact of improperly selected incubation programs. It should enable executive managers of existing incubation programs to refine their startup selection process and better articulate the value propositions of their programs. At the same time, we should point out that our study is based on a limited number of cases. Future studies should build a broader empirical base by selecting a larger number of startups and more sophisticated methodologies, taking into account the distinction between the incubation programs, the stage, and the strategic goals of the new ventures.

Business Incubators: Pros and Cons

Subtitle: For Fledgling Businesses, joining a Business Incubator Can Be a Big Boost 

As you start your business, you might be dealing with limited funds, time or personnel, and you might be wondering how entrepreneurship really works. You might wish you had more resources, a mentor or more education to help you through the process of growing your business so the operation and the finances become more easily sustainable. 

If you’re ready to grow your business, but you’re not sure how to overcome these hurdles, then a business incubator might offer the resources you need to succeed. In this article, we’ll take a look at the benefits and downsides of business incubators so you can decide whether joining one is right for your business. But first, we’ll answer the question: what is a business incubator?

What is a Business Incubator?

An incubator is an organization designed to help startup businesses grow and succeed by providing free or low-cost workspace, mentorship, expertise, access to investors, and in some cases, working capital in the form of a loan. You’ll work around other entrepreneurial businesses, often with a similar focus as yours.

Joining an incubator is almost like joining a college program: You have to apply, be accepted, and then follow a schedule in order to meet benchmarks set by the incubator. You’ll also need to commit to a length of time to be a part of the incubator, typically one to two years.

Incubator Benefits

Based on the definition, you can already see some of the pros an incubator can provide to businesses to get a powerful start. Make sure to research potential incubators carefully to be sure they provide the following benefits:

-Your incubator should provide a free or low-cost workspace that allows you to reduce overhead while you grow.

-Look for an incubator that will give your business access to benefits that can help accelerate your business, including office space and services, mentorship, expertise, influence, and sometimes capital.

-Incubators may also offer business development programming such as workshops and panel discussions.

-Make sure investors trust the incubator to invest in the right startups and groom them into successful businesses. Joining this type of incubator will give you an advantage when seeking funding.

-Businesses in some incubators might have access to office must-haves like internet, administrative support, and production equipment. Office services vary from program to program.

-The structured environment and curriculum of an incubator can help a new business keep focus and grow in the right direction.

-Many incubators target specific industries-such as digital education, green technology, homeland security, fashion and food-and thus offer targeted resources and expertise. It’s important to make sure you have a clear understanding of what an incubator provides before applying.

Incubator Downsides

Not all incubators are equal; some provide more or better benefits than others. Here are some potential downsides:

-The application process can be rigorous and competitive. For most incubators, an applicant is required to submit a detailed business plan and disclose all business activities.

-Many incubators require a time commitment of around one to two years, plus adherence to the schedule set by the incubator, which can include many trainings and workshops. Yes, you will learn a lot, but you’ll also spend a fair amount of time doing it.

-For better or worse, an incubator is a professional environment. You can’t simply come and go as you please, and you’ll be expected to answer to someone other than yourself in regards to your progress. Think of an incubator like a boss who is invested in your success.

-As you can see, the benefits can be great for the right applicant. Make sure you are willing to dedicate yourself and your business to the program in order to reap the rewards.

How to Choose a Business Incubator

Choosing an incubator for your startup business is a big decision, especially if you’ll be giving up a hefty chunk of time and equity for its resources and expertise. Here is what you should look for in a business incubator before you choose a program:

  1. Incubator Perks

Research the incubator’s offerings to see if they match your needs. Learn what resources and services the company provides. Study the incubator’s mentors and advisers to determine if their expertise, skills, and networks match your business’s needs.

  1. Incubator Curriculum

Many incubators require rigorous training and have strict schedules. Assess the curriculum to make sure it teaches what you need to learn in order for your business to succeed. Make sure you can take it all on while still running daily operations.

  1. Incubator Track Record

How have similar businesses performed with the support of the incubator? If possible, contact alumni for their take on the experience. Most incubators list graduate companies on their websites.

  1. Incubator Cost

How much does it cost to use the workspace and the equipment? If applicable, what are the loan terms offered, or what percentage of equity will the incubator take? Make sure the cost fits with the sacrifice you’re willing to make.

  1. Incubator Location

As previously mentioned, joining an incubator is not unlike joining a college program. Because you’ll be going to class several times per week if not every day, you’ll need to be on campus–that is, in close proximity to the incubator. This may mean relocating to be closer to an incubator if you can’t find the right fit close enough to home.

startup accelerator indonesia

Launch Your Startup: 7 Essential Steps, Tips to Start

startup accelerator indonesia

Subtittle: Strategies to Start Your Start up

Everyone has ideas. Some of these ideas may be decent, while others are probably not so good. Even if your idea is great, there’s a big difference between having a great idea and creating a successful startup company.

Do you have what it takes to be an entrepreneur?

It will take hard work, dedication, money, some sleepless nights, and even some failure before you succeed. 71% of businesses fail within 10 years.

Once you get your company off the ground, you need to work just as hard to keep it going each year.

You can use this guide as your blueprint for launching your startup company.

1. Make a business plan

Having an idea is one thing, but having a legitimate business plan is another story.

In simple terms, a business plan is the written description of your company’s future.

You outline what you want to do and how you’re planning to do it.

Typically, these plans outline the first 3 to 5 years of your business strategy.

The business plan needs to be the first thing on your list because you’ll use it to help you with some of the remaining steps.

2. Secure appropriate funding

You’ll need adequate capital to get yourself off the ground. There’s no magic number that applies to all businesses.

The startup costs will obviously vary from industry to industry, so your company may require more or less funding depending on the situation.

For a small, part-time startup with no equipment, employee salaries, or overhead to worry about, it may only cost you less than $10,000.

Based on the graphic above, the vast majority of this money comes out of the entrepreneurs’ pockets.

The cost of doing business is much higher than people initially think.

Let’s circle back to our business plan for a minute.

All business plans contain a financial plan. This plan usually includes:

Balance sheet

Sales forecast

Profit and loss statement

Cash-flow statement

82% of businesses fail due to cash-flow problems.

You’ll use these financial statements to determine how much funding you need to raise in order to get started.

You may discover that the number is significantly higher than you originally anticipated.

3. Find investors.

Investors can be:

Friends

Family

Angel investors

Venture capitalists

Proceed carefully because you don’t want to start giving away significant equity in your company before you even get started.

The type of business you’re starting also influences the likelihood that angel investors and venture capitalists will be willing to give you funding.

If you find a potential investor, you need to know how to pitch your idea quickly and effectively.

You need to have your financial numbers memorized forwards and backward.

Refer to your business plan.

Make sure it’s presentable so you can give them a copy, but you also need to know how to successfully verbalize your startup strategy.

It’s imperative that your business plan has a proper executive summary.

Investors are busy and may not take the time to read through your entire plan if the executive summary doesn’t give them a reason to move forward.

Once you secure the appropriate funding, you can proceed to the next step of launching your startup company.

4. Surround yourself with the right people

You’re going to need some help while launching your startup company.

So where do you start?

Certain people often get overlooked when entrepreneurs are getting their business started.

Sure, you may realize that you’ll need some staff and a manager to help run your company. Is that it?

How many people do you need?

It depends on the industry.

Let’s take a look at an example from a study about the amount of employees for startup companies in the technology industry.

Based on this information, the vast majority of startup companies are small teams.

These numbers would be significantly different if you were starting a business in the restaurant industry.

You would need servers, a kitchen staff, bartenders, and managers.

5. Before you do anything, you need to register your business name.

Once your business gets registered, you’ll need to get a federal tax ID number, as well, from the IRS.

The IRS lets you submit your business information online to get your employer identification number (EIN).

You also need to consult with a:

Lawyer

Accountant

Financial advisor

Unless you’re an expert in law, finances, and accounting, these three people can help save your business some money in the long run.

They can explain the legal requirements and tax obligations based on how you structure your business.

Sole proprietorship

Partnership

Corporation

Limited liability company

While your lawyer, accountant, and financial advisors are not necessarily employees on your payroll, they are still important people to surround yourself with.

Don’t forget about insurance.

Shop around and find an insurance agent who can get you plenty of coverage at an affordable rate.

Now you can start hiring people within your organization.

6. Find a location and build a website

Your startup company needs a physical address and a web address.

Whether it’s offices, retail space, or a manufacturing location, you need to buy or lease a property to operate your business.

As you can see from the graph, leasing property for your business is significantly more expensive than buying.

With that said, it may not be realistic for all entrepreneurs to tie up the majority of their capital in real estate. You should strategize for this in your business plan.

Try to secure enough funding so that you can afford to buy property. It’s worth the investment and will save you money in the long run.

You also need to create a website. Don’t wait until the day your business officially launches to get your website off the ground. It’s never too early to start promoting your business.

If customers are searching online for a service in your industry, you want them to know that you exist, even if you’re not quite open for business yet.

You can even start generating some income through your website.

Once your website is up and running, you need to expand your digital presence.

Utilize social media platforms like:

Facebook

Twitter

Instagram

Snapchat

Your prospective customers are using these platforms, so you need to be on them, as well.

7. Become a marketing expert

If you’re not a marketing expert, you need to become one.

You might have the best product or service in the world, but if nobody knows about it, then your startup can’t succeed.

Learn how to use digital marketing techniques like:

Content marketing

Affiliate marketing

Email marketing

Search engine optimization (SEO)

Social media marketing (SMM)

Search engine marketing (SEM)

Pay-per-click advertising (PPC)

If you’re starting a small business in a local community, you can take advantage of some older and conventional methods such as:

Print advertising

Radio advertisements

Television

Billboards

While these methods can be productive, outbound marketing efforts are not as effective as they used to be.

As long as you’re doing these things, you’ll be able to fight through any obstacle your startup company faces in the future.

startup accelerator program

What Makes Startup Accelerator Programs Successful

startup accelerator program

Subtittle: Checklist for your startup to be ready for an accelerator program

Are you ready for the next big step in your startup , a journey that will change your life forever?

1. Trillion-dollar startup idea?

The bigger the idea the more likely you will get noticed in your application. You also need to make sure that you are able to explain your idea so that it is easy to understand.

95% of accelerators seek B2B startups, while only 78% of accelerators look for B2C startups.

2. MVP

Your product/service needs to be completed, but that doesn’t mean it has to be perfect. Launching a Minimum Viable Product shows how your idea can work in the real world, gives you time to get customer insights, and highlights the areas where you would want to improve your product/service when you apply to enroll for an accelerator programme.

68% of accelerator programmes accepted startups that already have a prototype in place.

3. Evidence

Are you growing as a business? Can you prove it? What is the likelihood of growth in your startup over the next 2 to 5 years? How many customers have you worked with? How many people are visiting your website? What’s your ROI? These are the things that you will need to provide when you’re filling in an accelerator application.

53% of accelerators accepted startups that already have some customers, even if some of those customers aren’t yet paying.

4. Your Team

You need employees. No one can run a startup on its own for long (#burnout!!). Your employees need to work full time or be willing to switch over to full time when being accepted into the accelerator.

18% of startups fail due to team problems such as a lack of domain knowledge, lack of marketing knowledge & plan, lack of technical knowledge, friction within the team, lack of motivation, and a lack of availability.

5. Network + Research

Do you have references from mentors and other founders who have gone through one of these programmes? Have you done your research on which accelerator will be the best fit for your startup?

“It’s OK to ask recruiters and hiring managers questions to see if their vision aligns with yours so you can run a successful business.” — Stephanie Wells, Formidable Forms

6. The Pitch

If you get accepted to go through to the interview for one of these programmes, you need to be ready with your pitch. You need to know your business inside out. This means you need to know the metrics, stats, the vision, and how to overcome potential obstacles (check Point 3 again).

“Most tech startup people are so in the trenches of their product that they forget how to talk high level about who the tech is for.” —John Murphy, eBike Generation

7. Accepted 

If you get accepted you are one of few. Take this opportunity to expand your network in the startup realm. In addition, make friends , being an entrepreneur isn’t always easy and not everyone understands that part of the startup world.

New research from the University of Georgia links startup accelerator success with a few key program elements, such as mentorship and open discussion among participating startup founders.

Recently published and forthcoming papers co-authored by Susan Cohen in Research Policy, Administrative Science Quarterly and Organization Science examined the variation among several accelerators.

Accelerators are fixed-term, cohort-based educational programs for startups. There are about 170 accelerators located across the country, including more than a dozen programs in Georgia.

“When I started studying accelerators for my dissertation in 2011, I was routinely asked whether accelerators were a fad and if they were going to last,” said Cohen, an assistant professor of management at the Terry College of Business and one of the first academics to study accelerators. “What we found is a few accelerator programs improved outcomes for the startups, so we compared the ones that had stronger results versus those that were less effective.”

In one paper Cohen found that, although many accelerators used mentorship as a cornerstone of their program, the key difference was how they spaced out those interactions. Some programs concentrated them upfront and prioritized meetings with both mentors and customers, which is a hallmark of the lean startup methodology. The more the entrepreneurs met with mentors, customers and various stakeholders, the more open they were to new ideas, Cohen said. They often joined the accelerator thinking they were ready to launch a product or scale delivery strategies, but the concentrated interactions helped them determine where they needed to change their plans.

“What they soon learned is they had the seed of an idea, and sometimes they had to pivot quite substantially to make the idea work,” she said. “Those interactions helped them to figure out both that they needed to learn and what they needed to learn.”

Second, the accelerators differed in privacy. Some fostered privacy and were concerned that the entrepreneurs might steal each other’s ideas, yet others forced entrepreneurs to pitch each other frequently and work in cramped, open spaces. The accelerators that encouraged transparency often worked better, and participants often helped each other with execution. Plus, their businesses often were less similar than they initially thought and were rarely actually competitors.

Third, standardized programs tended to perform better than programs that were tailored to fit each venture and each entrepreneur. Often, the entrepreneurs — and even accelerator directors — had weaknesses in certain business skills that they couldn’t recognize by themselves. A standard program helped them to cover common ground, broaden their knowledge and speak a similar language.

In terms of benefits, Cohen’s research team found that ventures that participated in some startup accelerators had better long-term outcomes securing funding, including venture capital and angel investments. They also received more online traffic and hired more employees. The effects were large in some accelerators, including up to 170% more funds. However, the results weren’t universal.

“I often caution entrepreneurs who ask me whether or not they should apply to an accelerator to be careful,” she said. “Do your due diligence in making sure it’s a program that will help your company achieve its goals.”

To help with this, Cohen and two partners produce the Seed Accelerator Rankings Project annually for entrepreneurs to evaluate accelerator programs. Since accelerators can’t always divulge information about their individual startups, these rankings help the programs to showcase their results and performance while still maintaining confidentiality for startups.

Based on her dissertation research, Cohen saw several organizational design elements emerge for the top startup accelerator programs. She found that accelerators with smaller cohorts tend to have stronger performance, and programs sponsored by investors or universities (rather than governments or corporations) raise more money. In addition, programs run by former entrepreneurs are correlated with lower valuations, versus those run by former investors or government employees, which draw higher valuations. Other factors, such as providing workspace, show mixed results and may not be as important to the accelerator’s design.

As the popularity of startup accelerators climbs in 2020, Cohen will continue to study what works and what doesn’t. She also wants to know how accelerators influence the career trajectories of entrepreneurs who participate.

“We know accelerators work for some ventures, but we’re wondering what their impact is on entrepreneurial careers,” she said. “We’re also looking at how these entrepreneurs build relationships with different types of investors, such as angel inventors, venture capitalists and corporate investment.”

Cohen studies accelerator programs with several colleagues. “The Design of Startup Accelerators” was co-authored by Daniel Fehder of the University of Southern California, Yael Hochberg of Rice University and Fiona Murray of the Massachusetts Institute of Technology. Cohen published the Administrative Science Quarterly and forthcoming Organization Science papers with her doctoral advisor Chris Bingham of the University of North Carolina and Benjamin Hallen of the University of Washington.

startup accelerator & incubator

What is a Startup Accelerator or Incubator Do to Help Startups Attain Success

startup accelerator & incubator

Subtitle: How Startups Attain Success with Accelerator or Incubator 

Are you ready to make your side hustle becomes your main hustle? Or maybe you’ve got an idea you just don’t quite have the details fleshed out. You may be considering an incubator or accelerator to help you get started. But what’s the difference?  And What is a Startup Accelerator or Incubator do to help startups attain success? 

Accelerators

Accelerators usually begin with a rigorous application process. Top accelerators like Techstars and Y Combinator are highly selective, accepting less than 2% of applicants into their programs.

Typically, the accepted companies have already demonstrated fast growth and a minimum viable product (MVP). They’re often given a small seed investment and paired with mentors from the accelerator’s vast network.

The goal of the accelerator is primarily networking, mentorship, and resource allocation to skyrocket the success of proven business ideas. A business’ time at an accelerator typically ends with a presentation sharing the growth and development they’ve achieved during their weeks or months in the program.

Things to Consider When Joining an Accelerator:

Is it the right time? Make sure you’re joining an accelerator at the right time. If you’re still searching for a co-founder or your first few employees, you may be a better fit for an incubator.

How fast or slow are you growing? If you’re a fast-growing company, an accelerator might be the right fit. If your growth plan is still developing, an incubator might be a better choice.

Will you relocate? Many accelerators require you to relocate for the few months you’re participating in their program.

Incubators

Some incubators select candidates through an application process while others only work with companies or entrepreneurs passed along from within their network of advisors. Some incubators are focused on specific verticals. For example, Monarq Incubator supports female-led startups through their programs.

Incubators also tend to focus on businesses or entrepreneurs from a certain geographic location — or require participants to relocate to their coworking space or local community for indefinite periods of time.

Participants spend their time at the incubator networking with other entrepreneurs, fleshing out their ideas, determining product-market fit, and creating a business plan. Intellectual property issues are also vetted and dealt with at this stage as well.

The incubator process usually lasts a few months — but is often open-ended — and ends with a pitch or demo day where the entrepreneur presents their business idea to the incubator community and/or investors.

Things to Consider When Joining an Incubator:

Do they have the right mentors? Make sure your incubator can offer specific and experienced guidance for your business or idea. The last thing you need is someone advising you on your shipping business idea who’s spent the last 30 years mentoring young restaurateurs.

Do you need funding now? If you’re looking for capital to grow your business, an accelerator might be a better fit. Incubators focus on preparing the entrepreneur or founder with the business model, plan, and mentorship necessary to confidently pitch their finished business plan to investors.

Can You Get By with a Coworking Space?

If funding, business savvy, and a proven business idea aren’t an issue for you, you might consider simply joining a coworking space. You’ll get the office space you need with built in networking opportunities and events. Some coworking spaces even help you outsource administrative tasks so you have more time to spend on the bigger tasks at hand.

Another benefit of joining a coworking space is that you don’t have to give away equity in your company. Incubator and accelerator mentors generally receive equity in exchange for their expertise. That’s not an issue with coworking spaces.

If you’re joining an incubator or accelerator, make sure you have clearly defined, actionable goals. And be honest about whether or not you can achieve those goals without joining an incubator or accelerator. The process for applying to and joining these programs is lengthy and arduous — and it’s time you could be spending getting your business off the ground without parting with equity.

-Incubators

An advantage of being a part of an incubator is that your startup business gets access to a wide range of financial capital alternatives. In addition, it also provides mentorship, networking, and expertise in your specific startup industry, as well as helps startups turn ideas into new businesses.

Sometimes these benefits can also be a disadvantage to incubators. Certain types of mentorships and networking with entrepreneurs may hinder the startup owner’s focus during the risky early stages of their startup and your idea might not always lift off.

Accelerators

On the other hand accelerators in general work extremely close with everyone involved in the startup, which is an advantage. Accelerators also match the partners and investors to fit with the chosen startup.

In accelerator programmes they also focus on the development of pilot projects for their startups to ensure growth and success. Accelerators try to provide a platform for the startups to grow fast while enrolled in the programme to increase the probability of receiving startup investment.

Y Combinator accepts about 1.5% to 3% of the applications it receives.

A disadvantage of accelerator programmes is that they are short-lived and won’t provide as much support as an incubator would over an extended period, however the short-term acceleration might produce better results in the long run. Another con is that these programs only accept a few startups every year and require equity in each startup they accept.

In the end, it depends on how developed your startup is and what type of support it will need to grow.

At a high level, startup accelerators and incubators are organizations that seek to help startups attain success. Startup accelerators tend to focus on providing startups with mentorship, advice, and resources to help the startups succeed, including a Demo Day, a day to focus the attention of the startup investor community on the startups through hosting a series of investments pitches from the startups to startup investors.

Accelerators tend to not offer dedicated office space to startups (and may encourage startups to find their own dedicated space), but may have a physical location for shared resources and accelerator events such as invited guest speaker talks and advising office hours. Incubators tend to offer dedicated office and development space to the startups for a set period of time.

Startup accelerators and incubators can get involved at all stages of a startup’s development, from idea stage to revenue-generating, late stage. However, most tend to focus on relatively early stage startups, as this is when companies can typically most benefit from outside help.

Startups are usually admitted in batches, with many incubators and accelerators offering 1-3 batches per year. Some focus on a specific industry, market, technology, stage, or other thesis, whereas others are more generalists. Most seek to run an application and screening process.

However, while a handful of accelerators and incubators have been very successful in helping startups attain success, being admitted to a startup accelerator or incubator is not a guarantee for success to a startup founder, and not a guarantee of a sound investment for a startup investment.

Accelerators Vs Incubators: How to Choose the Right One

Subtittle: What is a startup accelerator or incubator? Which One Better

Accelerators and incubators both offer entrepreneurs good opportunities early on. Founders get help to quickly grow their business and they often better their chances of attracting a top venture capital (VC) firm to invest in their startup at a later point. Still, the programs are different frameworks for startup success.

Let’s start by breaking down the goals of each of these types of programs. Accelerators “accelerate” growth of an existing company, while incubators “incubate” disruptive ideas with the hope of building out a business model and company. So, accelerators focus on scaling a business while incubators are often more focused on innovation.

While both types of programs were popularized in startup hubs like Silicon Valley, nowadays they can be found all over the world. Although most people associate these programs with tech startups, most of them accept companies from a wide variety of verticals.

Accelerators

One of the big differences between accelerators and incubators is in how the individual programs are structured. Accelerator programs usually have a set timeframe in which individual companies spend anywhere from a few weeks to a few months working with a group of mentors to build out their business and avoid problems along the way. Y Combinator, Techstars, and the Brandery are some of the most well-known accelerators.

Accelerators start with an application process, but the top programs are typically very selective. Y Combinator accepts about 2% of the applications it receives and Techstars usually has to fill its 10 spots from around 1,000 applications.

Early stage companies are typically given a small seed investment, and access to a large mentorship network, in exchange for a small amount of equity. The mentor network–typically composed of startup executives, venture capitalists, industry experts, and other outside investors–is often the biggest value for prospective companies.

The mentor networks aren’t small, either. TechStars, for example, has hundreds of mentors in its program.

Aaron Harris, a partner at Y Combinator, said he’s not sure that accelerators necessarily work as a whole, but Y Combinator’s success is due to the way it approached incentives.

“A lot of that success comes back to the alignment of incentives,” Harris said. “Good programs completely align all parties — at YC all the partners who advise the companies have a stake in their success. We also do as much as we can to limit distractions. We don’t schedule unnecessary meetings, don’t force them to work in a big loud co-working space, etc.”

At the end of an accelerator program, you’re likely to see all the startups from a particular cohort pitch at some sort of demonstration day (often shortened and referred to as a demo day) attended by investors and media. At this point, the business has hopefully been further developed and vetted.

“The goal of the accelerator is to help a startup do roughly two years of business building in just a few months,” said Mike Bott, general manager of the Brandery. “If you go through a good one, you’ll know at the end where your startup founding team and business stand.”

Incubators

Startup incubators begin with companies (or even single entrepreneurs) that may be earlier in the process and they do not operate on a set schedule. If an accelerator is a greenhouse for young plants to get the optimal conditions to grow, an incubator matches quality seeds with the best soil for sprouting and growth.

While there are some independent incubators, they can also be sponsored or run by VC firms, angel investors, government entities, and major corporations, among others. Some incubators have an application process, but others only work with companies and ideas that they come in contact with through trusted partners. A good example of an incubator is Idealab.

Depending on the sponsoring party, an incubator can be focused on a specific market or vertical. For example, an incubator sponsored by a hospital may only be looking for health technology startups.

In most cases, startups accepted into incubator programs relocate to a specific geographic area to work with other companies in the incubator. Within the incubator, a company will refine its idea, build out its business plan, work on product-market fit, identify intellectual property issues, and network in the startup ecosystem.

A typical incubator has shared space in a co-working environment, a month-to-month lease program, additional mentoring, and some connection to the local community.

Co-working is a big part of the incubator experience and has been split off as its own separate business offering around country, with co-working spaces charging rent for access to utilities. Some accelerators offer a co-working space, but most provide companies with private office space or let them find it on their own.

“If you need private space, most incubators are open seating, and this can be distracting for larger teams,” TechStars mentor Troy Henikoff said. “The economics are usually on a per-seat basis, which is great for the first few people, but at a certain point it may be less expensive to get your own office.”

Both incubators and accelerators offer a great opportunity to help young companies and ideas for startups get headed in the right direction, but it’s up to you where you need to start.e 

Accelerators and incubators both offer entrepreneurs good opportunities early on. Founders get help to quickly grow their business and they often better their chances of attracting a top venture capital (VC) firm to invest in their startup at a later point. Still, the programs are different frameworks for startup success.

Let’s start by breaking down the goals of each of these types of programs. Accelerators “accelerate” growth of an existing company, while incubators “incubate” disruptive ideas with the hope of building out a business model and company. So, accelerators focus on scaling a business while incubators are often more focused on innovation.

While both types of programs were popularized in startup hubs like Silicon Valley, nowadays they can be found all over the world. Although most people associate these programs with tech startups, most of them accept companies from a wide variety of verticals.

Accelerators

One of the big differences between accelerators and incubators is in how the individual programs are structured. Accelerator programs usually have a set timeframe in which individual companies spend anywhere from a few weeks to a few months working with a group of mentors to build out their business and avoid problems along the way. Y Combinator, Techstars, and the Brandery are some of the most well-known accelerators.

Accelerators start with an application process, but the top programs are typically very selective. Y Combinator accepts about 2% of the applications it receives and Techstars usually has to fill its 10 spots from around 1,000 applications.

Early stage companies are typically given a small seed investment, and access to a large mentorship network, in exchange for a small amount of equity. The mentor network–typically composed of startup executives, venture capitalists, industry experts, and other outside investors–is often the biggest value for prospective companies.

The mentor networks aren’t small, either. TechStars, for example, has hundreds of mentors in its program.

Aaron Harris, a partner at Y Combinator, said he’s not sure that accelerators necessarily work as a whole, but Y Combinator’s success is due to the way it approached incentives.

“A lot of that success comes back to the alignment of incentives,” Harris said. “Good programs completely align all parties — at YC all the partners who advise the companies have a stake in their success. We also do as much as we can to limit distractions. We don’t schedule unnecessary meetings, don’t force them to work in a big loud co-working space, etc.”

At the end of an accelerator program, you’re likely to see all the startups from a particular cohort pitch at some sort of demonstration day (often shortened and referred to as a demo day) attended by investors and media. At this point, the business has hopefully been further developed and vetted.

“The goal of the accelerator is to help a startup do roughly two years of business building in just a few months,” said Mike Bott, general manager of the Brandery. “If you go through a good one, you’ll know at the end where your startup founding team and business stand.”

Incubators

Startup incubators begin with companies (or even single entrepreneurs) that may be earlier in the process and they do not operate on a set schedule. If an accelerator is a greenhouse for young plants to get the optimal conditions to grow, an incubator matches quality seeds with the best soil for sprouting and growth.

While there are some independent incubators, they can also be sponsored or run by VC firms, angel investors, government entities, and major corporations, among others. Some incubators have an application process, but others only work with companies and ideas that they come in contact with through trusted partners. A good example of an incubator is Idealab.

Depending on the sponsoring party, an incubator can be focused on a specific market or vertical. For example, an incubator sponsored by a hospital may only be looking for health technology startups.

In most cases, startups accepted into incubator programs relocate to a specific geographic area to work with other companies in the incubator. Within the incubator, a company will refine its idea, build out its business plan, work on product-market fit, identify intellectual property issues, and network in the startup ecosystem.

A typical incubator has shared space in a co-working environment, a month-to-month lease program, additional mentoring, and some connection to the local community.

Co-working is a big part of the incubator experience and has been split off as its own separate business offering around country, with co-working spaces charging rent for access to utilities. Some accelerators offer a co-working space, but most provide companies with private office space or let them find it on their own.

“If you need private space, most incubators are open seating, and this can be distracting for larger teams,” TechStars mentor Troy Henikoff said. “The economics are usually on a per-seat basis, which is great for the first few people, but at a certain point it may be less expensive to get your own office.”

Both incubators and accelerators offer a great opportunity to help young companies and ideas for startups get headed in the right direction, but it’s up to you where you need to start.

accelerator program

Startup Accelerator Business Model, Everything You Need to Know About Accelerator Programs

accelerator program

Subtitle: What you Have to Know About Startup Accelerator Business Model

If you’re looking at a viable business model for your startup, I’m sure you’ve found out by now there are different choices with some fundamental differences. One of those choices that everyone fancies is a startup accelerator business model which provides everything a startup founder dreams of:

  • Financing
  • Education
  • Mentorship

All of it is condensed in a very limited time span, which makes this particular choice an intense experience. Despite all the buzz they receive, these seed accelerators (their other moniker as they support seed and early-stage startups) are not a great fit for every aspiring startup out there. 

Why? Let’s start with the basics:

What are accelerator programs?

One way would be to define them as hybrid models focused on the development of early-stage startups through mentorship, education, and support during a (typically) three-month period. In other words, tech startup accelerator programs “accelerate” the growth (hence the name) of an established business (one that already has a team, proof-of-concept, market validation, and so on) by providing everything necessary to scale. In exchange for the seed money they offer, they take equity in the business (some are non-profit). 

How do startup accelerators work?

First, there is a rigorous application process where the acceptance rate is only 1-2% for the more popular and established programs, while the percentage is just a teensy-weensy higher for the less prestigious accelerators.

Once accepted, a startup enters an accelerator on-site for a precisely defined/fixed period which is typically three months but can also be half a year. You also become part of a cohort of companies, which is another plus because a great deal of the connections you make during the process can turn into long-term, meaningful relationships – not to mention lead to potential funding-related introductions.

Because the accelerator experience is aimed at accelerating the life cycle of a young startup, it’s very intense and immersive with educational seminars and workshops, group and individual mentorship meetings, investor pitches, networking events, and everything else needed to fine-tune the product/service and business model. You are thrown into a highly compressed cycle that would usually take a few years so it’s vital to be able to focus, learn, and make progress at a rapid pace. 

Finally, the speedy learning-by-doing experience comes to an end with a ‘demo day’ – a business version of college graduation where startup founders present their business model. Each startup in the cohort gets an opportunity to publicly pitch to the investors and community, with the possibility of private and follow-up presentations. 

The entire startup accelerator structure is what makes all of this an enticing proposal. There are distinct collective elements that make this form of cultivating early-stage startups fairly unique: 

  • Fixed period
  • Cohort-based
  • Mentorship and education-driven
  • ‘Demo day’ exit

And with that, we reach the question that’s on every founder’s mind:

Are startup accelerators worth it?

With its ever-growing importance in startup communities across the globe, it’s easy to see why the startup accelerator business model is often perceived as the predominant way for scaling and securing funding from investors. While some programs actually provide limited funding or guarantee it in exchange for an equity stake, it’s important to note they aren’t suited for every startup. 

The thing is – they are not mandatory for building and growing a successful business. While not every program works in the same way, the high-pressure environment is one constant you’ll find in every accelerator. Arguably, not everyone is equipped both emotionally and cognitively to thrive under such conditions, which is a must in this case. 

There are plenty of alternatives where you can reap largely the same benefits without devoting yourself to the exhaustive pace of an accelerator. That being said, the truth is these programs have literally transformed promising businesses like Airbnb, Stripe, Dropbox, Udemy and many others into global companies. Plus, the value of accelerators is reflected by the fact that all parties involved (investors, startups, end users, even the economy) benefit from the intensive learning regime. 

Once more, I’ll reiterate: learning-by-doing is critical to scalability, and accelerators make a point to speed up that process by stuffing years’ worth of learning into a few months. As such, they are great opportunities to quickly grow early on but also to attract other investors. 

How do you know if your startup is ready?

Most accelerators follow a similar process so before you decide to apply for one, you need to ask yourself a few key things:

  • Are you in the right stage of development? If you’re growing quickly, have a minimum viable product (MVP) and some form of competitive advantage, you’re likely ready to go a step (or two) further.
  • Can you and your team move on-site for 3 to 6 months? In order to be admitted into the program (and take full advantage of it), you must be on-site, even fully relocate your startup in some cases. 
  • Are you able to dedicate yourselves 100% to your startup during that time? The majority of accelerators require a full-time effort from the entrepreneurial team
  • Can you thrive in a frenzied, highly demanding environment? Because not everyone is suited to handle learning organized in such a fashion, not everyone is coachable in the eyes of experts who lead the accelerator.

On a side note – do you know how to clearly articulate what you (c)are about? Paul Graham of YCombinator, probably the most successful startup accelerator around, says most of the applicants don’t present their startup concisely, poorly explaining what they do and ultimately, conveying little to no relevance and importance. There’s something to think about.

Final thoughts

The startup accelerator business model is designed with an aim to help entrepreneurs of all walks of life scale their business and make an impact. From verifying your idea or concept to validating the market to securing financing and everything in between, there are many benefits that, in the end, significantly improve a budding startup’s chances for success. 

Do note this: addressing these key issues doesn’t automatically make much of a difference as these programs can differ in their success. My advice to you is to take your time, evaluate both accelerators and other options, and think long and hard about your ability to fully commit. Understand both the value you’ll be receiving and gamble you’ll be making.