All the info you need to make the decision for your Startup or Small Business. Peter/CXO
TOPICS: Definitions, Comparison, Pros & Cons, Best Accelerators & Incubators, How to chose an Accelerator or Incubator.
Startup Accelerators, are fixed-term, group -based programs that typically include seed (initial) investment, connections, sales, mentorship, educational components, then culminate in a public Pitch event or Demo day to accelerate growth. Most startup Accelerators in Silicon Valley & globally are privately funded as an Investment fund that take equity (share of the company) and focus on a wide range of industries. Accelerators are considered a new model of providing assistance to entrepreneurs, and have essentially evolved from the original business Incubators.
Incubator is a company that helps startup companies to develop – by providing services such as management training or office space. The National Business Incubation Association (NBIA) categorizes their members’ Incubators by the following five Incubator types: academic institutions; non-profit development corps; for-profit property development ventures; venture capital firms, or a combination of the above.
Business Incubators differ from Research & Technology (R&T) parks in their dedication to startup & early-stage companies. R&T parks tend to be large-scale projects that house everything from corp, govt or univ labs to very small companies. Most R&T parks do not offer business assistance services – which are the key feature of a Business Incubation program.
SBA. U.S. Small Business Administration’s Small Business Development Centers (SBDC) and similar business support programs are different than Incubators – in that they serve only selected clients. SBA’s purpose is to “aid, counsel, assist & protect, the interests of small business concerns.” In addition, the charter ensures that small businesses receive a “fair proportion” of any govt contracts & sales of surplus property. SBDCs work with any small business at any stage of development, but not only Startup companies. Many business incubation programs partner with their local SBDC to create a “one-stop shop” for startup business support. ( from Wikipedia )
|Definition||Organization for existing business that helps them achieving growth in their biz.||new small biz & startups that offer support staff & equip for further development|
|Objective||Support startups with a flexible array of business support resources and services.||Support startups with a structured program with fixed curricula|
|Time Period||Intense 3 to 4 month intensive program||Long Term with less time pressure & less intensive|
|Business Model||Large mentor-driven business network||Smaller mentor network|
|Entrance||Any Startup or Small Business can apply||Only in the Area of the Incubator|
|Selection||Extremely selective||Usually much less selective|
|Equity Ratio||Take 6 to 8% Equity stake||No Equity stake is taken|
|Sectors||Web, Mobile, IT, Hdwe, AI, IoT,||Bio Chem Mktg Retail, Food|
|Selection Process||Competitive – essential to business model||Competitive – based on available space & resources|
|Services||Fast-test and validation of ideas, Mentoring support from experienced entrepreneurs & Seed $$$ funding||Management support, IP rights assist-ance, network-ing and access to external financing|
Pros & Cons
Incubators promote slow growth within the confines of the program, while Accelerators push for fast progress & a quick exit. Before choosing one type of program over the other, consider these benefits & shortcomings of Incubators & Accelerators. ( Lending Tree )
|Startups experience fast growth.||Intense work schedule is unsustainable for a long period of time.|
|Associate structure provides networking and bonding opportunities.||Startup selection process is extremely competitive.|
|Equity investment typically available from program directors.||Participants have to give up a stake in the company. Typically 5 – 10%|
|Long-term access to Mentorship and other resources in your specific Sector.||Possibility of becoming co-dependent on the Incubator program.|
|Valuable introductions to investors, consultants and other professionals.||Funding not usually provided through the program, and you may have to pay a Fee for some educational features.|
|Low competition to get into the program.||Lack of opportunity to bond with others within a program.|
Best Accelerators & Incubators
Y Combinator – The most popular startup accelerator that has produced companies like AirBnB & DropBox. They invest ± $120,000 in each company for a 7% stake. a Three month program that ends with a Demo day of your actual product.
TechStars – provides $118,000 in seed funding, intensive Mentorship, and an amazing Network of mentors and Alumni for a 7-10% equity in your company.
500 Startups – Four-month Accelerator pro-gram in Mountain View, San Francisco, and Mexico City; has invested in over 1,000 startups.
AngelPad: offers the complete opposite in the same area by investing larger amounts of money in fewer startups over a longer period of time – in order to provide a more intensive and tailored mentorship Incubation program to the startups that they take under their wing.
Startupbootcamp – Accelerator programs have one key focus – to connect startups with the most relevant mentors, investors and partners from around the world. They do this through an intensive three-month program that’s been fine-tuned since 2010 – to efficiently tap into the largest international network of over 400 alumni founders, top corporate partners, and investors – spanning all stages of growth. All programs culminate with up to a 1000 attendee investor Demo Day celebrating the progress that’s been made and preparing for future scaling.
Matter: Their 5 month program kicks off with an intensive Boot-Camp focused on building scalable Media ventures with a human-centered, prototype-driven design process. Next, share-outs, weekly speakers, and monthly design reviews build up to a Demo day in San Francisco and a media showcase in NYC. They invest $50,000 in their companies.
Founders Space: An Incubator + Accelerator looking beyond just tech. Comprehensive pro-gram taught by Entrepreneurs who’ve done it all. This community of Founders are passionate about helping one another (ie, “free” co-working space to collaborate with your associates during the program). Network of top advisors, growth hackers, lawyers, angels & marketing pros. Access to our mentoring sessions and workshops for 12 mo. Optional to receive $$$ or equity. (all chosen by Tek.co)
How to choose.
#1: Who’s behind your Accelerator, Why?
Who owns/operates a given Accelerator? Why are they’re doing it? Business “Incubator” programs can be helpful for new entrepreneurs with little or no business experience. But, if you’re interested in quick growth, you’ll want to work with an “Accelerator” – led by someone with a great Track Record of guiding others to success before. You’ll also want to prioritize programs with direct access to potential Investors. Focus on working with experienced business people – especially those who have experienced the kind of success you want for yourself. Ideally, you should only work with someone who has a proven Track Record for taking startups to market, and guiding them to profitability. Make sure your Accelerator (as a Mentor) can teach you about time-tested, battle-worn business strategy & tactics – not just the technologies or resources that are available to you.
#2: What kind of “Juice” does your Accelerator have?
In the Tech world (and most other business niches), relationships are the key to rapid funding & development. For this reason, an Accelerator is only as valuable as the relation-ships and access it brings. In order for your startup to be successful, look for an Accelerator whose leadership already has all the connections & resources you’ll need. Most importantly, the accelerator must have direct, visible relation-ships with Funding sources, leading tech companies, designers & manufacturers. Media connections help, too. If your new product or service impresses people with relationships & resources, they’ll introduce you to Investors – and that’s most of the battle anyways – when it comes to business success.
#3: What’s their Track Record?
Since past success is the best predictor of future success, try to work with an Accelerator that has already launched other successful businesses in your target Niche. Do some homework by reading old mews – to see who’s worked with which Accelerator in the past, and where they are today. You’ll probably see some patterns – and those patterns should help your decision in choosing an Accelerator and their program.
#4: What’s your Goal?
Long before you sign a deal with any Business Accelerator, you should have a clear idea about your own Goals – as well as understand the metrics by which you’ll gauge your Accelerator program success. Entrepreneurs usually have strong personalities and thrive in a dynamic collaborative environment, but problems can arise when there’s a divergence in vision between the original Founder & Co-Founders. That’s why it’s best to carefully read the fine print in your Accelerator’s Development Agreement before signing. Even if you’re already confident your new product or service will be a winner, don’t jump at the first opportunity strictly based on the initial Funding amount it offers. Instead, compare the features & benefits offered from different Business Accelerators. Keep in mind also, that the staff at an accelerator wear two hats – they’re both Investors & Biz Developers. Occasional dis-agreements are normal. Don’t expect partnership perfection. Instead, choose the group with which you have the best overall “chemistry.” No matter how clear your Vision seems right now, all business models are improved by fresh input from experienced professionals (ie, Mentors)
#5:Make the “right” Accelerator choice !!!
Ultimately, flexibility is the key to success. You’ve got the best chances of surviving & thriving inside a fast-paced Business Accelerator if you’re able to stay on your Vision course – while still being flexible in its execution. [Biz2Comunity]
How to choose an Incubator.
Beyond providing an office facilities & equip, see if they can support startups in other ways, such as providing business services, access to Investors & training programs. Also, check their portfolio, alumni, mentors & track records (Small Biz Organization)
#1. Industry-Specific or General?
Industry-specific Business Incubators have the expertise & structure to help you grow fast. The Niche Incubators may even provide costly, specialized tools – that may not be readily accessible to startups. A general Incubator maximizes your exposure to as many different types of businesses as possible – within the same space. However, with well-connected Incubator management, even industry-specific Incubators can be connected to complementary businesses outside the Incubator.
#2. Incubator Management
Check out the Team behind the Incubator. Are\were they successful entrepreneurs? Do they have the experience to provide your business with what it needs? Ideally, the team behind the Incubator should have some experience dealing with your industry. Check that they have helped several startups achieve success.
One of the most valuable aspects of being in a Business Incubator is Mentorship. A good Incubator pro-actively connects you with successful Entrepreneurs in your industry to guide you.
#4. Track Record
Look deeper into a few of their Clients and judge for yourself – if the Incubator played a key role in its success or failure. Checking on an Incubator’s Track Record is the quickest way to determine if it’s a good one. Many Incubators showcase their portfolio on their website. Just do a quick Google search on a few of their portfolio Clients to see how they are doing. The Incubator should be fine as long as they have significant number or successful clients. Keep in mind that a company’s success isn’t entirely the respons-ability of the Incubator. Many businesses fail. Look deeper into each Client and judge for yourself – if the Incubator played an influential role in its success or failure.
Check to see if the Incubator has other affiliates & partners as well. Looking at their Client list is a good way to see if they can get you connected directly to the people you need. Visit the LinkedIn profiles of the management & mentors to see who are the people within their networks. Check to see if the Incubator has other affiliates & partners as well.
Ensure that it is on stable Financial grounds before you commit. Find out the source of the Incubator’s funding – especially if the Incubator is relatively new. Ensure that it is on stable Financial grounds before you commit. Otherwise, if the Incubator collapses, it will disrupt your business and may set you back.
#7. Incubator Facilities & Services
Ideally, your chosen Incubator should have the resources to support all the business activities you need. It should have basic amenities (such as Internet connection, printers and meeting rooms) & services (such as accounting, legal & marketing services).
#8. What do you have to Give Up?
Most Incubators are businesses themselves. Some may ask for a low monthly Fee, while others may ask for Equity. Think about what you can afford and what you can give up carefully. Besides Ffinancial costs, you’ll have to spend time going through the Incubator’s programs and fulfill their requirements. Find out, about how much time you’ll need to commit and consider the impact of the time loss on your business. Good Luck & may you be Successful !!!
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Compiled by Peter/CXO Wiz4.biz 5/20
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