Let’s talk: Accelerators and incubators
Wed 10 July 2019 - 1:49 pmFeatured | Let's Talk
When seeking to join an accelerator or incubator, what must a startup founder consider?
There can be huge benefits for startups that join either an accelerator or an incubator. Although they are subtly different, in that an accelerator “accelerates” ideas with seed funding and set time frames and incubators nurture those initial niche ideas, both offer budding entrepreneurs an opportunity to grow and scale their business.
The differences between both, and what may suit you and your business specifically, is explained more thoroughly by our experts in today’s discussion. They also delve into the questions you will need to ask yourself, as a founder, before deciding whether to jump in and apply for a programme.
Join the discussion to learn more about the pros and cons, and what every startup founder must first consider before joining a programme.
Stephen Barnes, Byronvale Advisors Pty Ltd, Management Consultants
Founders should consider the stage at which their business is at. Fledging new businesses that are just beginning of their business journey and perhaps have a turnover under $1 million should look for an incubator that has other complementary businesses. The timeframe within an incubator can vary and be a lot longer than that of an accelerator.
Accelerators are better suited to slightly more advanced businesses (adolescent businesses). Usually these businesses with have developed a product and have some market traction. They are at the stage where they need certain expertise and support, perhaps an advisory board and possibly further seed or angel investment. Accelerator programs are usually more intensive and are for 3- 6 months.
David Burt, Executive Manager of CSIRO ON
When looking to apply for an accelerator or incubator, founders need to take a step back and ask themselves the following:
What is their business model?
Every accelerator and incubator program has specific objectives that they are measured against – and determine how they get paid. Each different program will push your startup to conform to what they are measured on – this will influence whether your startup will benefit from their program. If the program can’t (or won’t) explain how they pay their bills, that’s a red flag.
What specifically will I gain from participating?
Don’t fall for marketing hype, be curious and find evidence for how a program can specifically help you. The best source of evidence comes from talking to founders with startups like yours who’ve previously completed the program – what did they get out of it? Participating in an accelerator is a huge time commitment – make sure it’s worth it for you.
What help is on offer once the program finishes?
Founders must consider not just the support offered during the program but also what happens after the program finishes. The earlier stage your company is, the more critical post-program support is for you. At ON, we provide services for our teams years down the track to help them access the knowledge, networks, and resources they need for growth. Most programs do not offer meaningful post-program support, so talk to founders who’ve previously completed each program to understand the real story.
Julian Kezelman, Program Manager, RealTechX Growth Program, Taronga Group
Founders need to figure out why they want to join the program in question. How will the incubator help them to achieve their near-term business goals? Who is involved in the accelerator that can provide unique and relevant advice? What is the relative advantage of joining a program versus going it alone?
Many founders join innovation programs to be part of a community, find a temporary home for their business or simply for the investment into their company – such benefits alone should not be sufficient.
Founders need to figure out how the program will help to move their business forward. For example, our growth program RealTechX is deliberately designed to meet the needs of later-stage businesses by focusing on scalable customer acquisition, strategic investment, and international expansion.
Similarly, innovation programs need to be responsible for delivering tangible business outcomes that ultimately set founders on a path towards independence and sustainable growth.
Jasmine Vreugdenburg, Director of UniSA Innovation & Collaboration Centre
Deciding which one to opt for depends on the type and status of the startup.
Incubators are generally for ventures at the idea/very early stage or are longer term projects i.e. companies building hardware along with software, while accelerators are for ones that have started generating revenue, have a minimum viable product (MVP) and are ready to scale.
Accelerator programs are highly competitive and often require startups to operate from a specific geographic location – founders must commit time, resources and finances (directly and indirectly).
Incubators generally support companies that contribute to an industry focus area or are affiliated with the organisation who is financially supporting it i.e. a university incubator.
Accelerator programs are designed to rapidly validate and test a startups’ viability by providing intensive support from a network of mentors and business leaders (including VCs) and work to a set time period of three to six months. The aim is to accelerate the value of a company in a short period of time. Founders have to be in the right mindframe to take this on as it requires intense, full-time commitment and might require relocating to another city or country. In this situation, support from friends and family is important.
Accelerators are typically run as for-profit businesses and will provide funding in exchange for equity, so be sure to go through the t’s and c’s with a fine tooth comb. Be clear on what exactly you have to give up – now and well into the future – and decide whether it’s worth it.
Incubators generally support founders over a longer period of time, two to three years, and provide an environment that enables founders to refine their ideas, and develop them in a risk free environment with the support of the community and mentors associated with the incubator. Incubators are often better suited to ventures that may take longer to get to market.
Incubators in Australia are normally associated with a not-for-profit organisation that is providing support in exchange for other benefits.
If you’re looking for an incubator, find one that offers more than just desk hire.
For example, if you want to enter the financial services arena, look for an incubator that has a strong and active corporate partnership program with financial institutions, and good links to the angel investment/venture capital community. This can pave the way for introductions to potential customers and funding when you’re ready.
Matthew Werner, Stockland Accelerator Program Director, BlueChilli
The first thing to consider is fit: industry-fit, stage-fit and expertise-fit. For example, BlueChilli focuses on early-stage founders who are domain experts, not coders. So, one of the benefits we offer is access to our tech and product team to build your first product.
A good accelerator will teach you how to build a product and launch a company, but it should also open doors to strategic partners and advisors whose interests align with the problem your solving. For example, highly-engaged corporate partners could help you secure pilots to demonstrate traction – and attract investment.
An accelerator is an intense experience aimed at preparing founders to be successful CEOs. It can be hard to transition from the “safety” of a program overnight, so talk to alumni about ongoing support. Look for a long-term partner who can offer advice well after the program, like when it’s time to fundraise or recruit.
Stephanie Strunk, Head of Amadeus Next
From speaking to and working with startups through the Amadeus Next program, I’m often reminded of how important it is for a startup to make sure the corporate partners they pursue are not simply takers, but givers; that they’re genuinely interested in building something great together.
Founders should definitely do their homework – ideally you want to find a corporate partner with a clear innovation strategy. Easier said than done, right? One way to look at it is to find out what type of programs the corporate has put in place to engage with startups. Have they mainly held one-off events? Is the corporate supporting startups by sharing resources, or partnerships, or are they betting on startups through an investment arm?
Look at their track record with other startups to determine the opportunities to learn, validate and grow with the support of a true partner. At the end of the day, it’s about achieving a form of collaboration that benefits both parties.
To get the most out of collaborating with corporates, founders should have a clear idea of what they’re offering to build together and how they plan to do it. Here, the Lean Startup technique can be a valuable tool to address the problem statement. It is important for startups to have a clear value proposition and ideally a minimum viable product that you can start testing and validating immediately. The mantra is focus and deliver. All of this will help to build trust, speed up the validation and learning process.
There’s no shortage of corporate startup programs which can make them tricky to navigate. If you find a partner who is willing to co-create, introduce new thinking and apply their wisdom to your vision, hold on tight!