There are a lot of innovation driven early stage entrepreneurs who want to leverage technology to solve a problem and build a revenue generating business out of it. However, building a business is no child’s play - there’s the need of deploying a lot of resources of various sorts.
Step in incubators and accelerators !
Every entrepreneur will find themselves grappling with many different programs available today.
Why choose this, and why not choose that ?
Here's an attempt to break it down.
Let’s try to understand the basic differences between a startup incubator & a startup accelerator
A startup accelerator is a fast track program lasting 4-6 months, at the maximum and is for the startups who are looking to find a platform that enables rapid growth in terms of customer acquisition, product refinement to target a greater audience, or expansion, whether global or pan India.
A startup incubator, on the other hand, has programs longer than 4-6 months, closer to the range of 8-12 months, attempting to handhold the startups which are still working on the ideal product, apart from market validation at scale
Instead of focussing on the “Why” let’s first focus on the “How” i.e How to enroll for the startup incubators?
Most startup incubators & accelerators have their application form on the Website itself, linked to an “Apply / Apply Now” button on the homepage. Some of them host their applications on other portals like F6S, Gust, LetsVenture etc and one has to do a free registration on the portal first and then fill up the forms, as requested.
The application form asks the questions about
the unique solution,
‘why would people pay for the solution’ aka the Value Proposition,
‘how will you make money’ aka the Revenue Model,
the Technology Stack,
Validation from the target group (people who will use the product/service the startup is working upon) / pilots if it’s a B2B model / paid or free users if it’s a B2C model, and
Entry Barrier i.e ‘what prevents any other team of entrepreneurs from doing the same thing as you are’ etc.
Some of them also ask the applicants to list out what they think are the three to five “business metrics/KPIs” which are crucial to the startup’s success for the next few months. It is also advised to keep handy a brief presentation having less than 8-10 slides mentioning all the details along with the financials (which can be a simple spreadsheet depicting the revenue, expenses, projections, fund utilization etc.)
How most startup incubators/accelerators select the startups
Team: The team should ideally be cross-functional, having the desired execution capabilities, a clear understanding of their business model and the flexibility to pivot. Well balanced teams consist of different Co-Founders leading different aspects of the business say Product, Technology, Business Development, Sales, Operations & Finance etc with each Co-Founder sometimes also handling multiple domains.
Sector: Each incubator/accelerator has some specific sectors in which they think they can add value, though some of them are sector agnostic as well. It is very important for the entrepreneurs to understand this fact as it helps them determine the long term capability of the startup enabler as well.
Stage: We define the stage of a startup either by the maturity of its product, whether it is at ideation, developmental or deployment phase or in terms of revenue as Pre-Revenue, Early Revenue, Steady Revenue & Growth. Most startup incubators accept the startups who are at the Prototype / Minimum Viable Product (MVP) stage and rather give the Ideation stage startups a miss.
Post submitting the application form, the incubator team/selection committee evaluates it, followed by a round of discussions with the entrepreneurs to understand things to a greater depth. If convinced, the incubator then presents a TermSheet to the entrepreneurs, which is essentially a document containing Terms & Conditions with respect to the Investment & Incubation Services. Please note that the Term sheet is a non-binding agreement, and a comprehensive Due Diligence process follows which ensures that all the Legal, Financial & Company Secretarial compliances, as well as certain business hygiene practices, before signing of the legal definitive agreements. Once the definitive agreements are through, the startup is legally onboarded as an incubatee.
Now let’s focus on the ‘Why’ or rather the ‘What’ i.e What the need of a startup incubator/accelerator is, also enabling the startups to judge the right fit between themselves and the incubator/accelerator
Mentoring: The most important aspect of business incubation is the one-to-one access to the domain experts, Mentors, Technologists, Growth Hackers, Industry Veterans, who not only help the entrepreneurs on various aspects including but not limited to product, marketing, team building, fundraising etc but also enable them to understand 'what not to do’ to be a successful venture.
Capital: There are certain incubators that invest upon the onboarding of the startups, there are some that invest at the graduation while there are some who don’t make any direct capital investments at all and rather believe that the incubation support is necessary enough to enable the entrepreneurs to raise funds at the right time from the right set of investors.
In-house Team: Equipped with an in house team, a good incubator, works closely with the incubatees as an extended arm to their own team mostly on a shared allocation basis. It is always prudent to get introduced to this Team because they are the people with whom a startup will be spending their most time mostly and they are the people who will enable the startup to succeed
Business Opportunities: The network effect which an incubator introduces enables potential business opportunities for the startups. The startups should do an initial research concerning the quality of the network that the incubator brings in.
Infrastructure: Access to office space is the most common & tangible aspect of all Incubation / Acceleration programs, the suitability of the space to the entrepreneurial team in terms of the design, aesthetics, functionality, ambience and flexibility in working hours as well as the reachability for potential clients and investors is an important for the startups to consider.
Service Partners: Collaboration is Key. Most good incubators have an affiliation with various Service Providers to meet the needs of the incubatees in the leanest manner. Some of these service partners may include Legal, Financial, HR, Cloud deployment, Travel, Product Development tools, CRM, F&B, Events & Logistics etc. Typical examples being IBM GEP, AWS, Tracxn, LetsVenture, F6S, Flock etc.
In conclusion, most of the Startup Incubators and Accelerators are doing their best to encourage early stage startups by providing them the resources to succeed. However, it is also imperative for the startups to realize that which startup enabler is the best fit for them as it is for the startup enablers to understand that not every startup is a “me too”.