Knowing when and where to get support for your budding startup can be the difference between success and failure. Going it alone initially is how most startups get off the ground, however, to grow all businesses need support and that can come from various entities. For example, there are investors, mentors, incubators and accelerators. Investors are hands-off, providing little for your business than forwarding the funds you want on the agreed terms.
Mentors are individuals there for the business owner, sharing personal experiences, and they may help with networking, setting goals and identifying opportunities. They are role models. So what about business incubators and accelerators.
In this In this article, we delve into business incubators and accelerators.
Incubators and Accelerators
There are many ways to get support for your startup, and two that are often overlooked are business incubators and accelerators. UK based investor Tej Kohli says startups should look at all their options before moving forward with just funding. Investment only works when the business has all its ducks in a row with a robust business plan and strong leadership. Incubators, for example, provide a lot more than just funds, including mentoring, networks, and promotion.
An incubator is a company entity that essentially provides management services and often office space to startups. Budding entrepreneurs keen to do their own thing will just seek funds; however, investment alone is no guarantee of business success. Knowing what to do with the funds is crucial, and incubators provide expertise with commercialising ideas, prototyping, patenting, scaling a business and more.
Developing deep connections within industries and governing bodies is far more valuable for startups than just the investment. Timing is everything, and seasoned entrepreneurs know when to take a product or service to market and when to diversify the offering.
Governments contribute grants to state-funded incubators to support startups.
Associations offer services to incubators usually with funded with membership fees. Associations support and connect venture capital investors, joint venture investors, economic development managers and incubators. They run events, foster networking and provide best practices guidelines.
National Business Incubation Association (NBIA) is well known in the USA and globally for its work with incubators specialising in most sectors from Health, to Technology.
Using an accelerator will require your business being transparent on its performance and business plan. Working directly with the business mentors that are assigned to it, the time of engagement could be a few weeks or months. Seed investment and access to a large group of mentors are exchanged for a small amount of equity in the business.
Timing is everything, and your startup needs to prove it’s ready for an incubator or accelerator. Not all new business owners see incubators or accelerators as the way to get their business operational and off to a great start. Some of the reasons they are avoided by startups include their application process, the timeframe and professional environment.
Startups in a hurry do not want to go through the rigorous application process that requires full disclosure, transparency of business activities and a detailed business plan. Incubators and accelerators need to be sure they are investing their time and resources into businesses that will last the distance, and this brings us around to time. The usual time commitment.
Incubators are usually more flexible with their involvement and commitment, whereas accelerators are timebound and will want equity. Incubators will set milestones to reach, including attendance in workshops, training sessions and startups in a hurry may struggle to keep with the programme as it can run for a couple of years.
Finally, the professional environment of an incubator is not what every new business owner wants or needs. Accelerators are more flexible and work within the existing business environment.
Startups should consider support from professional entities like business incubators and accelerators. The pros should outweigh the cons, particularly for young businesses in competitive markets.