Is your startup ready for an incubator or accelerator program?
I am Edna, Startup Support Specialist at Startup Garage, an accelerator program, which is housed-in Invest Ottawa incubator. This summer, we are helping 13 innovative startups from different industries launch and grow their businesses.
In this article, I define the incubator and accelerator programs. I list their benefits, what to be cautious with, and finally, I share some tips on how to get in these programs. Enjoy!
Incubator vs. Accelerator Programs
Incubator and Accelerator programs are often confused and at times understood as the same concept, and although they have overlapping services, they also have major differences. For starters let’s define both programs:
Incubator programs are designed to help early-stage startups to develop and grow their businesses. The programs’ duration varies from months to years, and they support young companies with a pool of resources that usually include mentorship, workspace, contact with other startups, some funding, and training. Some examples are Idealab and DMZ.
Accelerator programs intend to support and speed up the life cycle of early stage, and innovative startups. They distinguished themselves in four aspects: they have a fixed duration — usually no more than six months, are cohort-based, an extensive mentor network drives them, and conclude with a pitch or demo day. They also offer workspace, training, and small seed investment in exchange for a small amount of equity. These programs tend to be highly competitive. Some examples are Y Combinator and Techstars.
Each of these programs is different, and depending who their backers are, they could specialize in a market or a vertical, i.e., SaaS (Software as a Service), cleantech or hardware, still many of them welcome companies from every sector.
While these programs can be extremely beneficial, they are not a one size fits all for every startup. Below, I list some of the benefits, as well as some aspects to consider before applying to any program:
- Access to expertise. Through each program, several experienced mentors and investors will support you in growing a successful and sustainable company. This knowledge outside the programs would cost a fortune!
- Continuous learning. These programs offer training on a variety of topics such as marketing, legal matters, finance, and on important skills for any entrepreneur, such as the ability to raise money.
- Access to some seed capital. Some of the programs will offer a small amount of capital to warm your business up. Be aware of what they ask in exchange; some can be grants, loans or an equity investment. For example, 500 Startups offers a seed program investment of $150K, for 6% of your company.
- Better chance to get investment. These programs improve your chances to get investment from a third party once you graduate. Moreover, being part of these programs will give your startup extra PR and brand recognition.
- Coworking space. Working in close quarters with entrepreneurs who are dealing with the same challenges as you are.
Be aware of:
- Wasting your time. At times, the multiple meetings, training, and events could distract you from doing your work. Not all the events are mandatory, choose wisely the ones that give the most value to your startup or team.
- Giving some of your startup’s equity. Some programs ask for a portion of your company’s equity, make sure that the percentage is fair and worth it for what they offer. Understand that the expectation for you is to build a high growth company that should raise additional capital and exit in 7–10 years. Ask for advice before accepting any offer.
- Conflicting advice. Not all mentors and networks are created equal. You will encounter many different and conflicting bits of advice on your business. Listen attentively, and then evaluate all the advice you’ve received. Decide the one that makes more sense to you, trust your gut.
Are these programs adequate for you?
It depends, if you feel confident in growing your business on your own, have a clear business model, the right skills to implement it, and have a decent network; you probably don’t need these programs.
However, if you have a killer idea, but your business skills and insights are not as sharp, and your network in your industry is small and not influential, you would highly benefit from the expertise of mentors and the extensive network that these programs offer.
What do I need to do to get in?
These programs are extremely competitive, that’s why you need to be 100% sure that you want to get in and prepare for the application process. Here are a few tips to decide on the program and how to prepare your application:
Set your goals
Why are you looking for incubator or accelerator programs? What do you think your business needs to be able to take off? How do you think these programs will help your company grow? Setting your goals beforehand will give you an easier time when researching and evaluating different programs.
Each program is different. Take the time to research in depth each program that seems suitable for your business. Answer questions such as: Are they specialized in my industry? What do they offer? Who are their mentors, and are they influential and experienced? For how long has the program been operating? Where are they located, and is that area strategic to grow my business? What is their track record with past participants (i.e., “follow-on financing raised,” and “exits.”)? Is this program worth the time and (probably) the equity that I am giving in exchange?
Contact alumni companies
The best way to gather information on each program is asking alumni companies. Check the program’s website and connect with the companies that are in your same industry or with a similar product/service. And if possible, meet them! This will give you a clearer idea of the program’s potential, and a better chance to get accepted if they recommend you.
Have a strong team
Incubator and accelerator programs, just as investors, invest in people and not in ideas. Your team is the motor of your business, and they look at how strong and flexible your team is. Your idea and technology may pivot during the program. They want a team that can pivot with it.
Prepare your pitch
You can differentiate yourself from other applicants by having a well-rehearsed pitch and be prepared to answer questions related to your business and market in case of an interview (check my post on How to pitch your business in 3 min).
In conclusion, incubator and accelerator programs are great initiatives that can help you and your business grow into a successful and sustainable company. Nonetheless, these programs aren’t suitable for everyone. Evaluate the program value and always look for advice before accepting any offer.