The benefits of incubator and accelerator programmes

musings

Thoughts from Nick Marshall, CEO and Founder - Twistar.

I am really passionate about startup ecosystems globally and it’s something we have witnessed first-hand at Twistar. They are amazing when they work well, but as with so many things the devil is in the detail.

There are three different types of support programmes for startups:

  • Pre-Seed
  • Seed
  • Series-A stage firms

The majority of the commercially-oriented programmes are organised for pre-Seed stage. The startup should have some kind of product and interest from potential clients, may or may not already be generating revenue and will be preparing for their next funding round in 6-12 months.

The most common pre-Seed programmes are:

Accelerators – Sponsored or led by companies.

These programmes can be excellent, particularly those run by large corporates, and most of them will cover basic expenses associated with participation. On top of that, it’s great PR for a start-up to be associated with a well-known brand name.

There might occasionally be conversations about the company running the programme owning an equity or cash stake in the start-up in exchange for participation. However, this should be approached with caution as it’s not always great for B2B relationships and can create complications for future scaling.

For the success of these programmes, the sponsor company must have a clear understanding of their objectives and engage with the start-ups accordingly. On the other side, start-ups should always review the contract terms carefully (i.e. exclusivity, region, options, etc.).

The best situation would be if a specialist firm with experience of designing and managing accelerator programs is engaged as a third party to coordinate and structure objectives. When there are many parties involved (in addition to the actual start-ups), the programmes require very firm leadership, which may at times feel dictatorial, but is necessary.

An excellent example of this type of accelerator management firm is Union.vc from Washington DC.

Accelerators – Sponsored or led by Governments

These are increasingly common as cities, regions, departments, etc. are realising the huge opportunity they have to attract exciting and geographically ambivalent, start-ups to engage and enable change on a large scale.

These are similar to company sponsored programmes, however, Government affiliate programmes will not request an equity stake for participation.

An excellent example of a Government sponsored accelerator program is the Dubai Future Accelerators (DFA). Each cohort has around a dozen semi-‘client’ entities, each with unique challenges, opportunities and a strong agenda to engage and support the start-up ecosystem. However, DFA’s focus is on more advanced commercialisation, akin to early Series-A level start-ups with an established product.

Commercial Accelerators / Incubators

  These are independent businesses, who often then will work with sponsors.  But don’t be confused about their motives – as they are still commercial in nature.

If you are considering one of these programmes you need to put the ‘Cash:Equity’ debate to join the program to one side. The cash component will only cover your costs of travel for the programme and living expenses. As for equity - you will not retire to the Bahamas off 5-15% sale of equity to be part of the programme! Either you want to be on the programme, or you don’t, the decision is yours.

My personal opinion is that there is Y-Combinator and then everyone else!

Many like TechStars, StartupBootcamp, PlugandPlay, etc. are excellent. In particular their programme specialisms (i.e. AI, IoT, hospitality, automotive, blockchain, etc.) offer particular help to start-ups in niche areas, with fantastic mentors.

These programmes are extremely commercially-oriented which gives them a strong focus and clear objective, that continues well after the 9-12 week programme actually finishes. They will do everything possible to make you, your team, your product and your company as polished as possible throughout the programme and will continue to support you as one of their alumni in the future. They are making an investment in you!

Do as much research as you can on any programme, check out the structure and content where available and connect with previous participants on LinkedIn. In my experience, programme alumni are keen to share their stories, learnings and opinions; you will get real insight this way.

Typically, programmes are 3-months in duration and you should make them your priority. They will put you in front of investors, clients, mentors, leaders and give you opportunities that would otherwise take you months to organise and cultivate independently.

In summary, I will leave you with a quote from a friend who attended one of the Techstars programmes and raised more than $1.5m in the following quarter:

“We made 9 months of progress in 9 weeks, it was incredible.”