One way to help get your business off the ground, is to leverage the mentorship and investor relationship benefits of a startup incubator or an accelerator. First of all, what is the difference between an incubator and an accelerator.
What is a Startup Incubator?
An incubator is physically locating your business in one central work space with many other startup companies. In many cases, the startups in these incubators can all be venture funded by the same investor group. You can stay in the space as long as you need to, or until your business has grown to the scale it needs to relocate to its own space. The mentorship is typically provided by proven entrepreneurial investors, and by shared learnings of your startup CEO peers. Examples include Lightbank and Sandbox Industries in Chicago.
What is a Startup Accelerator?
A startup accelerator is very similar, but has some distinct differences. Your time in the space is typically limited to a 3-4 month period, basically intended to jump start your business and then kick you out of the nest. The cash investment into your business from the accelerator itself is very minimal (e.g., $20,000), but your time in the accelerator should largely improve your chances of raising venture capital from a third party entity on the back end, after you graduate from the program. Mentorship could be coming from 100 entrepreneurs that are affiliated with the accelerator (many of which are proven CEOs, or investors looking for their next opportunity or simply helping the local startup community). Examples include Tech Stars and Y Combinator.
Are These Programs Right For You?
Deciding on whether or not you should pursue starting up your business via an incubator or accelerator largely comes down to your personal confidence in the defensibility of your business model, your execution skills and your fund raising skills. If you have a credible story and your business is nicely progressing on your own, you probably don't need to be part of one of these programs. But, if you need help fine tuning your business model or revenue model, or may be a first time CEO wanting to hone your skills from proven peers and entrepreneurs, then this type of mentorship could be perfect for you.
The Advantages?
The pluses of programs like these are: (i) shared learnings and mentorship (helping avoid typical startup pitfalls and speeding up your efforts); (ii) access to capital, either within an incubator or post an accelerator; and (iii) the PR value and exposure you get from these programs (not to be underestimated).
The Disadvantages?
The minuses of programs like these are: (i) they can be distracting, at times, with lots of related meetings and events with mentors and investors (getting in the way of focusing on your own project); (ii) they can be confusing at times (getting 10 different opinions from 10 different mentors), so you need a good "filter" on any advice--be sure to read this post on how to filter the conflicting advice; and (iii) sometimes, sharing space with other companies is not always a plus, especially in long term incubators that may be carrying dead weight of under-performing companies.
Key Takeaway?
Overall, I think these programs are terrific for first time CEOs, that can quickly get up the learning curve with the help of mentors and investors that have "been there, and done that". Plus, your odds of raising capital are vastly improved given the tight screening processes of these groups, that naturally raise the creme-de-la-creme to the top, from the 1000's of applicants they receive each year. Competition is naturally fierce to get one of these coveted spots, so make sure you have a fine tuned pitch and leverage your network to help pull some strings for you.
And, don't forget, if you don't get accepted into a startup accelerator or incubator, and want to get that kind of expertise for your business, be sure to check out the new startup excubator model that is being tested, an outsourced digital services suite powered by experts, that is open to anybody that is interested, provided they have the capital for the services.
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George Deeb is a growth consultant at Red Rocket Ventures, and author of "101 Startup Lessons--An Entrepreneur's Handbook".
