When a young Mark Zuckerberg had the idea of a social networking site to connect loved ones from far- off places, he often used to take guidance from his mentors on how to turn his idea into reality. His mentors were Roger McNamee, Billionaire investor, who was one of the early investors in Facebook, Steve Jobs (Apple) and Bill Gates (Microsoft). Mentors play an important role in supporting entrepreneurs during different phases of business cycle. This is especially true with startups. If an idea gets the right environment in terms of guidance, there is an extended possibility that the idea will be converted into a startup or a startup will accelerate and
scale up to grow into a successful venture.
Over the years, alternate support models have evolved to help founders reshape, remodel their ideas, help them build strong and capable organization during the scale up phase. First such model is called Accelerators or Seed Accelerators. Accelerators, such as Y Combinator, are programs of a particular period that accelerate the initial startup phase. It is a cohort-based program, i.e., the program incorporates a group of startups and shares the same knowledge with each of them.
The knowledge delivered can be tacit, shared by mentors through seminars or it can be structured, complimented by case studies, books and manuals. Generally, a combination of both is used. They are competitive and cyclical and stretch for a period of about 3 to 6 months. The program is intense as it is meant to accelerate progress at a tremendous rate.
An accelerator program starts with a complex application process with an acceptance rate of 1-3% acceptance rate to select the best available startups. Then all the knowledge transfer takes place as a University lecture. The program is concluded at pitch or demo day where startups present their idea to a group of potential investors in the hope of raising requisite funds. Accelerators are generally public-funded programs although they can be funded by private players as well. Depending upon their business model, they may or may not take an equity stake in the startup or provide funding.
It has been observed that the startups who have undergone such programs usually achieve key milestones, and funding earlier. They are better prepared for the competitive entrepreneurial environment and likely to be more successful. Another model is called an Incubator or Business Incubator. It is an organization that provides a full range of services starting with management training in the fields of HR, Finance, Legal, etc., and office space and ending with venture capital. They even help Startups with networking, funding, business etiquette, understanding the business environment, etc. The sole purpose is to grow the business by
providing every possible service.
Just like accelerators, they also invite applications and accept startups that seem feasible and providing a solution to a customer problem. They are usually non-profit in model and can be run by public and private organizations. Another business model can be Rental, where they charge rent from the startups for the business space they are providing. Although the two may sound very similar, there are differences. For instance, Incubator programs are generally long in duration. They can stretch to three years. There are no such cohorts. The services are provided on a case-to-case basis. They are not cyclical and less competitive. In essence, they incubate and work on different ideas and are called a preparatory platform for enrolling in the Accelerator
program.
There is often confusion about where to go in case mentoring and guidance are required. One should reach out to Accelerators if the need is quick and concrete results. On the other hand, if the need is to set and achieve a long-term vision, establish networking, etc., an Incubator is the best choice. Or, if one does not care too much about definitions, feel free to reach out to us, our consulting services, i.e. Agility Consulting Services will help you out in every possible way.
