In recent years we have seen a notable increase in foundations of acceleration and incubation programs for startups. Especially programs such as Y Combinator or techstars, both based in the US, have gone viral with many seed and early stage startups being supported. As of today a total of 417 startups with 322 still being in business have gone through the techstars program. Inspired by these predecessors, Berlin based accelerators and incubators are on a similar verge for growth. Names such as Plug and Play, hub:raum, Microsoft Ventures Accelerator, and Startupbootcamp, to only name a few, come to mind when thinking of the offers startups find here. With this – it seems – finding and selecting a suitable program should not be difficult for startup founders. I wonder, however, if Berlin founders always consciously select. After all, it is their task to compare the offers, to decide which one to go for and – eventually – what to make out of the benefits derived. In this, continuous learning cycles of both, founders and programs can jointly contribute to startup growth.
Different programs and their selection criteria
Taking on a general stance, it seems as if all accelerator and incubator programs put their emphasis on supporting early stage startups that are currently focusing on developing their business models, their products, and on discovering their markets. Usually, accelerator programs support startups at a slightly earlier stage which is characterised by the business idea only just developing into an initial business model, whilst incubators invest in early product and business model prototypes. But these selection criteria may vary between the different programs. Being either founded as joint ventures out of big corporations that provide an initial direction to the core selection themes of the institution, or as independent programs that tend to be more open and free to choose their strategic orientation, both accelerators and incubators share the ultimate goal to increase value for money. But whilst collaborating with startups can lead to corporate benefits such as knowledge spill-overs into their business units, this effect seems to be less noteworthy to independent programs.
Do your homework – Compare the different offers
What all programs have in common is a bundle of services offered to their startups. Benefits can include co-working spaces, legal, HR, IT, PR, marketing, funding, access to external networks of business angels and venture capitalist, regular mentoring, coaching, lectures, events, and networking amongst the incubated startups. In turn, most programs take equity shares from the startups.
However, these bundles just like what is asked from startups differ notably between the various programs, which necessitates founders to compare and prioritize. By enlisting specific needs and by defining short, mid and long-term targets, founders can establish a preliminary list of priorities to kick off their program search. Additional sources to provide input on the programs are articles about graduated startups, exchange with currently incubated startups, or research on external experts supporting these programs. For corporate accelerators and incubators it is recommendable to gather the strategic orientation of the corporate mother, which can usually be derived from websites and/or media coverage whilst independent programs tend to establish strategic partnerships, for instance joint funds. A strategic fit can become a core contributor to a startup’s advancement.
Recognize the explicit, but also the implicit opportunities of your program
Having selected, applied to and eventually been chosen by a specific program, permits access to the aforementioned as well as additional opportunities. Thus, with entering into the program, the startups’ investments in research can lead to initial payoffs by using the benefits offered by the programs strategically and efficiently. In doing so, the advantages estimated in advance can be turned into real opportunities. Simultaneously new chances arise that should as well be taken into consideration. They may at this point – however –seem more implicit. Internal and external program experts will presumably not promote all networks they can provide access to at once, but rather test the startups for their potential. Implicit options also arise through the variety of business units of corporate firms to which startups in a corporate program can getaccess to. Yet, recognizing all the opportunities will take time, one of the startups’ biggest constraints.
Manage your constraints with foresight
And time will only get more scarce as with entering an accelerator or incubator program that is limited to three, six or a maximum of twelve months, the quest for fundraising only starts. The program can be an access point to follow up funding through the accelerator or incubator program, or through the program coordinators being connected to business angels and venture capitalists. But not every investor is necessarily the right strategic partner to every startup. Therefore, founders have to dedicate time to do their homework once again in order to decide on helpful, strategic investors. Additionally, with the incubator usually being one of the first investors, founders should also consider if all people involved are capable of contributing to a fruitful collaboration. A prerequisite to gathering and using the aforementioned knowledge certainly is to regularly assess current and upcoming needs as well as the implications every new relationship or new network access can have for the startup itself. They should constantly ask themselves, how can this – really just anything – be of advantage to my startup in the future?
A constant battle between daily doing and meta level assessment arises that requires the founder not to loose touch of operations just like the overall strategy, both of which demands time, focus and foresight; variables that may seem contradicting, yet necessary, at first sight.
Continuous learning cycles can help founders and programs to prosper
With all these challenges arising for the startups when selecting and entering an accelerator or incubator program, it remains open to question what we can learn from it. Or more specifically, what can both Berlin startups and Berlin-based programs do to separately and jointly act upon it? Berlin is still a comparably young startup ecosystem and joint learning can only contribute to it quickly becoming a prospering one.
In this, a key take away for the startup founder is to establish a routine of assessing their startup’s needs and to align these with what the respective programs have to offer, both explicitly and implicitly. And the program coordinators who see a variety of startups come and graduate, should continuously collect, and evaluate the insights gathered in order to learn from these. They see what benefits led to what outcomes, which startups failed, which ones survived, and why they did so (see for instance: startupclass.samaltman.com). Consolidating and transmitting that knowledge to the incubated startups can help all parties to benefit in the long-term.
In sum, by consciously implemented learning cycles, incubator programs in Berlin may eventually lead to just as many startups still in business as in the case of techstars.
Hansen, M. T., Chesbrough, H. W., Nohria, N., & Sull, D. N. (2000). Networked incubators. Harvard business review, 78(5), 74-84.
Colombo, M. G., & Delmastro, M. (2002). How effective are technology incubators?: Evidence from Italy. Research policy, 31(7), 1103-1122.
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