Do Accelerators And Incubators Serve Themselves Better Than Startups?
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The document discusses the increasing availability of startup support resources like accelerators and incubators, while highlighting their mixed success rates and the challenges they face. It points out three key issues with these programs: inadequate evaluation processes, lack of effective mentorship, and insufficient brand recognition to attract high-quality startups. Ultimately, it suggests that while these support systems promise growth and success, many fail to deliver tangible benefits to the entrepreneurs they aim to assist.
![By Faisal Hoque
founder of:
DO ACCELERATORS AND INCUBATORS
SERVE THEMSELVES BETTER THAN
STARTUPS?
There are now more support
resources for startups than ever.
Trouble is, most oversell and
under-deliver.
[Photo: Rawpixel.com via ShuBerstock]](https://image.slidesharecdn.com/doacceleratorsandincubatorsservethemselvesbetterthanstartups-160121173712/85/Do-Accelerators-And-Incubators-Serve-Themselves-Better-Than-Startups-1-320.jpg)
Do Accelerators And Incubators Serve Themselves Better Than Startups?
- 1. By Faisal Hoque founder of: DO ACCELERATORS AND INCUBATORS SERVE THEMSELVES BETTER THAN STARTUPS? There are now more support resources for startups than ever. Trouble is, most oversell and under-deliver. [Photo: Rawpixel.com via ShuBerstock]
- 2. According to the 2015 Kauffman Index on startup activity, American startups are on the rebound, with approximately 310 entrepreneurs for every 100,000 adults in the U.S. today which translates into roughly 530,000 new business owners coming onto the scene every month. An enGre industry of startup support programs designed to help entrepreneurs beat the odds.
- 3. ACCELERATORS AS FAR AS THE EYE CAN SEE There are literally thousands of startup accelerators, incubators, coworking spaces, innovaGon hubs, government-funded small business associaGons, university programs, and more. AngelList alone shows over 4,233 incubators on offer, while F6s lists some 3,851 accelerators at the Gme of this wriGng.
- 4. And accelerators are just the Gp of the iceberg when it comes to the range of resources available to startups and entrepreneurs. Of course, support programs for new businesses aren’t a new phenomenon. What’s arguably changed quite a bit since then is the degree of confidence we’re apt to place in entrepreneurship as a means to progress and profit alike.
- 5. And despite what one observer characterizes as increasing chaBer about “a possible ‘accelerator bubble’” and skepGcism for “the viability of the accelerator model,” this confidence remains largely intact. It may be true that, as Forbes columnist Brian Solomon writes, only 2% of companies to emerge from even the top 20 accelerators have a successful exit. But it’s also true that some of the leading accelerators, like Y Combinator, TechStarts, and a handful of others, have produced major successes like Airbnb, Dropbox, and Reddit.
- 6. HOW ACCELERATORS EARN MONEY The programs' impact and success rates vary widely, o[en according to how each one is structured, operated, and financially sustained.
- 7. All of them face roughly the same challenge: “How,” as the innovaGon charity Nesta frames the issue, “do you charge a startup/client that has very liBle resources today and may never make money?” Accelerators and other ventures tend to take one of three broad approaches to generaGng income from startups…
- 8. Growth-driven: programs are primarily dependent on growing the startup as it generates revenue from equity Fee-driven: programs charge clients member and service fees as well as rent Independent: programs are supported not by income from startups, but by sponsors, public funds, and events
- 9. This table from the Nesta study breaks down these differences in greater detail:
- 10. THREE ISSUES WITH STARTUP SUPPORT SERVICES While most entrepreneurial support programs try to provide tangible benefits—from funding and mentorship to access to investors—they o[en miss some basics.
- 11. And in the process, unfortunately, they wind up doing a disservice to those they’re ostensibly trying to help, while sGll appearing to jusGfy their own existence. Here are three of the most common issues…
- 12. 1. The evaluation process isn’t scientific enough. Companies in accelerator programs usually create a business plan—a staGc document that describes its market opportunity, products and services. In real life, they rarely holds true during the execuGon phase. In real life, the business plan rarely holds true during the execuGon phase.
- 13. More oOen than not, it soon becomes necessary to reevaluate how a company is doing—checking its growth potenGal while balancing new innovaGon against operaGonal execuGon, developing processes to reach revenue growth while keeping an eye on cash flow, and pushing out a sustainable brand strategy, just to name a few.
- 14. These are big-Gcket, interlocking issues, and it’s tough to fault accelerators, incubators, and all manner of other support programs for failing to evaluate them rigorously. But that failure ends up gecng passed on to clients, which in turn too o[en fail themselves. These programs need beQer ways to consistently monitor every new business team’s capabiliSes and capaciSes to adapt and evolve.
- 15. 2. There’s a lack of real, hands-on mentorship. Any support program can put a list of well-known mentors on their website who agree (for a fee) to provide their advice. The best accelerators develop relaGonships with a select group of mentors who can offer hands-on entrepreneurial experGse.
- 16. The best accelerators develop relaGonships with a select group of mentors who can offer hands-on entrepreneurial experGse. The U.S. Small Business AdministraGon reports that some 70% of small businesses receiving mentoring services survive for five years or more—roughly double the rate of non- mentored entrepreneurs.
- 17. So there’s liBle doubt that good mentorship can make an enormous difference. But when there’s a disconnect between what a mentor can add and what the startup requires or expects, momentum can quickly stall.
- 18. 3. Many programs don’t have the brand recognition to attract high-quality startups. Every support program needs a sustainable pipeline of new companies in order to stay afloat. To date, too many are under-delivering while being propped up by the outsize demand for services.
- 19. As with any other business, accelerators, incubators, and others—especially those that aren’t in the top Ger—need to get their names and messages out there. Brand equity takes Gme to build. A strong, well- jusSfied reputaSon doesn’t come easily or overnight.
- 20. But there are a few places to start. Thought leadership content that creates a sense of differenSaSon, added value, and excitement among entrepreneurs is a good first step. And LinkedIn, Facebook, TwiBer, and other social plahorms, whose uses in the business world are evolving, can help programs build deeper connecGons with entrepreneurs that they can later deliver on.
- 21. So far, many are delivering too great a share of the wins only to themselves, leaving a long road behind them littered with failed startups and sterling intentions.
- 23. Shadoka’s por[olio of offerings enables entrepreneurship, growth, and social impact. Our customers and partners aspire to create sustainable value. They are focused on repeatable and measurable impact. We enable their aspiraGons. We bring together the management frameworks, digital pla[orms, and thought leadership for: • EvaluaSon, execuSon, and monitoring of programs • Scaling sales, revenue, and profitability • CreaSon and management of digital communiSes and marketplaces About SHADOKA Follow us @shadokaventures shadoka.com
- 24. About Me Founder of Shadoka and other companies. Shadoka enables entrepreneurship, growth, and social impact. Formerly of GE and other global brands. Author of several books, including Everything Connects – How to Transform and Lead in the Age of Crea:vity, Innova:on and Sustainability (McGraw Hill, 2014) and Survive to Thrive – 27 Prac:ces of Resilient Entrepreneurs, Innovators, And Leaders (MoSvaSonal Press, 2015). Follow me @faisal_hoque faisalhoque.com