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How to choose the right step for your startup

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If I were to start a company today, I would be overwhelmed by the wide selection of incubators and accelerators to join. How can you decide which one to join?

I recently spoke on a panel at the SBR 20 Hottest Startups Panel Briefing with Kineret Karin (founder of ImpacTech), Michelle Woo (program head of Oracle), and Kumaran Pillai (founder of Apple Seed Venture Accelerator).

The topic was close to my heart, as I’ve spent the past six years incubating and investing in startups and running accelerator programs.

The topic was close to my heart, as I’ve spent the past six years incubating and investing in startups and running accelerator programs.

(L-R) The panel moderator, Michelle Woo (program head of Oracle), Kineret Karin (founder of ImpacTech), Kumaran Pillai (founder of Apple Seed Venture Accelerator), and Elise Tan (funding manager for Entrepreneur First)

If you’re considering to join an accelerator, here are three takeaways from the panel that can help with your decision.

Financially-backed or corporate accelerator

The first question addressed to the panel was regarding the pros and cons of joining a financially-backed or corporate accelerator.

Because each of us either represents one or the other, we had different takes on the topic. (Disclosure: Entrepreneur First (EF), which I represent, is a financially-backed accelerator.)

Beyond the pros and cons, I think it is more important for entrepreneurs to consider their objectives of joining an accelerator. Have they found a co-founder yet? Do they know how to build a business on their own?

For example, some benefits of joining a financially-backed program include finding skilled and experienced co-founders, learning how to identify a feasible and defensible business idea, and getting funding to realize their ideas. The inherent disadvantage is that financially-backed programs take an equity stake in the companies they back.

On the other hand, if your objective is to engage corporate customers on proof-of-concept (POC) pilots or access certain networks and resources, you may find corporate accelerators particularly helpful.

Some corporate accelerators like Oracle, Microsoft, and Google also do not take equity in the participating startups. But of course, there are also shortcomings, like having a shorter period of time for dedicated support. You may also have to provide them with the first right of refusal when you create a new product or start commercializing.

Pillai described that even the objectives of the two types of accelerators differ. Usually, financially-backed programs focus on providing hands-on support to help startups do well, while corporate accelerators usually focus on building additional business streams or identifying new technologies.

Early-stage startups and accelerators

“We are now running our second cohort,” Woo says. “Companies which are at an early stage may not benefit as much from the program. To have the bandwidth and ability to turn around for POC projects in a short amount of time it is not going to be easy for early-stage companies.”

I agree with Woo on this because I used to run corporate hackathons and accelerator programs at the National University of Singapore (NUS). It is challenging for early-stage startups to work with corporate sponsors to complete their POC project within a short time (six months or less).

But Karin shared that early-stage startups need more assistance and guidance, and that accelerators could be their “one-stop shop” and “shortcut” to domain experts. She also shared that having peers that are “going through the same phases” can be a bonus.

“Your challenge today is another one’s challenge tomorrow,” she says.

Measuring potential returns

One thing we all briefly shared on is whether our accelerators take equity. But I would suggest that a better way of making your decision is to consider whether the equity stake (or other factors) is justifiable depending on your potential returns.

The Oracle Startup Cloud accelerator, for example, does not take any equity, but it also does not provide cash funding, as it already provides facilities, expertise, technical advice, and cloud service access.

EF, on the other hand, takes 10 percent equity in return for de-risking the startup process, helping to build a startup’s businesses from scratch, and investing S$105,000 (or ~US$76,000) in them.

So, it’s generally good to look at the following factors:

  1. The type of support you’re getting from the accelerator (e.g. are they helping you find a co-founder, build a defensive and scalable business, and raise funding?).
  2. The percentage of founders that manage to raise a seed or angel round after graduating from the accelerator.

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According to a survey by the NUS Entrepreneurship Centre, nearly half (47.9 percent) of Singapore-based startups have tapped on support schemes like mentoring, incubation, and accelerator programs for their growth requirements in 2017.

At the end of the day, choosing the right one depends on the industry of your company, the type of support you are looking for, as well as your company’s development stage.

TheTechTea
TheTechTea is an indian online focusing on the tech industry. TheTechTea specifically reports on the business related to tech, technology news,Gadgets news analysis the latest trends in tech, and profiling of new tech businesses and products.

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