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By: Ronda PaynePublished On: March 3, 2020
Starting a new business is risky. That risk doesn’t mean you don’t have a great idea or that you don’t have entrepreneurial skills, it’s just that the odds of start-ups succeeding aren’t great due to a wide range of reasons. According to the website Small Business Trends of all businesses that started in 2014, just 56% made it to the fifth year. Another site, Failory.com, which actually studies business failures, estimates the failure rate of start-ups to be as high as 90%.
So what can you do to ensure your business idea has a better chance of succeeding? One option is accessing help through start-up incubators and accelerators.
While these terms may sound odd, they are actually good descriptions of what each type of program does.
Generally speaking, incubators are programs designed for very young businesses where ideas, support and information are needed to bring the core business concepts together to start the company’s growth. Think of it like a chicken’s egg in an incubator. The egg needs the incubator’s heat in order to create growth and ultimately hatching so the chick can emerge and walk around on its own. In the same way, you want to increase the amount of knowledge and information you have in order to get your business going and growing.
Accelerators are for businesses that are already formed and are in their early growth stages. Like a car that is ready for travel, you push down on the accelerator in order to go farther, faster in a vehicle that is already set for the trip.
Many incubators and accelerators are specific to the market segment. Meaning, someone who has a tech company that benefits agriculture may be able to access help in the tech space, the agriculture space or in an ag-tech incubator or accelerator program. Some of these programs are involved in funding new businesses in addition to providing tools, resources and education while others are specific to mentoring and networking only, but with the goal of offering information and contacts necessary for business success.
This is where the differences come in. Business ready for an incubator is just launching and is determining procedures and goals. Incubators often provide shared office space, access to resources, mentorship and investment opportunities. At this stage of development, an incubator provides a business with the information and tools needed to grow effectively. Some may be non-profit organizations while others may require a portion of ownership in the company.
Accelerator-ready businesses are in need of support to move forward and grow beyond the initial stages of business. This is generally a mentorship program that lasts for a defined period of time, but would be shorter than an incubator program. These businesses need help getting past their early success and moving on to the next stage of growth to run successfully on their own, establish their position in the market and achieve more long-term growth goals. Some accelerators are designed around finding ways to access investors while others are about the mentoring required to find new opportunities and systems to create growth.
Another aspect of accelerators is the common opportunity to present the business at a “demo day” where the start-up investing community has the opportunity to learn more about the businesses, hear pitches and ask questions. Think of this as something like a mix of Dragon’s Den and an elementary school’s science fair where everyone’s ideas are on display.
Anyone looking to start a business is still taking a risk regardless of whether they are admitted to a start-up incubator and accelerator or not. There is always an investment of personal resources such as time, energy and yes, financial capital. No investor will put their money on the line without a business owner taking on the risk of their own. Therefore, to be admitted into an incubator or accelerator program requires putting your own “skin in the game” – meaning you are willing to put your own efforts and resources on the line to do everything possible to make the business work.
Given the challenges inherent in making a business succeed, anything less than a full commitment won’t be enough for a program to accept you. That being said, even when you do put your complete effort into your business and have the help and support of an incubator or accelerator behind you, you still may not succeed, however, your chances for success will be better.
Once you understand the differences and similarities of start-up incubators and accelerators, the real work and research begin. Don’t rush onto the internet and start sending inquiries out expecting to be accepted to the right program immediately. This is the time to get deep into what you see your business doing now, in the next few years, five years in the future, 10 years in the future and beyond. Most programs need a solid amount of information and time to make a decision on your admission.
Start-up incubators and accelerators are looking for the businesses that are most likely to succeed so you must have research to back up your business plans and goals. Also keep in mind that when you are looking to apply to these programs, you will need to tailor your application to their needs. The information in this post is general in nature so it may vary from what you find when you do research on the incubators and accelerators that could be right for your business.
For example, in Canada, there are a number of incubators and accelerators and the majority are designed for tech companies. One in Vancouver is called Launch Academy and it considers itself a “tech hub” with several ways to help companies get started, get a mentor and get growing. One option in Toronto, called Ideaboost, is focused on media and entertainment tech companies and has a one-year renewal to a maximum of a three-year program term. Another one in Vancouver, called Immigration Practitioner Zone, helps new immigration consultants and lawyers build and expand their practice by interacting with experienced practitioners, business professionals, leading experts and other influencers.
Starting a business is both exciting and risky. Fortunately, there are a great number of start-up incubators and accelerators to help create growth and reduce the risk.