Startup? Can You Figure Out If You Need An ‘Accelerator’ Or An ‘Incubator’?

Considering that the entrepreneur wave is at an all-time high the world over, the ecosystem too has been responding positively to keep up the tempo and give the rising trend a further boost. The fact remains that a majority of startups that are launched fail to survive past the crucial first year and the ‘great idea’ often dies with it. To better their chances of succeeding in the long run, they need handholding at various levels. They require mentorship and understanding of the business which can help them scale up. And to get the necessary support, they now haveangel networks, mentors/advisors and accelerators/incubators to count on.

Accelerators and incubators offer mentorship, capital, seed funding, tech, infrastructural support and everything else they need to build a strong and lasting foundation.  Though both accelerators and incubators serve as enablers for the startup ecosystem, it is important to understand how they differ from each other, so you know which way to go when you reach out for the necessary support.

A business incubator mentors and fosters a company completely in its initial stage by offering office space, business skill training, professional expertise and financial help; essentially offering the necessary advice and infrastructure for the business to stand on its own.

On the other hand, an accelerator plays a pivotal role post incubation and pre-VC funding to enable the startups to build scalability and healthy business metrics. Just like guiding a teenager is the most trying period for any parent, similarly, this stage is very crucial as most new ventures get stuck in the trenches of day-to-day operations and the need for guidance is far from over. In the midst of all the hustle-bustle, drawing up long term strategic plans (that are extremely critical to give a clear direction to the business), takes a backseat. Here’s where an accelerator comes into the picture. Its pursuit is to grow the size and value of a company as fast as possible, and prepare it for the initial round of funding.

Apart from this, the amount of time a company spends in an incubation program can vary widely, depending on a number of factors, but the period is generally longer as compared to an accelerator program, which typically ranges from a few months to a maximum of 1 year. So, while incubators essentially jump start your business and then kick you out of the nest; accelerator programs are more intensive and aim for the startup to raise venture capital fund at the end of the program and therefore, entrepreneurs who adopt this program for their company should understand that it will demand aggressiveness not only from them but also from their teams.

Moreover, some of the accelerators offer seed funding to the startups that come to them for the ‘run for investment program’ and also take a stake in the company. An incubator normally doesn’t offer any funding or take any stake in the company, but offers more of mentorship and shared resources (common office space and other basic infrastructure for startups etc.), without which taking the ‘entrepreneurship plunge’ can seem intimidating. Since most of the accelerators have a stake in the company, they do all-that-it- takes to ensure that the startups they are mentoring are successful, and just like the name suggests, they are able to accelerate the pace of growth and readiness for Series A funding for their startups.  In fact, a good accelerator would handhold a startup from start to exit.

Yet another differentiator is the fact that incubators have much smaller mentor networks as compared to an accelerator network where mentorship could be coming from more than 100 entrepreneurs who are affiliated with the accelerator. Most of them are successful CEO's or investors who are looking to fund the ‘next big idea/company’ or simply to help the local start-up community. They offer expertise in all areas related to a business – marketing, public relations, legal, strategy-making, engineering, accounting, operations and what not – everything that one needs to take the business to the next level.

The advice that one gets from the accelerator community is not philosophical but straight and clear ‘actionable talks’, because everyone there is interested to see the startup succeeding fast, very fast. This community works extensively on building a solid revenue stream for the company because that’s how they can prepare the startup to raise funds. Today investors in India are not just looking for a million-dollar idea or a power point presentation. Rather, they are interested in investing in companies that have already productized their ideas and have a revenue stream, i.e., they are looking for ‘real’ traction.

Reality checks are important for any company to know whether their business model is going in the right direction or not and an accelerator program is built to keep a continuous check on the company’s health.

Considering the immense support and value that both incubators and accelerators add to a startup at different stages in the early phase, there’s no denying that they make the journey far less bumpy for a startup. As an entrepreneur, if you are driven to ‘get it right’ the first time and better your chances of succeeding in the long run, all it takes is to reach out to a credible incubator or accelerator…Who knows, you might just be the next ‘Billion-dollar baby’ in the making! 

For More Details - http://www.ghvaccelerator.com/

Source : INC42. 

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Why are most startups not able to raise Series-A funding?

Most startups, even those who get angel funding or seed-stage funding or investments from accelerators/incubators, are unable to get follow-on funding. Why is Series-A funding so elusive? When Angel Investors invest in a startup, they do so after assessing whether the startup will be able to raise follow-on capital. That’s how they have a chance of getting an exit for their investments.

Why then, are startups not able to raise follow-on capital despite the mentoring and advice they receive from their angel investors or accelerators or incubators? At GHV Accelerator, we analyzed this problem and spoke to investors and startups to understand the reasons. And based on our conversations, we had some very interesting observations. Kindly note that these are reasons of decline by VC’s, even when they believed that the opportunity was large and the concept/product was exciting.

Reasons for startups to not get Series-A funding

(This is in no order or priority, but investors mentioned that they often see at least two of these reasons in angel-funded or accelerator-supported startups that they end up declining)

• The team has failed to build the skill-sets and competencies that are required to take the venture to the next level i.e. some skill sets are missing
•  The venture has not done enough to demonstrate that there is a potential to grow i.e. whilst focusing on developing the product, the venture missed out on building traction as an evidence of the potential
• Lack of defensibility of the differentiator – often lack of IP or anything that can give the company a defensible, unfair advantage
• Lack of in-market validation of the product
• Interestingly, poor product or service was rarely a reason for decline

When we spoke to startups, we realized that most were totally unprepared to engage with VCs. Here is a checklist of what we think startups should be prepared with. Of course, there are a whole lot more things that they need to be ready with, but these are absolutely necessary for even getting follow-up meetings after the initial interaction with VCs – research their past investments, understand their perspectives and thoughts on the market, etc. This helps startups align their thoughts and conversations in line with the VC perspective.

• Understand their investment criteria – some may give more weightage to traction, some to the team, some to market sentiments, some to global opportunities while some may look for domestic focus, etc.
• Understand what they are looking for i.e. the kind of ventures they are seeking – some may be keen on product ventures while some may be open to a services business. Some may look at operationally intensive businesses, while some may not.
• What is the investment scenario – remember startups are ‘competing for capital’ with other startups, even those from completely different sectors than yours – and therefore, it is important to understand the investors view of your sector. (e.g. in the current environment, some VCs are shunning e-commerce ventures while some believe that there is still some potential in verticle spaces, and yet some others are keen to invest in ventures that support e-commerce e.g. logistics, analytics, etc.)
• Be clear on what you seek from the VCs beyond the money – clearly articulate how they may be able to add value – this helps them understand why this could be a relevant investment for them e.g. “You have investments in XYZ and ABC company. Clearly, there are synergies in what we do and two of your portfolio companies. Hence, we believe that your fund will be the ideal investor for us as it will help us leverage some synergies.”

Check the webinar –https://www.youtube.com/watch?v=sy8W75wqAzw

About the Author :

Vikram Upadhyaya, Accelerator Evangelist, GHV Accelerator

Vikram is having diversified experience from Japanese Projects Offshoring to Global Corporate Strategy and New Ventures Turnaround, specialized for the Japan-India Cross Border Business execution.

For More Details - http://www.ghvaccelerator.com/

Source : YOUR STORY 

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Angel Investor Vikram Upadhyaya Launches Green House Ventures (GHV) Accelerator (Economic Times)

Entrepreneur and angel investor Vikram Upadhyaya has launched Green House Ventures Accelerator (GHV), which will fund and mentor startups between the incubation and venture capital stages.

"GHV will house startups at pre-venture capital stage but post incubation," said Upadhyaya, chief mentor at GHV who has invested in companies like Druva, Stayzilla, Merinews, IndiaCollegesearch. "They should have gone through an incubator or passed the criteria of an incubation stage, proof of concept, paying customers, revenues, team in place, and validation of the business model." Unlike others in India, GHV does not work on a batch system. Instead, the sector agnostic accelerator will house 10 startups at a time through a yearlong programme. Each startup will get seed funding up to $ 100,000 in exchange for equity up to 20 per cent.

According to Upadhyaya, the accelerator has received interest from 350 startups, of which 10 will be short-listed over the next 10 months. Entrepreneurs are required to be resident at GHV once a month for a week to get mentored. "We took a flexible approach because these companies already have teams in existing locations. Moving them may be difficult," Upadhyaya said. Alongside, startups will work in a controlledenvironment where specific functions like human resource (HR), finance, market research will be provided by a set of predefined vendors identified by GHV.

"Instead of spending time on all this, umbrella services provided will act as a de-facto department for these companies and is optional to startups," Upadhyaya said. Anurag Kapoor, executive director and co-founder of GHV, will head this side of operations. The intention is to help companies ramp up growth, focus on scale, shorten time to get VC funded, and attract higher valuation. So far, GHV has a commitment from four small and midsized domain experts to act as vendors in the space of market research, finance, HR, and public relations. "This program is going to prepare startups to close Series A in 12 months. Some VCs, which are also mentors at GHV, have shown interest to co-invest with funds in Japan," he said. 

For More Details - http://www.ghvaccelerator.com/

Source : Economic Times. 

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