With an explosion of incubators and accelerators trying to nab promising new companies, some programs are specializing by product or industry
When Y Combinator accepted its first startup cohort in Cambridge, Mass., in 2005, no one paid it much mind. A decade and 800 companies worth a collective $30 billion later, every budding business or team of founders worth its seed capital goes through an accelerator.
These programs provide startups with the mentorship and resources they need over a fixed period of time to successfully “graduate” or launch into the market. Y Combinator is still the best-known accelerator in the world, but its success and that of other startup-supporting organizations has led to an explosion of similar offerings.
To distinguish themselves from the crowd, some accelerators are choosing to focus on startups in particular sectors or industries. Sean Wise, associate professor of entrepreneurship at Ryerson University and host of the Oprah Winfrey Network show The Naked Entrepreneur, invokes political philosopher Adam Smith to explain the phenomenon: Massive market growth eventually leads to market specialization. Wise thinks it’s a positive development on the whole. “Specialization allows for economies of scale to occur, and allows the accelerator to build relationships with large corporate players.”
Here’s a simplified path a startup would take through an accelerator and how some of the new breed of specialized organizations tackles the process differently.
1. Find a great idea
Before the programs start, accelerators must weed through the applications of entrepreneurs and startups to pick a fixed number of enrolees. Many have exacting requirements.
What: Gaming studios
Length: 4 months
Terms: 6% equity, plus 0.16% for every $1,000 in funding up to $50,000
Notable alumni: Outerminds, Norsfell, Lightning Rod Games
To enter Execution Labs, promising video game studios must have a core team of at least three people, with at least one person focused exclusively on programming or technology, one designer or creative director and one business-focused member.
2. Identify who your customers will be
Disney Accelerator (in partnership with Techstars)
Where: Los Angeles
What: Consumer entertainment and media technology
Length: 13 weeks
Startup Capacity: 10
Terms: $100,000 for 6% equity
Notable alumni: Sphero, Tyffon, MakieLab
Working closely with the House of Mouse and understanding its needs can lead to future opportunities: When Disney was looking for a company to build a toy version of the BB-8 droid from the upcoming Star Wars movie, it picked Sphero, an accelerator alumnus.
3. Identify what makes your product unique
Where: Washington, D.C.
What: U.S. federal government
Length: 6 months
Terms: Fee of $130,000–170,000
Government requirements are unique and inflexible, so Dcode42 assesses the technology of enrolled startups for compliance on a number of indicators, including privacy, accessibility and security, and helps modify them as necessary.
If the idea is good enough, potential customers will be lining up to buy it. At this stage, Wise says you should be collecting purchase orders, building a community and finding a sales channel for your products.
What: Enterprise SaaS
Length: 9 months
Startup capacity: 6
Terms: 4% equity if the startup raises an investment within 15 months of launch
Notable alumni: Punchtime, Zination
Most accelerators have a heavy mentor- ship component, but L-Spark embeds experienced executives into the teams of enrolled startups during a portion of the program for maximum impact. Among the advisors available are sales process experts, who help companies build channel partnerships.
5. Make a prototype
Where: Shenzen, China & San Francisco
What: Hardware and the Internet of Things
Length: 111 days
Startup capacity: 15
Terms: $25,000 for 6% equity
Notable alumni: Palette, Helios, Particle
Bartesian, a single-serve cocktail company based in Waterloo, Ont., enrolled in Hax last year. Bartesian co-founder Bryan Fedorak says the Chinese location made a big difference. “It’s way less expensive and way faster to prototype there,” he notes. “Where our office was located, you could just go down to the building across the street and there’d be every component you could ever dream of.”
6. Sell to early adopters
Where: San Francisco
Length: 6 months
Startup capacity: 16
Notable alumni: MightyHive, Assemblage, Matternet
Alchemist arranges one-on-one meetings between startups and customer prospects, most of which are Fortune 100 companies. If the big firm’s problem and the startup’s solution line up, there’s the potential for a proof-of-concept pilot project.
7. Promote it
What: Web, mobile and SaaS
Length: 12 weeks
Startup capacity: 20
Terms: $50,000 for 6% equity
Notable alumni: Oohlala, Transit App, Vanhawks
FounderFuel’s mentor pool includes a who’s who of the Montreal tech scene, as well as executives from top ad agencies and media companies in the city. Startups can control their marketing costs with a bevy of perks and discounts for services like 99Designs and MailChimp.
8. Demo it
Finally, it’s time to “show the community your success to date,” says Wise. Presenting beside your fellow start-ups from the program, you’ll meet potential investors, customers and partners drawn from your accelerator’s sponsors, networks and alumni. Plenty of funding deals and big contracts get done at these events.
Target Accelerator (in partnership with Techstars)
Where: Bangalore, India
Length: 5 months
Startup capacity: 5
Notable alumni: Unbxd, Torch
Among the visitors to the accelerator’s first ever Demo Day last year was an executive many of the presenting founders must have been eager to pitch: Target’s president for Target.com and mobile, Jason Goldberger
This article is from the December 2015 issue of Canadian Business.Subscribe now!
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Originally appeared on PROFITguide.com