It always starts with two interconnected things – a business idea and a dream ! Unfortunately, in many cases, start-up ventures end in failure. To avoid this, you can take your ‘idea and a dream’ through bootcamp. Bootcamp in this case means either an Accelerator or an Incubator. They are not the only ways to fund or grow an idea but they are certainly very viable ones that should be considered by a founding team. Both, accelerator and incubator, are related in function, yet have a different time frame and have slightly different ideal entry points. Which is the right one for your idea and situation?
An accelerator, as the name suggests, helps by giving a real turbo boost to an idea. In most cases, the founding team is being provided with a ‘booster package’ consisting of office space and expert mentoring for a short period of time, usually around 2-4 months. Often the accelerator will also give some seed funding, all in exchange for a piece of the pie – a share in the company, usually ranging anywhere from 5-15% (anything beyond 20% at this point is quite excessive but it does happen).
As 2-4 months is a fairly compressed time frame, accelerators tend to put a strong focus on the ‘team’, not just the idea.
A founding ‘team’ is considered much more robust and prone to success than an individual.
The quality of the team next to the sustainability and scalability of the idea and business model, is the deciding factor for successful accelerators. In other words, a more experienced founding team is preferred.
In terms of opportunities, both the accelerator and start-up can clearly benefit if the overall match is right. For the start-up, having access to professional mentors and a vast business network can shorten the usual lengthy business development phase into only a few months. At the end of those few months, the idea has been either validated and is ready for a first real round of funding, or it has failed validation and will not be taken further. For the accelerator, it is also a way to cash in relatively quickly on high-potential ideas and founding teams.
An incubator provides similar services but its environment is slightly more nurturing. One big difference is the time frame which is clearly longer than that of an accelerator. It can range anywhere between around 9 months to 3 years or more. Due to its longer time frame and more nurturing quality it favors younger founding teams with less business acumen and experience.
The service package of an incubator usually include office space, mentoring and networking opportunities as well as access to investors. Well developed business plans are very welcome but as the idea is the most vital aspect of the equation, even below par presentations and written plans have the chance of passing. For an incubator, it is vital to select high-potential start-ups with little experience but sustainable business models.
THE RIGHT CHOICE
As you can see, there is quite a strong overlap between incubator and accelerator, with the later clearly favoring more seasoned founding teams. In terms of seed funding, both incubator and accelerator may provide it in exchange for equity in the start-up. Next to the financials, though, having access to mentors and a professional business network are clearly the key merits of both types of booster programs.
Researching the quality of mentors as well as suitability of the individual business networks including tie-ups with venture capital firms is probably the most important task to be completed in successfully selecting the right booster path.
Just last week we had the chance to attend a presentation of accelerator & incubator ‘hub:raum’ during the ‘Start-Up Safari’ days in Berlin. Next to offering both an accelerator as well as incubator program, hub:raum is very unique as it is directly tied to Germany’s biggest telecom provider ‘Deutsche Telekom’. This opens up a whole new dimension for start-ups that are accepted as they can fall back on an unrivaled national and international business network and reputation. For Deutsche Telekom, having their own in-house incubator and accelerator gives them access to new technologies, ideas as well as a more dynamic style of thinking – it provides a fresh breeze for the more established culture of such a giant corporate.
Entrance lobby of hub:raum Berlin including a cafe and social area.
Both, the accelerator and incubator provide co-working space and mentoring, as well as access to the vast Deutsche Telekom network. hub:raum describes its accelerator program “as an academy with mentoring by experienced entrepreneurs, workshops by experts and meetings with Telekom Business Units & hub:raum Partners.” Its goals for the incubator program are “to produce sustainable businesses by providing you with financing, mentoring, co-working space and a pragmatic access to corporate levers.” As part of the incubator program, financing between Euro 100,000 – 300,000 is provided for a 10% equity share in the start-up. The incubation period is set to between 9-12 months, whereas the acceleration period lasts 3 months.
Program Services and Merits
Explaining the program cycle.
Every accelerator or incubator usually has an industry focus. hub:raum is especially interested in some of the following areas: Telecom & Connectivity, Cloud based Business Solutions, Mobile Payment and Commerce, Advertising Technology as well as Device and Access Security. Start-ups from anywhere can apply to be considered for either of hub:raum’s programs. The application process can be completed online, however, a personal introduction is highly recommended and probably necessary to be seriously considered.
Some of the investments of the Berlin office of hub:raum as well as current participants.
TJ Bruder Berlin Office
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