In search of comprehensive expertise, founders sooner or later consider collaboration with an incubator and/or accelerator. But the trouble is that those who are far from the venture capital market or start-ups often mistakenly believe that these organizations are almost identical (if they know about their existence in principle). This is a serious misconception that we will try to “eliminate” with this material.

First the Incubator

The first and most fundamental difference has to do with the stage of development of the accepted projects: incubators usually admit startups at the idea stage, when the project founders just begin to discuss the future business model, look for a team of like-minded people, study the market, and think through the architecture of the realized solution. In their turn accelerator take more mature startups-usually at the prototype or MVP stage or if they have their first users, preferably paying ones as well.

Most incubators are spaces where entrepreneurs get a workspace, mentorship support, access to private events and other valuable resources through which they learn how to build and grow a business from the ground up for a monthly fee.

Incubators typically do not charge for their services, but they do not provide funding either. Their main goal is different: not so much to give startups cheap office space, but to help aspiring entrepreneurs avoid rookie mistakes and thereby increase the survival rate of businesses at the earliest stage.

Once the funder(s) bring the startup to the incubator, they typically build a prototype or MVP, build a team backbone, and prepare to bring the MVP to market. Then the company grows and the value of the incubator starts to drop.

There is no universal algorithm for knowing if a project has outgrown the incubator level-usually it’s a story about how the founders feel. If you feel that the offered space is already too small for your growing company and mentors’ advice seems to be more and more banal, it is time to decide for the next step – to move to the first own office and to start free floating.

Then the Accelerator.

If, having made this very important step, the founder feels the need for further mentor support and assistance in further development and promotion, he should think about going through an acceleration program-study the local and international market and choose the most attractive options (as a rule these are either acceleration companies with a reputation, or narrowly focused acceleration companies offering very deep expertise in their industries).

Accelerator are programs that give the company individual mentorship and access to a network of partners during the course of the program. These programs typically last from 3 to 6 months and end with a demo day in which the projects pitch to investors, marking the beginning of a fundraising campaign.

Classic equity accelerator typically invest in selected companies at the beginning or during the program (usually amounts in the order of $50-100K) in exchange for a share (usually 3-10%). The exception is accelerator that work on the non-equity model – they do not give financing and do not take a share in the project, but startups have to pay for most of the programs (except for non-equity accelerator financed by the government and/or universities).

In fact, the main task of a accelerator is to help the project find the points of explosive growth and prepare it for institutional money: to find the right and scalable business model, to test the channels of attraction, to crystallize a plan for exponential growth.

The biggest and best-known accelerator are Y Combinator (among its outgrowths are Reddit, Airbnb (attracted more than $4.4 billion in investment), Dropbox (IPO at $9.2 billion) and 500 Startups (Twilio (IPO at $1.2 billion, valued above $18 billion as of July 2019), Behance (bought by Adobe for $150 million)). On their heels is Techstars (Rover.com (valued at $970 million), SendGrid (bought for $3 billion)).

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You won’t get it right the first time. Only a persistent series of attempts and tests of hypotheses approaching infinity. Do not believe the nice stories about “you sat down, wrote the code in 24 hours, and tomorrow you will be rich”. If it happens, it’s by chance and luck. And if you plan to build your startup on luck, you will quickly fall apart. This topic is worthy of a separate article.

Don’t be afraid to not pay a salary / offer to work for free.

There are plenty of young (and not so young) people around who spend their free time away from their main job on bullshit. They better spend it on your bullshit you call a startup. All you have to do is convince them of that. Paying your friends and relatives is really fucked up. At some point you can start paying a little bit, but do it right, taking into account the value per hour spent. This, too, is a topic for a separate text.

Don’t be afraid to offer to buy a product to customers and get rejected.

The most effective way to figure out if a product is useful to someone you make is to try to sell it. People buy crap every day, transfer money to scammers, and trust MLM schemes. There will always be someone who will buy the very thing your startup produces. 100 rejections and one sale will give you more value than “constantly sawing the product” to some kind.

Don’t be afraid of reversals (“pivots”).

A startup should become a business, and business is about money. The product has to be flexible and adapt so that it brings in more revenue, even if it changes it beyond recognition. If the market forces you to start making smart masturbators instead of a smart home system, that’s the way to do it. And you have to treat this product like a child, present it as if you’ve been sick of it all your life and it’s your destiny. If you’re not ready for that – go to work for hire, don’t waste your life fulfilling false dreams. Money should make money, only infobusinessmen, who just make money on you, put other faith in your heads.

Don’t be afraid to admit your mistakes.

Budding startups think it’s important to always be successful and not show your mistakes. The smart ones know that admitting mistakes and conclusions sell you better to investors, just do it right. But the most important thing is to admit mistakes to yourself and to your team. The sooner the better. This teaches you to avoid them in the future and to avoid misunderstandings and the collapse of the project. Many startups fall apart because the founders couldn’t agree, and the culprit is an unwillingness to give in and admit that you’re the bottom.

Don’t be afraid to optimize.

Most likely there will come a situation where money will not be enough. Your habitual way of life may be in jeopardy, and that may be a reason to drop everything. It’s worse when founders are entrusted with this as a fatal setback and an indicator of their incompetence. It’s not. Shit happens. And you have no idea how budget friendly a person can be for a while. Be smart about optimizing your spending – it’s also an investment in your future. It might even teach you more financial literacy.

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