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Incubators, Accelerators & Co-Working Spaces
BRIDGING THE GAP BETWEEN IDEAS & RESULTS
Content
1) Introduction
2) Why Create an Incubator, Accelerator or Co-‐Working Space
3) Incubators
4) Accelerators
5) Internal Corporate Accelerators
6) Co-‐Working Spaces
7) Creating your own Incubator, Accelerator or Co-‐Working Space
IntroductionOver the past 10 years we have seen a significant rise in the number ofIncubators, Accelerators and Co-‐working Spaces cropping up across the globe.This has largely been due to a rise of investment in the startup scene, drivenpredominantly by innovations in the mobile, online and digital space.
Incubators and Accelerators aim to help startups mature to a point wherethey are viable to attract significant investment. They are very selective in theStartups they accept because their main source of income is based on anagreed share of future profits generated by the startups which becomesuccessful businesses.
Co-‐working Spaces have also become a lot more common due to the rise inthe Startup scene, as small businesses seek to work in shared workenvironments which are cheaper than dedicated office space.
As we enter the so called ‘4th era of Innovation’ corporates are feeling a greatnecessity to Innovate. Large corporates, in their aspiration to innovate likestartups, have realized that they can leverage the lessons, tools andmethodologies developed in the Startup scene to drive their own innovation.As a result corporates are developing Internal Corporate Accelerators.
The following deck is intended to introduce you to some of the commonconcepts which are fundamental to these different Programmes. In this fastmoving age of Innovation it is critical for any aspiring entrepreneur orbusiness to be aware of and understand this particular landscape.
Lets begin…
Why Create an Incubator, Accelerator or Co-Working Space
There are various reasons why a business, government, research institute or group of entrepreneurs mightwant to establish an Incubator, Accelerator or Co-‐Working Space. Below are just some of the reaons. Thereason or ‘the Why’ will ultimately dictate which Programme is adopted as well as the exact business modeldeveloped. It is therefore important to start with theWhy.
A CSR Programme
Social Incubators and Co-‐Working Spaces are createdby company CSR programmes and governments inorder to empower and uplift under-‐developedcommunities. They serve as platforms forcommunity members to work with mentors andinvestors to identify opportunities and solveproblems whichexist in their communities.
A Semi Independent Corporate Capability to Focus on Radical Innovations
Businesses create Corporate Incubatorsand Corporate Accelerators to create aninnovation capability free from thebeuroctratic and BAU contraints of theparent Company. This gives them thenecessary freedom to take calculatedrisk and be measured against a differentset of performance indicators.A Business
Because you see it as a business opportunity and youare passionate about empowering promisingbussinesses and entreprenuers. Well run Incubatorsand Accelerators can be highly succesful businesses.Uber and Linkedin are well known examples ofcompanies which came out of Acclerators which arenow highly respected and succesful in their ownright.
Drive Growth and Economic Prosperity
Incubators, Accelerators and Co-‐WorkingSpaces are often set up in specificlocations as part of a strategy to drivegrowth.
IncubatorsIncubators run time-‐boxed programmes for promising young startups. The application process to get into an Incubator isusually very competitive. Incubators work with the startups in their programme to get them to a point where they are readyand worthy of further investment from anetwork of Angel Investorswhich is associated with the Incubator.
Tip 1 Adapt the model to the realities of your region, if none exist, build a new one.
Tip 2 Acquire the best expertise. You will be shaping peoples lives.
Tip 3 Establish a healthy ‘online’ & ‘offline’ network of Investors and Entrepreneurs.
Angel&Investors
StartupSeed$Funding$10,000.$20,000
Initial$Equity$+/. 6%
Share$of$Initial$Equity
Fee$foraccess
Angel&InvestorsStartup
Angel&Investors Startup Mentors
Salary
Incubator
Successful&StartupsReceive&further&Investment
Angel$Investment
Further$Equity$Share Negotiated
Incubator&Cash&and&Equity&Flow
1.$Startup$gives$up$initial$equity$to$Incubator$+/. 6%2.$Angle$Investors$Pay$Incubator$to$get$access$to$Startups$at$the$end$of$the$Incubation$Process3.$Share$of$initial$equity$given$by$all$the$startups$allocated$to$Angel$Investors$4.$Seed$funding$given$to$Startups$to$develop$ their$business$ in$the$incubator$$10,000$ . $20,0005.$Depending$on$whether$Mentors$are$volunteers$ or$employees$ they$will$be$paid$a$salary6.$Startups$who$manage$to$secure$Angel$Investment$after$from$their$time$in$the$Incubator$give$up$further$Equity$to$Angel
1 2
3 4 5
MentorshipWorkshopsHackathonsExposure&to&Network
Value&Proposition&of&Incubator
. Mentorship$ to$early$stage$start$ups$and$entrepreneurs.$. Developing$ startups$to$the$point$where$their$$business$ ideas$are$eligible$for$Angle$Investing.$. Delivering$Investment$Ready$Propositions$ to$Angel$Investors
Methodologies&Used
. Lean$Startup
. Customer$Development$Cycle
. Minimum$Viable$Product$Development
. Rapid$PrototypingCash$Flow$&$Equity$out$of$Incubator
Cash$Flow$&$Equity$into$Incubator
6
3I6&Month&Programme
Accelerators exist to catapult late-‐stage startups, whether they have been incubated or not, to exceptional heights.Through an intense programme they help prepare startups for ‘Series A’ funding which is usually provided by VentureCapitalist firms. There is a far greater focus on Business development in Accelerators as compared to conceptdevelopment during incubation.
Accelerators
Tip 1 Ensure you are tapped into online platforms where VC firms can find you.
Tip 2 Ensure that Startups have at least one paying client by the end of the Accelerator to prove that it is client-‐ready.
Tip 3 Ensure your Accelerator has adequate resources to enable the rapid development of Startups.
VC#Fund
Startup
VC#FundsLate#Stage#Startup
Late#Stage#Startup Mentors
Some%pay%Mentors,%others
Don’t.
Accelerator
Successful#StartupsReceive#VC#Investment
VC%InvestmentFurther%Equity%Share%and%Profits%Based%thereupon
Accelerator#Cash#and#Equity#Flow
1) Take%Equity%from%Startups%accepted%into%Programme2) Receive%a%Management%Fee%from%the%funds% linked% to%the%
Accelerator3) Capital%is%provided% to%startups%to%develop%during%
Accelerator%Program4) Payment%of%Overheads%such% as%Mentors%and%Premises5) Startups%which%receive%further%VC%funding% give%up%
further%equity%to%VC%fund.%Those%which%go%on%to%be%successful% share%profit%according%to%equity%shares%to%VC%and%back%to%the%Accelerator.
1 2
3 4
Value#Proposition#of#Accelerator
P Provide%Startup%with%Credibility% by%virtue%of%its%participation%in%the%Accelerator.
P Help%Startup%develop%their%pitch%to%Investors.
P Prepare%Startup%for%its%first%CustomerP Provide%Startup%with%Legal%advise% including,%due%diligence,%Intellectual%Property,% Term%Sheet%Negotiations,%Valuation.
P Provide%VC%firms%with%viable% and%mature%Startups,%ready%for%Series%A%funding.
Cash%Flow%&%Equity%out%of%Accelerator
Cash%Flow%&%Equity%into%Accelerator
53#Month#Programme
Business#MentorshipWorkshopsExposure#to#VC#Network
Often%VC’s%demand%a%seat%at%the%table%of%a%startup
Fund#Managers+/P20%%of%Funds%gains$18P$20,000%
Capital%provided
Management%fee
AcceleratorProfit%or%‘Exit%Share%’According%to%Initial%Equity%Share
Internal Corporate AcceleratorThe Internal Corporate Accelerator is a special class of Accelerator. It is formed as a semi-‐independent function of a parentcompany and is focused on generating ideas, testing these ideas using methods such as rapid prototyping and the customerdevelopment cycle and then further developing successful prototypes into products and sometimes separate businesses.Corporateaccelerators should operateas semi-‐independent entities, free from the daily constraint of Business asUsual (BAU).
Tip 1 Must ensure that corporate accelerator is well networked outside of the parent organization.
Tip 2 Funding for projects should be appropriately sized at different stages of development.Not too much and not too little.
Tip 3 Ensure that the leaders and Mentors allocated are the right people for the job. This may require external hires.
Value Proposition of Corporate Accelerator
-‐ A structure relatively free from the day to day constraints of BAU
-‐ A place to test ideas and fail fast-‐ New streams of revenue from spinoff
products and businesses-‐ Enables the realisation of an innovation
mandate.-‐ Radical and disruptive innovation-‐ Give an organisation the ability to
adopt the lessons learnt from the startup sector to drive and implement new ideas.
Methodologies
-‐ Rapid Prototyping MVP-‐ Customer Development Cycle-‐ Lean Startup
Internal(Corporate(Accelerator
Parent(Company
Portfolio(of(spinoff( products( and/or(businesses
Dedicated(Budget(Allocated(Accelerator(can(motivate(for(more)
Incubator(given(relative(freedom(to(allocate(between(projects
Share(of(Profitsreinvested(in(Accelerator
Share(of(Profits(Taken(by(Parent(Company
Co-working SpaceCo-‐Working Spaces are about creating a vibrant community for small businesses and entrepreneurs wherethey can work and if desired network and collaborate with each other. Co-‐working spaces provide all theinfrastructure and services of a fully equipped office space. These resources are shared by the occupyingentrepreneurs and business who all pay rent to theowners of the space.
Tip 1 Engineer the facilities and services on the real needs of the local entrepreneurial community.
Tip 2 Geographical Location is critical. Ensure it is located near an existing community of Entrepreneurs or has good transport links
Value Proposition of Co-‐working Space
-‐ Bringing creatives and business people together to create a vibrant multidisciplinary community.
-‐ Some have a focus on social upliftment, in which case they provide a shared office & or studio/workshop infrastructure that would otherwise be lacking in the community.
-‐ Provide local community of Entrepreneurs with Seminars, Workshops, training, networking, hackathons.
-‐ Hot desks for daily, weekly, monthly, annual rental.
Tip 3 Offer services based on the real needs of the entrepreneurial community
Co-‐working Space Cash Flow
1) Co-‐working Space receives rental.
2) Some Co-‐working Spaces receive Subsidization
3) Main expense for a Co-‐Working space are overheads
Co#working*Space
Government*or*CorporateBusiness,Entreprenuer,* Freelancer
Overheads
Some*Co#working*Spaces*are*subsidised*but*usually*they*are*private*and*independent*businesses
Rental*+*Service*Fees
SeminarsWorkshops.Training.Hackathons
Rental,*Staff,*Essential*Service
1 2
3
Creating your own Incubator, Acceleratoror Co-Working Space
Create a model for your local context
It is important to recognize that the exactbusiness model which you use and valueproposition you offer should fit the constraints,challenges and opportunities of your availablenetwork of stakeholders. You cannot simply cutand paste a successful model from elsewhere inthe world and expect it to work.
Create a clear vision and plan
-‐ Ensure you have a good value proposition for all stakeholders involved.
-‐ Design your model and Business plan. Include a good Digital Strategy.
-‐ Assemble the appropriate capabilities: business analysis, prototyping, Technical capabilities, Entrepreneurial Credibility and Industry Experience.
-‐ Build a strategic network of Entrepreneurs, Investors and Educators.
Grow organically
In the case of Corporate Accelerators It is always bestto start with at least one project identified as havinghigh potential and developing an accelerator aroundit. Allocate the relevant people and team to optimisesuccess. Thereafter allow the accelerator to groworganically according to what works and whatdoesn't’t. Do not make the mistake of thinking thatby creating a magnificent space, great ideas willnecessarily follow and be successfully accelerated.This almost never happens
Work hard to find the right people to work with you in creating a success
The strengths of your partnerships will define your success. Reputation is key to the success of Incubators and Accelerators.
Get in contact for advise on how we may be able to assist you in creating an Incubator, Accelerator or Co-‐Working Space. Tel: +27 11 463 2205
Contact us
24 Peter Place, Lyme Park, Bryanston, 2191, South AfricaTel: +27 11 463 2205Email: [email protected]