Startup + Incubator Dating Redefined
In a startup’s life cycle, the first investment is the business equivalent of starting a serious relationship with a venture capital. Prior to the investment, startups and funds will scrutinize each other through a rigorous process, if it goes well then they will be ‘tying the knot’ in business context. We all know how hard it is committing to a serious relationship.
There is a new relationship blossoming between startups and funds in recent years. Yes, it is the incubator relationship. Incubators are organizations geared towards speeding up the growth and development of a startup by providing industry specific mentorship and access to capital. In recent years, the number of incubators have exploded from a handful to hundreds. Successful incubators like Y Combinator (YC) are well known around the globe.
As an aspiring entrepreneur, I believe incubators are the best launchpads for a startup providing financial and non financial support. They also reduce the enterprise risk through proper guidance. Success rate to get into top incubators like YC is almost 3% which is far less than Harvard’s 6% acceptance rate. This shows how successful and trustworthy incubators have become to startups.
Incubators provide the necessary experience of marriage before the commitment to startups. So it is almost like dating, where the startup and incubator work together for appreciation of startup’s value. You can also learn from the fellow entrepreneurs working at the incubator on their own startups. Even though it sounds like incubators are dating one too many startups at the same, its not harmful like in human relationships. It is also a symbiotic process involving growth of both the startup and incubator through unparalleled exposure to one another. This exposure is not possible with the traditional capital funds or bank loans, that is why startups coming out of committed incubators are usually successful.
During startup’s growth, I personally believe that Intellectual capital is more important than financial capital and that is exactly what any successful incubator should provide. Many entrepreneurs have transformational ideas, but lack in business development or industry relationships to successfully operate their novel ideas. Even serial entrepreneurs can find challenges in departments like design and ethnographic research. This is where the incubators come in, with their vast experience through various verticals and mentors from various industries providing guidance to the budding entrepreneurs helping their dreams become reality.
Though not all the startups might get funded by the incubator, they will be able to leave the nest with superior knowledge in managing their business, and a network of mentors with industry relationships. Sometimes, even the recognition of being incubated in a certain incubator is very valuable. So even if the relationship doesn’t work out, you’ll be better off on a good note. How good is that?
Please let me know your thoughts about growing incubators in India and how they can shape the best startups in the world through comments below.