A startup incubator is a collaborative program where startup execs go to seek mentorship and guidance. They are often tied to venture capital and, thus, are designed to help the startup succeed by avoiding many mistakes common to new business owners.
Entrepreneurs get help refining business ideas in an incubator and can move into accelerator programs where they speed up growth from years to months. Here are some common lessons learned by entrepreneurs working with incubator and accelerator programs.
Build Your Business Step by Step in the Incubator
Many business entrepreneurs have big ideas. While this is a good thing because it inspires big innovations, you don’t want to get stuck waiting for the end goal to be ready to launch. Break the business down into steps so that you can test after you complete each step. Build then test. Then build on that and test again.
Testing helps you identify problems. When done in a step-by-step process, it identifies issues earlier in the process. This is a development concept hammered into entrepreneurs by incubator and accelerator mentors. It’s known as the “iterative process of building” because you look for the various iterations to implement and then test. Each iteration builds upon the last, growing more organically because you’ve been able to change necessary components along the way.
Test All Assumptions in the Incubator
When you start a business, it is normal to have assumptions about things like who your target market is and what the ideal product is. It’s true that most entrepreneurs start their business because they are trying to fill a gap they’ve seen or experienced in the market. But assumptions aren’t always correct, nor do they always have the biggest payoff.
For example, let’s consider a company rolling out a gaming innovation. You may assume that your target market is kids who game regularly. But if you rigorously test your assumption about this, you would survey as many gamers as possible. Your research might lead you to the parents because the parents buy things for their kids. In this case, you need to show the parents the value of your product so that they feel good about getting it for their children.
The sooner you test assumptions and either prove or disprove them, the faster you can develop your product or service. If you don’t test assumptions, you may waste a lot of time and money on something that will not get results.
Talk to People
When you are at pivotal stages of development, it is vital to pick up the phone and talk to people. This might be your mentor so that you can bounce ideas off of him and feel confident that you’re making the right decision. It can also be your target market or potential partners. Have open conversations with them about what they are looking for and whether or not your existing solution meets that need.
Incubator programs recommend talking over email. This helps develop more personal relationships, allows you to have instant follow-up questions, and lets you gain insight from the tone of the conversation. Most incubator and accelerator programs want entrepreneurs who aren’t afraid to pick up the phone.
Aggressively Spend Money on Growth
When entrepreneurs enter an incubator program, they generally get seed money for a small percentage of the company. The incubator will offer guidance and mentorship along with the seed money. A mistake that many entrepreneurs make is to use that seed money for things that don’t put dollars back into the company – things like entrepreneurs’ salaries or extensive supplies.
Instead, entrepreneurs should be spending money on things that will truly move the business forward. This might be developing a prototype, testing assumptions, or creating a website to attract buyers. Whatever it is that you spend money on, it should be something that adds to the company’s assets and not just spending money to look like a business with salaries and supplies.
Make Money ASAP
If you do things right and build the company step-by-step, you’ll be able to generate revenue sooner than later. This is important for fledgling companies who will likely need more than just seed money. Getting bigger financial backing usually means showing that you can make money even if you aren’t profitable just yet. Look for the quick wins to send product iterations into the marketplace so that you can be selling while developing a bigger and better iteration of the product.
Done Is Better Than Perfect
When you’re in an incubator or accelerator program, you need to have the right attitude about your business. While you need to have workable results, you should have the attitude that done is better than perfect. Don’t be a perfectionist and be open to the guidance of the mentors. Remember that you’re working on iterations thus having a working product that you can test is better than having a perfect product that actually misses the target because you didn’t take the time to test things as you moved along.
Master Your Pitch
You likely had to pitch your idea in order to get into the incubator or accelerator. However, you want to keep perfecting your pitch and get really good at communicating your idea clearly to others. Clearly explaining your idea will help you as you talk to your target audience, strategic partnerships, and mentors. Remember that being a part of this program is likely the first step in working with venture capitalists. The better you are at communicating your idea the more people will be able to help you actuate it. Great communication will bode well for your entire entrepreneur journey.
Choosing an Incubator or Accelerator Program
When you’re starting out, getting as much help as you can is essential. Using the experience of successful entrepreneurs helps you avoid critical mistakes in your business. The first thing that you need to determine is whether or not you need an incubator program or an accelerator program. They both share similarities as you get mentorship from successful entrepreneurs, but the incubator is really a place to develop a new idea into a viable product. Think of an egg in an actual incubator. The chick is growing thanks to the environment it is in. This is how a business incubator works, too!
An accelerator is there to speed progress, ideally reducing the time it takes a business to generate revenues and turn a profit. The goal of an accelerator program is to reduce that timeline from years to months. In other words, you’re putting the gas pedal down on actions that generate money.
Understand what you’re getting when you sign up for an incubator or an accelerator. You have to be willing to give up a part of the equity in your company to participate. These programs usually take between seven and 10 percent. For the equity, you often get office space for the time of the program, networking connections, and mentoring. You may be eligible for a more substantial investment at the end of the program.
Take the time to find the right program where you feel that the mentors really believe in your product and that you will have the necessary support to succeed. Not everyone is a fit for every program.