Fredrik Grufvisare is a graduate of Uppsala University (Sweden) with two BSc degrees; one in Political Science and Government and the other in Business and Commerce. Fredrik also earned a BComm degree in Business and Commerce from the University of Melbourne. After completing his education, Fredrik worked in sales roles that included Head of Sales for Studentkortet Sverige AB, where he eventually moved into the leadership role as the company experienced disruptive digital transformation and unprecedented growth.
Accelerator and incubator programs are experiencing a time of tremendous growth right now, as governments, universities, and corporate powerhouses seek innovation. It is an opportune time to study this sector of disruption. Explain the difference between an accelerator and an incubator program in terms of the support each type of program offers and the duration of each type of program.
To simplify, there are three areas that define the unique qualities of accelerator programs and incubator programs – startup maturity level, industry or technology focus, and duration required for maximum success.
Incubator programs include startups at a very early stage, focus on viability through a host of capacity and infrastructure development, and are completed within one to five years. Interestingly, there are exceptions based on the stage at which the startup enters the program and the industry it is focused on; for instance, due to the high level of regulatory requirements, startups with a focus on biotech, life sciences, or cleantech tend to have a longer enrollment period.
Accelerators, on the other hand, are in charge of scaling up later-stage companies, focusing on growth through an intensive program with targeted networking, training, mentorship, and investment. At this stage of the game, accelerators are ready to launch dynamic, viable companies within six months.
When it comes to the top three VC tasks – (1) sourcing quality prospect ventures (2) doing due diligence for prospective investments and (3) helping current entrepreneurs – how are these the same or different for an accelerator or an incubator?
Actually, one of our community members answers this best. Abdullah Snobar from the top program DMZ (Toronto, Ontario Canada) sums up their top four directives as, “Connect the program and the client startups with the ‘4-Cs’ – Coaches, Customers, Capital, and the global innovation Community.” We can’t stress enough that there is no one ‘right’ path to success when it comes to creating a portfolio of services as an accelerator or incubator, however these four objectives are a great focus to begin with.
There are many activities that accelerators and incubators go through to meet these four objectives, including events, direct interaction with entrepreneurs, sponsorship recruitment, and networking in the local and global ecosystem. Since the benchmarked programs received almost 80,000 applications in 2018, reaching out for quality startups is an overall strong suit among them.
Using business accelerator and incubator programs as an example, what can GPs learn about creating long-term, productive relationships with founders?
One of the key takeaways from the study is the success at which the programs keep alumni founders involved beyond graduation. They accomplish this by creating a ‘pay-it-forward’ mindset in their entrepreneurs. Some go so far as to make it a requirement of graduation that the startup founder continues to report and check-in with the program or even participate as a coach or mentor for a certain period of time. Most, if not all, programs rigorously track alumni startups for years after they graduate, including this data as evidence of their effectiveness to grow healthy, viable companies when seeking funding, mentors, and new startups.
How do business accelerators and incubators address burnout, stress, depression, and other mental health challenges typically experienced by startup founders?
This is an excellent question and one we have asked startup founders at our top-performing programs. For instance, 1871 from Chicago, Illinois, is the #1 private business incubator in the world. In May of 2019, we interviewed an alumni founder that went through the 1871 program, Matt Meltzer, founder of Sage Corps, an entrepreneurial study-abroad program for college students and post-grads, that works with hundreds of students and international startups each year.
In addition to the expertise on how to run and grow a business and the powerful network 1871 opens to its startups, Matt found the personal interaction with peers, mentors, coaches and staff was a game-changer. The 1871 program made personal, meaningful efforts on Matt’s behalf that had a powerful impact on the success of his company. They introduced him to the right people, in the right place, at the right time – because they took the time to know him and his company.
What does this have to do with mental health, you might ask – I’ll explain. Being part of a community, sitting beside someone else facing the same challenges, and receiving personal, one-on-one attention to detail for the benefit of your success is the magic potion for a majority of the startups enrolled in incubators and accelerators. Now, compare that with an entrepreneur working from the coffee shop down the street every day or even alone in the basement.
This person is an island, without feedback or being able to share experiences and success stories. We have heard this from many successful alumni founders, and believe without a doubt that personal interaction with their peer founders and mentors is crucial.
How do accelerators and incubators gauge when companies are ready to graduate?
This is actually one of the KPIs that we focus on for the benchmark study – the number of startups that left the programs in an operational state, establishing themselves as legal entities. The programs in the benchmark reported over 26,000 graduates from 2014 to 2018.
To answer the question, we’ll turn to top-performing incubator Red de Incubadoras de la Universidad del Valle de Mexico’s Director, Aime Renata Gutierrez Antunez, who said, “Once a venture’s business plan is complete, operating processes are in place, and annual sales grow by at least 10 to 15 percent, it’s time to graduate.” Each program has its own methods to effectively determine whether a new venture is ready to graduate, and the quality of the startup companies hitting the starting blocks out of the benchmark programs is impressive. With an average 5-year survival rate of 64%, startups enrolled in benchmarked programs outperform non-incubated startups by 34 percentage points.
What are the top three qualities emphasized by business accelerators and incubators when the time comes to raise funds for a startup under their wing?
The programs that participated in the study raised a total of more than $12.6 billion over the past five years for client and recent alumni startups. This was achieved with a three-pronged approach to educating startups on what investors want, how funding works, and the experience of their peers. On the program side, the top three qualities would have to be the scalability of the venture (for incubators), the market readiness of the venture (for accelerators), the quality of the team running the venture, and finding an appropriate funding strategy to match.
Who is UBI Global?
Co-founded in 2013 by Swedish student Ali Amin, UBI Global set out to change the way incubators, accelerators and startups interact with each other on a global scale. By creating one of the first global communities for accelerators and incubators, we have established a platform where all major innovation programs can meet through our events, exchange best practices via our social platform UBI Connect, and learn from peers in our publications.
Today, UBI Global is a vibrant community focused on global innovation, with more than 1,200 accelerator and incubator members who represent nearly 40,000 startups across the globe. The UBI Global network is an outstanding source for future innovation across 64 different industries and over 40 technologies. We harness the power of our innovation community and provide innovation intelligence that goes much deeper than startup scouting. UBI Global works with corporations, VC’s and investors on an exclusive, industry-focused basis to pinpoint and identify suitable startups and entire ecosystems of innovation.
What is the World Benchmark Study?
Known worldwide as the gold-standard map of the impact and performance of business incubators and accelerators, the UBI Global World Benchmark Study report is now in its fifth edition for 2019/2020. The new edition of the study includes not only university-linked incubators and accelerators; for the first time, it also includes public, private and corporate programs. The new edition of the World Benchmark Study 2019/2020 is available from the company’s Publications store and is free of charge to members of UBI Global.
For more about the fifth edition of the World Benchmark Study and Report 2019 – 2020, explore the webpage here: https://ubi-global.com/benchmark-study-2019-2020/