So, you developed a great new technology that has the potential to disrupt your target market. What do you do next? If you are new to the startup ecosystem, it is important to determine which startup resource best fits your needs and objectives.
Incubators, Accelerators and Venture Studios – What are they, and how do they differ?
Incubators are Business Schools for Startups
Business Incubators help entrepreneurs develop the skills and resources they need to turn their innovation into a business.
Incubators may include programmed instruction and workshops or be less formal in their approach. They provide entrepreneurs with resources such as a workspace, mentorship, access to industry experts, networking opportunities, legal and accounting services.
Incubators vary in their business models and costs, but they can range from being fully grant-funded and free for participants to fee-for-service. Sometimes, the provider will take an ownership stake in any new company formed out of their program.
Business incubation programs often include access to investment funding or provide support when seeking initial pre-seed financing. However, these funds are generally insufficient to materially advance the opportunity.
Accelerators are Advisory Services
An Accelerator’s purpose is to rapidly advance the growth and development of existing companies. Participating companies move through an educational program designed to make a company investment ready.
Business Accelerators are often based on a cohort model, where startups apply to be accepted into the program. Programs are typically 3-6 months in duration and culminate in a ‘Demo Day’, where company leaders pitch their ideas to an audience of potential investors.
In addition to the formal coaching, some Accelerators include mentoring, access to office space and networking opportunities.
Similar to Incubators, there are many different ways in which Accelerators make money. Some programs are fully subsidised by grants or corporations, which makes them free for participants. Some charge a fee to participate or, like Incubators, the Accelerator is awarded a small ownership position in each of the companies passing through their program. Some Accelerator programs invest in their graduated companies, and most will offer introductions to investors.
Both Incubator and Accelerator programs are built around supporting entrepreneurs. However, not all inventors want to be entrepreneurs. This is where Foundries or Venture Studios come in.
Venture Studios are Foundries for New Companies
Rather than providing support services to entrepreneurs or funding to existing companies, Venture Studios form new companies around promising technologies. Venture Studios offer an alternate path to market for intellectual property holders.
Although there are significant variations in approach, the basic process for a Venture Studio is to:
- Source or co-develop novel innovations
- Source the talent needed to lead the venture
- Form and then fund a new company
The model is to share the initial ownership of the new company between the inventor, the new leadership team, and the studio. The split between these parties will vary by Venture Studio and depend on the technical readiness of the innovation and the relative contributions of each party.
The value proposition of a Venture Studio is to increase the likelihood of a successful outcome because of the care taken to assemble a strong foundation of technology, talent, corporate structure, and capital.