Posts

The Difference Between Incubators and Accelerators

The Difference Between Incubators and Accelerators

Starting a business is hard. Very hard.

Deciding to utilize an accelerator or incubator program can be a make-or-break moment in that process. At least 16 local incubators and accelerators took part in an event hosted by San Diego Venture Group last month. AngelList, Silicon Valley’s website for startups and investors, lists over 60 incubators and accelerators. The choices can be overwhelming.

Blair-GiesenIncubators provide guidance and advice to help startups grow and succeed in an unstructured program, with no specific goal or timeframe.

Accelerators provides structured curriculum in a short period to help rapidly grow the size and value of a company to get ready for a specific goal, typically to raise financing.

Both can help young companies figure out how to get through some of the early difficulties of starting a business. Both help create successful companies on a scale that has never been done before.

But one important question can help guide entrepreneurs who aren’t sure which path is right: What is the goal of the program? Once you’ve established that, compare it to your own company’s goals and see whether they align.

Either type of program can include some big benefits to a startup, including:

• Free office space

• Formal curriculum

• Mentor program

• Financing

• Links to strategic partners

• Marketing assistance

• Advisory boards

• Management team identification

• Access to angel investors and venture capital

• Help with presentation skills

• Networking events

Key Differences

The key difference between and incubator and an accelerator is what happens at the end of the process and what you and your company walk away with.

Typically incubators have a process of getting into the program, but that process is often unclear. Incubators help you build a company. Incubators take little or no equity in your company. Incubators are great if your goal is the get some help and retain control of your business or get prepared to go into a more competitive accelerator program. Incubators provide these services to a group of companies with no specific goals for every startup.

Accelerators prepare you for a major milestone – usually the ability to fundraise and attract a large investment round. Accelerators take anywhere from 3 percent to 8 percent or more of your company equity. The goal is to scale you fast and rapidly increase the value of your company. Scale is a characteristic of a business that describes its capability to grow as clients and customers grow while increasing its level of performance or efficiency.

There are many arguments for and against giving up equity but most of them can be boiled down to one question, Neil Senturia said at a San Diego Venture Group event for incubators and accelerators last month: “Do you want to be king or rich?” – basically, do you care more about control, or about growing the business quickly to increase its value? This is a question that all entrepreneurs need to ask themselves early in the process.

Accelerators typically have a more rigid process that governs how a company gets accepted into the program. Once accepted, a company goes through a very specific program to gain market traction and start an investor funding campaign.

Here are two examples of local accelerators:

Founder Institute: An after-hours, before-you-quit-your-day-job program that provides a structured curriculum. It’s a step-by-step process with experts to get you started. Founder Institute offers no investment in the startups that go through the program.

(Full disclosure: I went through this program, and thought it was amazing.)

Plug and Play San Diego: One of the most successful accelerator programs in the Bay Area now has a branch in San Diego. It offers local entrepreneurs an opportunity to pitch their startups, get an investment on the spot and enter the program. After the startup is in the accelerator program, startup founders are introduced to a wide range of strategic partners in a hands-on, structured program.

And here are two local incubators:

EvoNexus: This one’s centered on web or mobile technology. EvoNexus provides free office space and other benefits in an unstructured, a la carte way – startups can use various services if they want to. All EvoNexus incubator services are free to startups in the program.

CyberHive’s iHive: iHive is all about The Internet of Things (the connected technologies around home, wearables and auto in a structure connected to the internet). iHive provides a combination of co-working space and incubation services.  Visit iHive’s startup, music and art event SAM Fest to learn more.

Better Together

Yes, it’s important to seek out an incubator or accelerator that syncs up with your company’s goals. But there’s a wrench: Many startups go through more than one of these programs.

Why would they do this? Because most programs are not designed to create absolute success. Startups need to take advantage of every opportunity they can.

Startups must also remember that many of these programs have sponsors and are structured in a way that might not be entirely focused on the success of the startups in the program. As the founder it’s up to you to make the right decisions to guide your company. No one knows your business like you.

A more complete list of various programs can be found here.

I want to hear your stories of success and growth, frustration and failure with incubators and accelerators.

Blair Giesen is a VOSD contributor, serial entrepreneur and Zambig.com founder. Join the conversation by following him on Twitter @BlairsReport, blairgiesen.com or emailing him at blair@zambig.com.

Voice of San Diego is a nonprofit that depends on you, our readers. Please donate to keep the service strong. Click here to find out more about our supporters and how we operate independently.

San Diego’s No. 1 for Startups Now What?

San Diego’s No. 1 for Startups Now What?

Last week Forbes  named San Diego the best place in the country to launch a startup.

There are many different ways to evaluate this claim, and the comments section for the article proves there are some skeptics. So, is San Diego really No. 1 for startups? Let’s take a deeper look.

The Case for No. 1

Eric Otterson thinks the label is deserved.

Blair-GiesenHe’s the man who has made it his mission to grow the startup community in San Diego.

“The momentum is amazing right now. The companies that are being created and funded are growing at a rapid pace,” he said.

Here are some of the highlights Otterson pointed out.

DivX, founded in San Diego, is a company whose former founders are now starting amazing companies.  These are the kinds of companies that create a healthy startup ecosystem. They’ve started SweetLabs, an app distribution and discovery platform, and Prima Cinema, a company that lets you watch movies from your home the day they are released.

LifeProof, known as the best smartphone case on the planet, was created in San Diego. It’s the second company founded by Gary Rayner, and it was purchased by the largest mobile phone accessories company because of its design dominance. It’s still headquartered in San Diego.

Albeit slowly even Qualcomm and Intuit are getting active and creating entrepreneurs with recently funded companies HouseCall, an app to help with home projects, Zenhavior, an app that monitors your driving and TaxJar, to help businesses with sales taxes.

Go a little further back in time and you’ll find WebSideStory, a San Diego powerhouse that practically invented the banner ad. They helped to create startups like Apmetrix, a mobile and video game analytics company, and Tealium, which has raised over $27 million.

Starting to get the picture?  San Diego is No. 1 for a reason.

But that doesn’t mean things here are perfect, as some of the criticisms of the Forbes pieces, and of San Diego’s tech scene in general, make clear.

Room for Improvement

I’ve already detailed some of the things that are lacking for startups in San Diego:

• Local companies don’t work together that often. …

• The investment dollars just aren’t here. Investors look more often to L.A. or Silicon Valley. There is a real understanding of how the ecosystem works in those areas, investors figure. It’s already built.

• Many startup entrepreneurs don’t realize how hard it truly is to start a company. This is San Diego, and there are way too many distractions.

• There are no real mentorship programs. …

• Where’s the tech hub in San Diego? The place where entrepreneurs, programmers and investors can talk about the amazing things they are building? Is it Sorrento Valley? UTC? Downtown? North County? If you figure it out, let me know.

These are still issues that should factor into any discussion of San Diego’s place in the startup ecosystem.

Others voiced more wariness in the comments section of the Forbes piece. Here’s one:

If you want to sell overpriced cupcakes or recycled skateboards then this is your market.

If you’re a tech company or any company that requires technically qualified individuals then you’ll struggle every day. Unless you can lure people down to SD from SF and pay them the bloated salaries that they get in the Bay Area and promise them amazing benefits.

For as large as a metropolitan area that SD is it has in my opinion the largest group of unqualified workers. Most workers want to move down here so they can kick back and have that plush easy-going San Diego lifestyle that we “advertise”.

San Diego has its challenges and there certainly is room for improvement.

But things are changing as we are starting to retain the talent from UCSD, “which is an absolute goldmine,” as Navid Alipour, a local investor, pointed out in the Forbes comments section.

How to Build from Here

So, what next?

You want to take advantage of what San Diego has to offer, but aren’t sure how do you accelerate your idea?

Founder Institute and CyberHive can help you develop your idea and turn it into reality. Hard Tech Labs and Fab Lab will help you build it with their cross boarder accelerator.

The month of March alone makes a good case for why San Diego is the place to be:

• On March 20, San Diego Venture Group is hosting 16 incubators and accelerators from all over San Diego County.

• Startups can apply to Plug and Play for financing and mentorship, the deadline for this round is March 28.

• Another one is this week’s Wearable Wednesday where you can learn about the state of the wearable tech economy and learn about those opportunities. Email me a question to ask. I’ll be moderating this one. I can’t wait to learn more aboutQualcomm’s Toq smart watch.

• One of the biggest events of the year is March 26 at Stone Brewery in Liberty Station March Mingle. It’s a who’s who in business, tech and startups. March Mingle is a must-attend event that gives entrepreneurs the opportunity to connect and exchange ideas.

• The Social Media Examiner’s Social Media World is March 26-28 if you want to learn everything social media-related.

Two more, beyond March:

• There are also events that are attracting visitors from all over the U.S. Interactive Day San Diego, in May, is a digital marketing event. Whether you are a startup or an established company attendees can listen to experts in digital marketing and learn how to master it. Mitch Gruber, one of the organizers, tells me “start-ups compete for $5,000 in a real-time pitch off.”  The last two winners are still here in San Diego.

• Startup Week is, you guessed it, an entire week dedicated to startups in San Diego. It’ll be held June 17-24 and is jam-packed with visits to local startup offices, demos of new products, mentor nights with founders, introductions to investors and great advice from people who are based in San Diego and an impact globally.

San Diego is no Silicon Valley. And that’s a good thing. It’s better.  For all of the same reasons that so many choose to live here over L.A., New York and other more densely populated cities. And now you can actually make a living, change the world and thrive here in San Diego.

Blair Giesen is a VOSD contributor, serial entrepreneur and Zambig.com founder. Join the conversation on Twitter @BlarsReport, http://blairgiesen.com/ or email blair@zambig.com.

Voice of San Diego is a nonprofit that depends on you, our readers. Please donate to keep the service strong. Click here to find out more about our supporters and how we operate independently.