Operational Effectiveness

#4 Levels on Which Incubator, Accelerator and Co-working Spaces Work for Startups

Incubators, accelerators and co-working spaces should define their operational levels as many are run with no operational expertise and hence produce poor results
#4 Levels on Which Incubator, Accelerator and Co-working Spaces Work for Startups
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Founder, VibaZone (Canada, India and Malaysia) and CEO, HTIC-MedTech Incubator, IIT Madras
5 min read
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Incubators, accelerators and co-working spaces should define their operational levels as many are run with no operational expertise and hence produce poor results. Each of these levels will need to carry out certain activities to ensure the successful running of these centres.

All these centres should be set up in four levels. These four levels are somewhat similar to all the three types of centres with changes to suit what they are doing. These levels are level 0 to level 4 and each level has a specific role to ensure success of these centres.

Level 0 is the knowledge level, Level 1 is the selection level, Level 2 is the induction level, Level 3 is the engagement level and Level 4 is the graduation level. These would be the common levels for all three centres with changes depending on the centres.

Level 0

All three centres need to first understand the challenges the start-ups face, to be able to support them. Secondly, the centres should have knowledge of the latest happenings and trends in the area they are going to focus. Thirdly, the centre should understand the legal formalities, regulations and standards required for the start-ups they hope to support. The depth of understanding required for these will vary depending on the type of the centre.

Level 1

Here there will be some difference for all three centres. Firstly, the centres must have a process to identify teams with ideas to house them in the centres. Secondly all should have a selection criteria and evaluation for process, out of the three centres accelerators should have the most stringent selection process followed by the incubators and the least stringent would be the co-working spaces.

The next few requirements are not crucial for co-working spaces. Thirdly, both incubators and accelerators should have a council and a committee to select new teams. Fourthly, the selected teams should present to the screening committee who will then recommend to the council. Fifthly, the council will provide the final approval. The purpose of having this committee and council is to ensure the selected start-ups are of good quality as often the start-ups fail because the selection processes are weak and not well defined.

Level 2

At this level the differentiation of all these three centres happens. Co-working space would provide the least and the other two would provide a fuller and complete support. Here the incubator needs to help in need identification and support to setup a company and team. 

Both incubators and accelerators need to prepare on-boarding documents of teams, appointment of consultants and mentors for the centre.

The incubators should also help in competitive landscape, verification (internal), identification team members and validation (external). The purpose of carrying out these activities is to ensure that start-ups are working on the most viable products or services to ensure success.

By doing these, the incubators can help start-ups to re-look at their products or services to ensure a reasonable viable solution is been worked on. Accelerators should not do these it should be the job of the incubator to ensure by the time the start-up search the acceleration stage the they should have completed these activities and have some traction.

Level 3

Here again co-working space would provide the least and the other two would provide a more detailed support. Both incubators and accelerators need to help in the need and impact analysis, prepare long and short-term action plans, set up engagement of consultants and mentors, built a mentor-mentee relationship, help in intellectual property rights filling, 

Incubators need to support in product development, verification and validation of products. The teams have now built a prototype and are testing with customers different from level 2 which was more paper based and intangible. Both incubators and accelerators need to help the teams in building a business model, financial model, marketing plan, financial plan, plan funding at different stages, business plan and pitching, in addition the accelerators must provide these services and supporting more in depth and aggressive manner compared to the incubators. Primarily the incubator should help with the initial models and then it should be refined and expanded by the accelerator. All three need to provide networking, events and programs and these would vary in degree from one to another, for example the incubators and accelerators would need to be more active compared to co-working spaces. All three need to review and monitor periodically if the start-ups are moving in the directions. All centres must have the termination and relieving process in place to ensure the start-ups are being productive. Unless this is done newer start-ups cannot be engaged as the resources available are limited.

Level 4

All three would have different types of graduation policies and should post-graduation support. This is important for all three centres to build a stronger eco-system. Co-working spaces tend to be more infrastructure players and might not be too keen to graduate the start-ups as they depend on the rental income and they play minimal role in supporting the start-ups.

However, incubators and accelerators are not infrastructure players as most are equity-driven as such and if the startups do not graduate they will not be able to expand their portfolio and hence they cannot create more equity.

As both incubators and accelerators depend on cashing out on these equities someday, which generally it takes three to five years. As such this is a vital process in incubators and accelerators for them to be sustainable.

In conclusion, it is worthy to note that just because centres have these levels in place it does not guarantee success as many other factors contribute to the success of these centres. Having operational levels would most certainly help in moving these centres in the right directions.

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