Incubators,  Accelerators  &  Co-­Working  Spaces

BRIDGING  THE  GAP  BETWEEN    IDEAS    &  RESULTS

Content

1) Introduction

2) Why  Create  an  Incubator,  Accelerator  or  Co-­‐Working  Space

3) Incubators

4) Accelerators

5) Internal  Corporate  Accelerators

6) Co-­‐Working  Spaces

7) Creating  your  own  Incubator,  Accelerator  or  Co-­‐Working  Space

IntroductionOver the past 10 years we have seen a significant rise in the number ofIncubators, Accelerators and Co-­‐working Spaces cropping up across the globe.This has largely been due to a rise of investment in the startup scene, drivenpredominantly by innovations in the mobile, online and digital space.

Incubators and Accelerators aim to help startups mature to a point wherethey are viable to attract significant investment. They are very selective in theStartups they accept because their main source of income is based on anagreed share of future profits generated by the startups which becomesuccessful businesses.

Co-­‐working Spaces have also become a lot more common due to the rise inthe Startup scene, as small businesses seek to work in shared workenvironments which are cheaper than dedicated office space.

As we enter the so called ‘4th era of Innovation’ corporates are feeling a greatnecessity to Innovate. Large corporates, in their aspiration to innovate likestartups, have realized that they can leverage the lessons, tools andmethodologies developed in the Startup scene to drive their own innovation.As a result corporates are developing Internal Corporate Accelerators.

The following deck is intended to introduce you to some of the commonconcepts which are fundamental to these different Programmes. In this fastmoving age of Innovation it is critical for any aspiring entrepreneur orbusiness to be aware of and understand this particular landscape.

Lets begin…

Why  Create  an  Incubator,  Accelerator  or  Co-­Working  Space

There are various reasons why a business, government, research institute or group of entrepreneurs mightwant to establish an Incubator, Accelerator or Co-­‐Working Space. Below are just some of the reaons. Thereason or ‘the Why’ will ultimately dictate which Programme is adopted as well as the exact business modeldeveloped. It is therefore important to start with theWhy.

A CSR Programme

Social Incubators and Co-­‐Working Spaces are createdby company CSR programmes and governments inorder to empower and uplift under-­‐developedcommunities. They serve as platforms forcommunity members to work with mentors andinvestors to identify opportunities and solveproblems whichexist in their communities.

A  Semi  Independent  Corporate  Capability  to  Focus  on  Radical  Innovations  

Businesses create Corporate Incubatorsand Corporate Accelerators to create aninnovation capability free from thebeuroctratic and BAU contraints of theparent Company. This gives them thenecessary freedom to take calculatedrisk and be measured against a differentset of performance indicators.A Business

Because you see it as a business opportunity and youare passionate about empowering promisingbussinesses and entreprenuers. Well run Incubatorsand Accelerators can be highly succesful businesses.Uber and Linkedin are well known examples ofcompanies which came out of Acclerators which arenow highly respected and succesful in their ownright.

Drive  Growth  and  Economic  Prosperity

Incubators, Accelerators and Co-­‐WorkingSpaces are often set up in specificlocations as part of a strategy to drivegrowth.

IncubatorsIncubators run time-­‐boxed programmes for promising young startups. The application process to get into an Incubator isusually very competitive. Incubators work with the startups in their programme to get them to a point where they are readyand worthy of further investment from anetwork of Angel Investorswhich is associated with the Incubator.

Tip  1  Adapt  the  model  to  the  realities  of  your   region,  if  none  exist,  build  a  new  one.

Tip  2  Acquire  the  best  expertise.  You  will  be  shaping  peoples  lives.

Tip  3  Establish  a  healthy  ‘online’  &  ‘offline’  network  of  Investors  and  Entrepreneurs.

Angel&Investors

StartupSeed$Funding$10,000.$20,000

Initial$Equity$+/. 6%

Share$of$Initial$Equity

Fee$foraccess

Angel&InvestorsStartup

Angel&Investors Startup Mentors

Salary

Incubator

Successful&StartupsReceive&further&Investment

Angel$Investment

Further$Equity$Share Negotiated

Incubator&Cash&and&Equity&Flow

1.$Startup$gives$up$initial$equity$to$Incubator$+/. 6%2.$Angle$Investors$Pay$Incubator$to$get$access$to$Startups$at$the$end$of$the$Incubation$Process3.$Share$of$initial$equity$given$by$all$the$startups$allocated$to$Angel$Investors$4.$Seed$funding$given$to$Startups$to$develop$ their$business$ in$the$incubator$$10,000$ . $20,0005.$Depending$on$whether$Mentors$are$volunteers$ or$employees$ they$will$be$paid$a$salary6.$Startups$who$manage$to$secure$Angel$Investment$after$from$their$time$in$the$Incubator$give$up$further$Equity$to$Angel

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3 4 5

MentorshipWorkshopsHackathonsExposure&to&Network

Value&Proposition&of&Incubator

. Mentorship$ to$early$stage$start$ups$and$entrepreneurs.$. Developing$ startups$to$the$point$where$their$$business$ ideas$are$eligible$for$Angle$Investing.$. Delivering$Investment$Ready$Propositions$ to$Angel$Investors

Methodologies&Used

. Lean$Startup

. Customer$Development$Cycle

. Minimum$Viable$Product$Development

. Rapid$PrototypingCash$Flow$&$Equity$out$of$Incubator

Cash$Flow$&$Equity$into$Incubator

6

3I6&Month&Programme

Accelerators exist to catapult late-­‐stage startups, whether they have been incubated or not, to exceptional heights.Through an intense programme they help prepare startups for ‘Series A’ funding which is usually provided by VentureCapitalist firms. There is a far greater focus on Business development in Accelerators as compared to conceptdevelopment during incubation.

Accelerators

Tip  1  Ensure  you  are  tapped  into  online  platforms  where  VC  firms  can  find  you.

Tip  2  Ensure  that  Startups  have  at  least  one  paying  client  by   the  end  of  the  Accelerator  to  prove  that  it  is  client-­‐ready.

Tip  3  Ensure  your  Accelerator  has  adequate  resources  to  enable  the  rapid  development  of    Startups.

VC#Fund

Startup

VC#FundsLate#Stage#Startup

Late#Stage#Startup Mentors

Some%pay%Mentors,%others

Don’t.

Accelerator

Successful#StartupsReceive#VC#Investment

VC%InvestmentFurther%Equity%Share%and%Profits%Based%thereupon

Accelerator#Cash#and#Equity#Flow

1) Take%Equity%from%Startups%accepted%into%Programme2) Receive%a%Management%Fee%from%the%funds% linked% to%the%

Accelerator3) Capital%is%provided% to%startups%to%develop%during%

Accelerator%Program4) Payment%of%Overheads%such% as%Mentors%and%Premises5) Startups%which%receive%further%VC%funding% give%up%

further%equity%to%VC%fund.%Those%which%go%on%to%be%successful% share%profit%according%to%equity%shares%to%VC%and%back%to%the%Accelerator.

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3 4

Value#Proposition#of#Accelerator

P Provide%Startup%with%Credibility% by%virtue%of%its%participation%in%the%Accelerator.

P Help%Startup%develop%their%pitch%to%Investors.

P Prepare%Startup%for%its%first%CustomerP Provide%Startup%with%Legal%advise% including,%due%diligence,%Intellectual%Property,% Term%Sheet%Negotiations,%Valuation.

P Provide%VC%firms%with%viable% and%mature%Startups,%ready%for%Series%A%funding.

Cash%Flow%&%Equity%out%of%Accelerator

Cash%Flow%&%Equity%into%Accelerator

53#Month#Programme

Business#MentorshipWorkshopsExposure#to#VC#Network

Often%VC’s%demand%a%seat%at%the%table%of%a%startup

Fund#Managers+/P20%%of%Funds%gains$18P$20,000%

Capital%provided

Management%fee

AcceleratorProfit%or%‘Exit%Share%’According%to%Initial%Equity%Share

Internal  Corporate  AcceleratorThe Internal Corporate Accelerator is a special class of Accelerator. It is formed as a semi-­‐independent function of a parentcompany and is focused on generating ideas, testing these ideas using methods such as rapid prototyping and the customerdevelopment cycle and then further developing successful prototypes into products and sometimes separate businesses.Corporateaccelerators should operateas semi-­‐independent entities, free from the daily constraint of Business asUsual (BAU).

Tip  1  Must  ensure  that  corporate  accelerator  is  well  networked  outside  of  the  parent  organization.

Tip  2 Funding  for  projects  should  be  appropriately  sized  at  different  stages  of  development.Not  too  much  and  not   too  little.  

Tip  3  Ensure  that  the  leaders  and  Mentors  allocated  are  the  right  people  for  the  job.  This  may  require  external  hires.

Value  Proposition   of  Corporate  Accelerator

-­‐ A  structure   relatively  free  from  the  day  to  day  constraints   of  BAU

-­‐ A  place  to  test  ideas  and  fail  fast-­‐ New  streams  of  revenue  from  spinoff  

products   and  businesses-­‐ Enables  the  realisation   of  an  innovation  

mandate.-­‐ Radical  and  disruptive  innovation-­‐ Give  an  organisation  the  ability  to  

adopt  the  lessons  learnt  from  the  startup   sector  to  drive  and  implement  new  ideas.

Methodologies

-­‐ Rapid  Prototyping  MVP-­‐ Customer   Development  Cycle-­‐ Lean  Startup

Internal(Corporate(Accelerator

Parent(Company

Portfolio(of(spinoff( products( and/or(businesses

Dedicated(Budget(Allocated(Accelerator(can(motivate(for(more)

Incubator(given(relative(freedom(to(allocate(between(projects

Share(of(Profitsreinvested(in(Accelerator

Share(of(Profits(Taken(by(Parent(Company

Co-­working  SpaceCo-­‐Working Spaces are about creating a vibrant community for small businesses and entrepreneurs wherethey can work and if desired network and collaborate with each other. Co-­‐working spaces provide all theinfrastructure and services of a fully equipped office space. These resources are shared by the occupyingentrepreneurs and business who all pay rent to theowners of the space.

Tip  1  Engineer  the  facilities  and  services  on  the  real  needs  of  the  local  entrepreneurial  community.

Tip  2  Geographical  Location  is  critical.  Ensure  it  is  located  near  an  existing  community  of  Entrepreneurs  or  has  good  transport  links

Value  Proposition   of  Co-­‐working  Space

-­‐ Bringing  creatives  and  business  people  together  to  create  a  vibrant  multidisciplinary  community.

-­‐ Some  have  a  focus  on  social  upliftment,  in  which  case  they  provide  a  shared  office  &  or  studio/workshop   infrastructure  that  would  otherwise  be  lacking  in  the  community.

-­‐ Provide   local  community  of  Entrepreneurs  with  Seminars,  Workshops,  training,  networking,  hackathons.

-­‐ Hot  desks  for  daily,  weekly,  monthly,  annual  rental.

Tip  3  Offer  services  based  on  the  real  needs  of  the  entrepreneurial  community

Co-­‐working  Space  Cash  Flow

1) Co-­‐working  Space  receives  rental.

2) Some  Co-­‐working  Spaces  receive  Subsidization

3) Main  expense  for  a  Co-­‐Working  space  are  overheads

Co#working*Space

Government*or*CorporateBusiness,Entreprenuer,* Freelancer

Overheads

Some*Co#working*Spaces*are*subsidised*but*usually*they*are*private*and*independent*businesses

Rental*+*Service*Fees

SeminarsWorkshops.Training.Hackathons

Rental,*Staff,*Essential*Service

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Creating  your  own  Incubator,  Acceleratoror  Co-­Working  Space

Create  a  model  for  your  local  context

It is important to recognize that the exactbusiness model which you use and valueproposition you offer should fit the constraints,challenges and opportunities of your availablenetwork of stakeholders. You cannot simply cutand paste a successful model from elsewhere inthe world and expect it to work.

Create  a  clear  vision  and  plan

-­‐ Ensure  you  have  a  good  value  proposition   for  all  stakeholders  involved.

-­‐ Design  your  model  and  Business  plan.  Include  a  good  Digital  Strategy.

-­‐ Assemble  the  appropriate  capabilities:  business  analysis,  prototyping,  Technical  capabilities,    Entrepreneurial  Credibility  and  Industry  Experience.

-­‐ Build  a  strategic  network  of  Entrepreneurs,        Investors  and  Educators.  

Grow  organically  

In the case of Corporate Accelerators It is always bestto start with at least one project identified as havinghigh potential and developing an accelerator aroundit. Allocate the relevant people and team to optimisesuccess. Thereafter allow the accelerator to groworganically according to what works and whatdoesn't’t. Do not make the mistake of thinking thatby creating a magnificent space, great ideas willnecessarily follow and be successfully accelerated.This almost never happens

Work  hard  to  find  the  right  people  to  work  with  you  in  creating  a  success

The  strengths  of  your  partnerships  will  define  your  success.    Reputation  is  key  to  the  success  of  Incubators  and  Accelerators.  

Get  in  contact  for  advise  on  how  we  may  be  able  to  assist  you  in  creating  an  Incubator,  Accelerator  or  Co-­‐Working  Space.  Tel:  +27  11  463  2205

Contact  us

24  Peter  Place,  Lyme  Park,  Bryanston,  2191,  South  AfricaTel:  +27  11  463  2205Email:  ia@innovationagency.com