A regular college guy going through the rigours of engineering was travelling, when he stumbled upon a word he did not know the meaning of. He had a basic phone with no Internet connectivity, and then it struck him: why can’t there be an SMS based search engine? He got together with his friends, discussed, deliberated and they were convinced that an SMS based search engine indeed made sense. Elsewhere, as a part of their college project during the placement season, two friends got together to set up a forum to conduct mock interviews, which made it easier to filter right candidates. Its effectiveness got them thinking and they realised that it had a potential of being used by big companies to select right candidates.
The former went on to become the extremely successful startup SMSGyan, launched by Innoz and co-founded by four students from LBS College of Engineering, Kerala – Deepak Ravindran, Abhinav Sree, Ashwin Nath and Mohd. Hisamuddin. Today, it answers more than 2 million queries a day and more than 10 million users have availed of the service across India. While the latter is none other than InterviewStreet.com co-founded by engineers Vivek Ravisankar and Harishankaran K. Its roster includes companies like Zynga, Facebook, Amazon and even NASA. Earlier this year, the services of InterviewStreet.com were also sought by the US Government.
While both undoubtedly are great business ideas, their founders believe they wouldn’t have achieved half of what they have, if it were not for belief, support and mentorship that they received from the respective business accelerator they were a part of. So what exactly are these accelerators and incubators? What’s at stake and how do they help? We find out.
Centre for Innovation Incubation and Entrepreneurship, IIM, Ahmedabad, is one of the premiere incubation centres in the country
Incubator or Accelerator?
Since both Incubators and Accelerators offer almost the similar eco-system for startups to encourage business ideas with potential, they are often confused together. There is, however, a subtle difference between the two. Incubators are more traditional, usually funded by government, hosted by educational institutions and offer long term support. They incubate all kinds of startups be it technological, engineering or even scientific; they also encourage social entrepreneurial projects and each may have an area of focus. On the other hand, accelerators are relatively newer phenomenon and are usually run by people who have been through the rigmarole of startup and thus, offer mentorship to budding entrepreneurs. Accelerator programs are usually of a shorter duration and may not offer physical incubation space. They tend to favour technological startup that leverages Internet, cloud and mobile. However, many of the traditional incubators have also started offering short-term accelerator programs.
Why to incubate?
Many times, you have an excellent business idea. You may even start working on it and create a prototype, but you run into some problem and then you just give up on it all together. Or at times, it’s possible that you lose interest. Then probably few years down the line, you may come across a successful business that was just what you had thought about. How you wish then that had you pursued your idea a little longer, it could have been you. Well, that’s just what an incubation centre or an accelerator will help you do – focus and hone your idea into a successful startup. If they see that your idea has potential, then they will offer you work space, initial funds and technical support. They will connect you with a mentor and also help you raise funds by connecting you with VCs, angel investors, private investors etc. Once you find space in their program, then you can focus on fine-tuning and developing your idea, as you discuss and get insights from other teams as well as mentors. And if you stumble along the way, then rest assured that you will have a lot of helping hands. They will also offer you help with things like business model, marketing, IP issues etc. However, in return for all the support and mentoring that they offer, they will claim an equity stake in your business.
One of the benefits is the mentorship sessions, which will immensely add to your knowledge. A session under way at The Startup Centre
Are they necessary? There is no rule that says you have to be a part of an incubator or an accelerator in order to be a successful entrepreneur. And there are enough startups out there that have made a mark on their own. However, the eco-system that they provide is something that will ensure your idea finds its full potential. As Vivek Ravisankar co-founder of InterviewStreet.com says, the biggest way in which being a part of the program at The Morpheus helped them was in making decisions. He says, “It was a fantastic experience. When we started, we had no idea what a startup was all about and Morpheus helped us in understanding the business side of startups. I don’t think we would have achieved the same success, had it not been for the support we received there.” InterviewStreet also went on to become the first Indian startup to be incubated by US based accelerator Y Combinator, which is no mean feat.
Kattayil Rajinish Menon, Director- ISV & Cloud Strategy, Developer and Platform Evangelism, Microsoft Corporation, asserts Vivek’s claim, he says, “The single core benefit is that it will help you narrow down your idea, it will help you to understand and pin-point your problem areas very well. You will understand as you speak with the experts what could be the problems both from technology as well as business point of view. They will help you to understand where and why things could go wrong, what will or won’t work, etc. So it will encourage you to look beyond what you have been doing, which makes your chances of success much higher.” Microsoft runs several programs for budding entrepreneurs based on the feedback it receives from the student and developer community. Its initiatives like DreamSpark, BizSpark, BizSpark One and BizSpark Plus are highly successful. Recently, the company also launched Microsoft Accelerator program in Bangalore, which is a four month program aimed at helping early stage startups by providing them workspace, tools and mentorship.
Tanvi Rangwala, Director – iAccelerator & ICT Initiatives, Centre for Innovation Incubation and Entrepreneurship, Indian Institute of Management, Ahmedabad, points out another important factor as to why you should approach such programs. She says, “The number one way in which startup benefits is in the form of initial investment in return of equity. This will give them a longer run base. Most of them start off by utilizing their own saving, which may be limited. So the initial investment that they will receive will certainly keep them going for a longer period of time. Secondly, we also provide infrastructure support in the form of office space; we also provide help related to IP, compliance and with everything else that they would need to run their startup.” The CIIE runs several incubation programs for different kind of projects and the successful startup SMSGyan is a product of its iAccelerator program.
The Accelerator centres also provide facilities like recreation rooms, seen here is the recreation room at Microsoft's Bangalore Accelerator
You need more than an Idea
For incubators or accelerators to select you, your idea has to be powerful. It needs to have the potential to be a game-changer and truly innovative. It will be evaluated by domain experts and if they see a potential, only then you will find place in the program. The seats are limited and the competition fierce, so your pitch has to be strong and should convince them of its value. Apart from a business idea, what will also determine your success is your core team. In fact, when you approach incubators or accelerators, one important point of consideration for them is whether your passion is shared by your core team. Tanvi points out, “We put a lot of emphasis on the team, as it is very important for the success of your idea. Because there may be a lot of obstacles that can come along the way and they need to have a good leader leading them. And most of them are really young guys with good educational background and they know the kind of jobs that they can easily get. But despite of that they are choosing to startup on their own so there is a lot of amount of motivation that goes into it.”
Rajinish second her point, he elaborates, “You need to have a core team of believers, you may have an idea, but you also need to successfully rally some people around. Because after all it is very rare that someone can build a company on his own. You need to have a team who understands you and stands by you. If you are thinking of building or making a mark on the eco-system today, if you are thinking of big break-out ideas, then you definitely need to have a good team in place. It doesn’t matter whether the team is form a marketing perspective or technical perspective, but you need to have a core team in place. You cannot have people coming and working part-time for you.”
Things to consider
Getting into an incubation centre or an accelerator program is not as easy as it seems. And there is no right time to approach an incubator or an accelerator with your idea, as many of them provide support to projects at all stages. Whether you just have a sketch of what you want to do or you have a working proto-type, you will find the right program to fit in. However, there are certain things that you should bear in mind before approaching them, as Ms. Padmaja Ruparel, President, Indian Angel Network, which runs a virtual incubation centre, says, “Before approaching an incubation centre the entrepreneur should consider if their goals are compatible with the goals and objectives of the incubator centre. It should also be taken into account if the incubation will be able to provide the tools and mentorship that you require. Mentoring and guidance are the most important aspects of the program that will help you achieve success and growth. Every business idea takes time to translate into a successful venture and it’s the role of an incubator to provide the startup with the required mentoring and guidance to achieve success.”
Most of the accelerators are set-up by entrepreneurs like Sameer Guglani from The Morpheus, who are keen to share their experiences and mentor budding start-ups
Before approaching them, it’s always good to do some research about the program offered and their expectations. It will also give you a head-start when making your pitch. Sameer Guglani, a serial entrepreneur with over ten years experience and the co-founder of accelerator The Morpheus, has some words of advice, “Check if the accelerator has full time partners who have been startup entrepreneurs themselves. If yes, it can be extremely valuable to work closely with them for three to four months because they can step into your shoes, truly understand situation and give you the right advice, direction, suggestions etc. Typically accelerators work with a set of companies as a batch, which creates a good environment with lots of peer to peer learning as well as some healthy competition. So look for spaces, which are more open and where different teams sit next to each other. As interactions with other teams can bring the energy, ideas and even lead to collaborations. Also, go for places that are flexible and relaxed in terms of culture, work timings, etc. If they have rigid rules, better to keep away. Most importantly take a look at the deal terms, the equity expectations and cash fees if any charged. Other factors include a friendly community of portfolio founders that you can be a part of and also good relationships with angels, VCs, etc. so that they can introduce you at the right time.”
Wide, open spaces that allow teams to sit together is beneficial, as it encourages healthy competitiveness and interaction. Seen here is the facility at TLabs
Is it easier for Internet projects to get incubated?
Looking at the current scenario, it may seem that startups that leverage the Internet, cloud or mobile have an edge when it comes to acquiring incubation and even receiving funds. While this is partially true, it doesn’t necessarily sum-up the situation. Mahesh Krovvidi, CEO, National Design Business Incubator, National Institute of Design, Ahmedabad, agrees that Internet based startups find it easier, but blames it to the business economics of quick returns. He says, “Unfortunately in the country large number of people are involved in developing Internet based products, because it is easier for them. Even form the point of view of the incubators who typically provide support for about two to three years, if they take up a startup with a mechanical product then it’s highly unlikely that the product will hit the market in three years. On the other hand Internet based projects are relatively easy to develop and can be ready to hit the market in two to three years. This is the reason why most incubators are biased towards startups that leverage Internet.”
Another factor that works against them is the typical mind-set where manufacturing companies don’t mind getting a product that is successful abroad, instead of supporting a local entrepreneur who may have developed a similar product. They are more comfortable with a product that they know has been successful, instead of taking a risk with local innovation. And it’s not just the manufacturer, but that’s the kind of mind-set even the consumers have. Mahesh also rues the fact that even the innovators here are rigid, as in they want to do everything themselves instead of partnering with the right manufacturer and getting somebody to market their product. However, he is quick to point out that the situation is changing and is lot better compared to the last ten years. Today, there are investors willing to fund projects and even the number of incubation centres supporting local innovations has increased. There are incubators – most of them funded by the government and hosted by prestigious educational institutes like the IITs, NITs and the IIMs – that cater to the needs of entrepreneurs who are developing products in the technological, mechanical, engineering, medical and scientific field.
Incubators provide all the facilities that you could possibly need. Facility at Society For Innovation And Entrepreneurship, IIT Bombay
Incubation equals success?
Getting a place in the incubation program is definitely a big deal, as it proves that your idea has the potential. Because before you are incubated, your idea is thoroughly evaluated by a group of experts for its validity and its chances of success. But that doesn’t necessarily guarantee success and the biggest reason could be you, as Sameer rightly points out, “At the end of the day the biggest factor in success or failure of a startup is the hardwork and tenacity of the founders. Accelerators or incubators cannot help founders who are themselves not ready to put in the enormous efforts that a startup needs.” Most of the people we spoke to agree that this in fact was the biggest factor that can make or break a startup after being incubated. Of course, there could be other factors at play, which could be beyond the hands of both the incubation centre as well as the entrepreneur, like the market situation or some technical flaw. But that’s very rare owing to the detailed evaluation of your idea that they undertake. Once incubated, you benefit from support, mentorship and funding – things that will allow you to turn your idea into a successful startup. However, what can throw you under the bus is lack of focus and interest on your part.
Some of the Incubators & Accelerators in the country
Accelerators, Accelerators in India, Business Idea Incubator, General, IAN, Incubation Centre, Incubators or Accelerators, Innoz, InterviewStreet, Microsoft Accelerator, NID, Start Ups, Startup Funds, The Morpheus