In the last blog post I explained the parallels between incubators, accelerators and company builders. This comparison demonstrated the difference in the length of support and the difference how they measure progress.
In order to successfully support a startup a supporting program needs to recognize that startups may see and understand success as well as progress differently.
Understanding of success / progress
A corporate business acceleration program aims at supporting a startup in finding and developing a viable, repeatable and successful business. But being corporate by nature most corporate acceleration models might experience difficulties in doing so.
The corporate accelerator needs to match its goals and interests with the ones of the startup in order to provide an efficient and effective program. It also needs to understand and include the entrepreneurial nature of the startup.
Only by doing so it aligns the efforts of both parties towards a sustainable progress.
Goals and interests of startups
The main goal for each venture is to find a scalable, repeatable and profitable business model.
Several major causes for young ventures to fail within the first four years of being founded have been identified. The two most important are:
- Incompetence or inexperience (46%)
- Lack of managerial experience (30%)
Other causes include a limited range in the business network of the startup as well as insufficient financial resources.
In 2014 the European Commission identified in a European Accelerator Assembly the most important benefits a startup is looking for in an acceleration.
These interests included
- Mentorship / Coaching / Feedback (over 80% of respondents)
- Network / Alumni / Prestige (over 80% of respondents)
- Investment / Financial Benefits (over 30% of respondents)
- Connections to Investors (over 30% of respondents)
Guided mentoring, together with an extensive network of experts and coaches, and effective resource allocation can help to solve the incompetence / inexperience (managerial, entrepreneurial, etc.).
Goals and interests of an accelerator
Fast-paced markets, industry competition, and the fact that innovators establish a leading position in their markets, form the necessity for traditional companies to stay innovative in order to survive.
The globalization of markets and the digitalization of industries leads to increasing transparency, decreasing information and transaction costs.
This evolution of doing business amplifies the importance for innovation and forces established companies to scout for innovative trends, products and services.
Innovation inside of an existing company is much harder than a startup. Accelerators as one approach to identify and potentially insource innovation therefore have to scout for
- innovative / disruptive business models,
- innovative / disruptive products,
- innovative / disruptive services.
Comparison of interests
A comparison of the interests of accelerators and startups shows that they are matching. It demonstrates that a cooperation can generate a mutual benefit in the form of a win-win situation. If both parties are clear of the mutual benefit is not totally clear.
But the comparison also demonstrates that solely providing financing does not suffice to accelerate a startup.
This is falsely understood by some accelerators as a point of differentiation. More investments shall attract better startups.This however is not always the case. Wide and effective networks, excellent trainings and good mentors are other very important factors startups look for when being accelerated and have to be offered to increase the efficiency of the acceleration program.
Therefore accelerators need to be able to provide additional services and resources to successfully support innovative business models, products, or services. This effective provision of services and resources is what attracts talented ventures to join acceleration programs, together with a clear vision how the startup can benefit from being an acceleration program alumni.
Understanding the startup
Understanding the startup not only in terms of goals and interest but also in how it measures progress is the basis for a successful business acceleration.
Startups tend to measure their performance by measuring Key Success Factors. A Key Success Factor is those few things that must go well to ensure success for the organization, and must be given special and continual attention to ensure a high performance.
This means that startups tend to measure every single step they take. For first time entrepreneurs it can be progress to understand how a balance sheet works, or which legal aspects to consider when trading, etc.
Key Success Factors include what is essential for the achievement of a desired result. They describe an outcome and the result of an action.
Accelerators tend to measure their performance through Key Performance Indicators. Key Performance Indicators are a type of quantifiable measurement and are used to evaluate the progress of a specific activity in terms of effectiveness and efficiency.
A KPI describes what is essential in order to successfully put an activity into execution. It hence describes the efficiency of an action and is quantifiable. Strict KPIs and rigid processes are the main obstacles for corporate or public companies to become agile and responsive innovators.
This demonstrates to some extent that established companies and startups measure progress differently. However the mutual benefit from business acceleration can help the corporate as well as the startup to grow faster, better and more efficiently.
What this means and how it can be achieved will be described in the next blog.