How to select the right startup incubator in 9 steps

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How to select the right startup incubator in 9 steps

There’s never been a better time to start a company, thanks largely to technological innovations that have made it easier to raise capital, find and manage new customers and streamline operations.

Some might say that entrepreneurship has entered a golden age in recent years. The Global Entrepreneurship Monitor’s 2015/16 Global Report estimates more than 100 million new businesses are launched each year. Furthermore, GEM puts the number of entrepreneurs worldwide at more than 400 million.

Those are encouraging figures, but there is a caveat — the success of a startup is far from guaranteed. Capital shortfall, having the wrong team in place, a lack of focus and unattractive unit economics are just some of the reasons startups fail. Overcoming those kinds of obstacles is no easy task. For some startups, however, participating in an incubator or accelerator can mean the difference between laying the foundation for a sustainable business and heading back to square one.

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1. Research, research, research

Individual incubator programs can vary greatly in terms of which industries they cater to, the kinds of educational and mentoring services they offer, and the degree of expertise the program leaders bring to the table. Understanding how individual incubators align with your company’s needs is essential to choosing the right one.

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2. Look at the mentorship

Having the right community in place can make a difference in outcomes for startups. A 2015 report from Unitus Seed Fund and Capria Accelerator found that the depth of an incubator or accelerator’s mentoring community is linked to the overall success rate of the program.

Beyond looking at the number of mentors who participate in a particular incubator, founders should also be paying close attention to who those mentors are. In an ideal setting, the experience and track record of a program’s mentors should be reflective of the industry your company is in and what you hope to achieve.

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3. Make sure the timing is right

Choosing the wrong incubator is mistake number one. Entering an incubator at the wrong time is second on the list. Apply too early and you may be turned down if your company doesn’t have enough traction for the incubator to work with. Wait until you’ve already established your network or you are already generating substantial revenue and you may find that an incubator simply doesn’t hold as much value.

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4. Refine your company’s story

Part of getting accepted into an incubator program is selling the acceptance committee on your company’s merits. That’s where a finely tuned narrative comes into play. To begin, think about what you want to accomplish and what problem your company addresses that other startups may be overlooking.

Then, reflect on your company’s history. Have you had to overcome any major hurdles to bring your startup to fruition? Are you taking an avant-garde approach to filling a specific need? Polish the details as much as possible so you’re creating a story that showcases where your company has been and where it’s headed.

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6. Consider the equity dynamic

One-thing founders need to be prepared for when entering into an incubator or accelerator is parting with a certain amount of equity. The amount varies from one program to the next. Five percent is a relatively common figure, although some opt for zero percent.

In exchange for equity, an incubator allows you to leverage its network and resources, with some also providing a small amount of capital. Davda cautions founders against getting hung up on the numbers when the discussion turns to equity.

If your business does not need substantial amount of capital to grow, you might be more sensitive to dilution. Maintaining an up-to-date cap table simplifies tracking of ownership stakes.

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7. Establish your startup’s fundamentals

Incubators are selective for a reason. They want to work with startups that have more than just a good concept.

That means your idea has to be viable and relevant to the market. That idea must be supported by a team of knowledgeable, passionate people who have a plan for bringing it to life. When you’re able to present a strong team with a proven track record in business and the relevant education and experience to back it up, making your case for inclusion in an incubator becomes much easier.

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8. Ask for a referral

In the startup world, who you know is valuable currency. Having the right connections can streamline your entry into an incubator. For example, a referral paved the way for RealtyShares to join 500 Startups.

Look at the people who are in your network. Are you acquainted with a founder who has successfully navigated the incubator process? Have you had a chance to work with one of the program’s mentors in the past? Tapping those existing relationships can open the door to an incubator or accelerator so that you’re able to forge new ones.

You can also leverage social media and online platforms like AngelList, where you can create a profile and share your product within a network that includes some of the biggest investors in Silicon Valley.

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9. Perfect your pitch

One final word of advice for founders: The last hurdle before acceptance into an incubator is presenting your pitch to the application committee. Typically, you have just minutes to do so and every second is precious. The better you understand your company, your mission and your overall vision, the better your chances of crafting a persuasive, effective pitch.

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