Heading for a crash landing! How to keep Incubators and Accelerators up to date.
Updated: Feb 2, 2021
In the face of the world's current state; we need to rethink how Incubators and Accelerators work if we don't want them to become obsolete.
Tackling the challenges that lie before us with science, technology, and entrepreneurship demands new kinds of support infrastructure that breaks with the common rules of traditional Incubators and Accelerators (I&A).
Building commercially viable companies that use groundbreaking technologies and solutions to address the UNSDGs and to fight climate change comes with a new set of challenges we need to overcome.
Besides other challenges, the ROI time horizon and the definition of success for such ventures are vastly different from what today's I&As can facilitate.
Today's I&A programs and support lasts between 3 to 6 month.
The primary capital source for I&As and the companies they support comes from VC funds with an exit horizon of 3 to 5 years.
And because success is defined by monetary ROI divided by time invested and the fact that only 5 to 10 percent of all startups generate any ROI, I&As need a high volume of companies going through the program with easy to prove business models and low technological risk.
To build the companies and develop the technologies which deliver the change we want and so desperately need to see, we need a new kind of Incubator and Accelerator working with a new set of rules.
Measurable positive impact needs to be the most important parameter for assessing and selecting participants into these new kinds of I&A programs without ignoring economic, technological and social viability.
One size fits all does not work anymore. The diversity of technologies and business models needed to tackle the UNSDGs and the climate crisis demand a more flexible and custom-tailored approach when it comes to determining for how long we support startups for and over what time frame we evaluate the ROI.
We should design our I&A programs in such a way that they reflect the different development speeds and time frames of technologies, markets, and desired outcomes.
To eliminate some of the risk, complexity, and uncertainty that comes with the variety of program durations and schedules, I&As need to focus on their core strength to deliver meaningful support and add value for the participants. They also need to mitigate the risk for their investors while at the same time investing in startups and technologies that are very early-stage or unproven. Cooperating with other I&A programs allows us to better leverage our resources, concentrate on and expand our strength, and spread our risk.
We should openly cooperate with other I&A programs that work under the same guiding principles to enable the best possible support for all startups and founders to deliver the desired impact.
The traditional VC funding is not suitable for all companies, business models, markets, and technologies. Especially if the technologies are in their infant state, regulatory or legislative hurdles preventing a fast market entry or the desired outcomes need broad behavioral changes from target groups. The singular focus of most I&As toward venture capital makes it almost impossible for them to support startups that do not rely on proven business models or established technologies because the time horizon for the investment and the multiples expected as ROI often don't match. To overcome this hurdle, I&As need to broaden their investment network and knowledge.
We should support and encourage the participants in our I&A programs to search for alternative funding models beyond Venture Capital. We should also build and foster relationships with charities, grant programs, impact investors, and government-backed funds.
Today's I&As KPI is the amount of money returned from the investment.
It is by far the easiest KPI you can track. And by all means, to generate a positive impact for the world, this KPI should remain a core indicator to evaluate the success of I&A programs. Only if the I&As and the companies they support are commercially viable, they can grow and be a sustainable force for positive change. But financial ROI cannot be the only KPI when it comes to tackling the UNSDGs and stopping climate change.
The next generation of I&As needs a second KPI that reflects the impact the program alumni have on the goals set by the I&A.
Tracing and measuring this kind of outcome will allow validating the value of an I&A and the I&As program and guide the selection for future participants.
We and our participants should collect and publish all relevant data beyond the end of our program and their participation that are suitable for measuring the actual impact of their activities in relation to the expected impact when entered into the I&A program.
Changing the world begins with changing us and how we see the world. It’s on us to set the framework we want to live and work in. The livelihood of future generations and the planet we live on depends on the decisions we make today, every day. Supporting entrepreneurs with a mission and building successful companies whose products and services have a positive impact on the environment and the lives of people is the best bet we have.
Our highest priority should be bringing positive change to the world and the people.
Let’s come together and change the rules of the game to create a winning hand for all of us!
Be part of the change, be part of the conversation and leave your thoughts and ideas in the comments! Feel free to share this post with your community.