SUMMARY
2021 saw a record amount of capital inflow to the tune of $42 Bn. Of this, $32 Bn was raised in late-stage deals and only $1.1 Bn was raised in the early-stage deals
Incubators and accelerators aim to empower startups with effective mentoring, expert advice, funding and market access
The knowledge and value that new-age companies acquire from these programmes can prove to be quite instrumental to their success
Incubators have an interesting history attached to them. The first-ever business incubator wasn’t trying to build unicorns — its goal was to incubate surplus chickens in the small city of Batavia. In over half a century, incubators have transformed into a powerful tool acting as catalysts for the startup ecosystem.
Most would agree that there has never been a better time to start a venture in India than in 2022. Seed stage funding is on the rise with last year crossing $1.1 Bn for the first time. Over the years, the Indian startup ecosystem has witnessed the creation of incubators and accelerators who offer mentorship opportunities to new-age ventures.
How Incubators & Accelerators Help Early Stage Startups?
It usually starts with an idea. Then comes the part where ideas turn into action. An early-stage startup needs someone to guide them in the right direction throughout this journey. This is where accelerators and incubators come in. They offer the right guidance to not only help startups realise their potential but also help them connect with potential investors and clients.
Accelerators and incubators aren’t exactly new to India. The first big wave showed up after 2008 with the likes of Morpheus, Kyron, and TheHatch coming in. Amid startup fever and funding frenzy, India crossed over 520 tech incubators and accelerators in 2020. In terms of the number of incubators, India is placed third in the world behind USA and China.
For the uninitiated, accelerators and incubators are finishing schools for aspiring entrepreneurs and early-stage ventures. A typical accelerator offers a more fast-paced and mentorship-driven experience where startups enter as a part of a cohort of companies. It is more intense and is aimed at compressing years’ worth of knowledge into just a few months.
Incubators are more open-ended and can run anywhere from six months to five years. Most accelerators and incubators provide mentorship and funding to startups in exchange for some equity, while others do it for a separate programme fee. Both programmes mentor startups and help turn promising ideas into sustainable businesses.
These programmes seek to enable innovation, entrepreneurship and job creation in a market teeming with possibilities. 2021 witnessed Indians gradually coming out of their cocoons to embrace new-age technology. With more comfort around buying, learning, and socialising online, there was a surge in tech-based startups rolling out tailor-made offerings for the Indian market. With the launch of 1,436 startups in 2021, the count of new startups in India grew by 15%.
Pandemic-induced pay cuts and changes in working conditions have seen students eyeing entrepreneurship as a lucrative career option. However, not all young entrepreneurs have knowledge of the best practices to make their businesses sustainable. With new-age ventures looking beyond capital infusion, accelerators and incubators offer an array of opportunities that benefit first-time entrepreneurs.
Financing
Lack of seed capital can hinder innovation, especially in new startups. 2021 saw a record amount of capital inflow to the tune of $42 Bn. Of this, $32 Bn was raised in late-stage deals and only $1.1 Bn was raised in the early-stage deals.
This confirms the fact that while funding is at an all-time high, it’s relatively inaccessible for newly established startups. Incubators and accelerators help offer a vital boost to new-age ventures in the form of capital infusion.
Networks
One of the biggest benefits that these programmes provide is the ability to tap into a strong network of investors and seasoned executives.
Access to vibrant and accomplished alumni networks helps startups gain traction and a step into the spotlight. This strengthens their ability to scout for leads and opportunities. A good network helps new-age companies build up their credibility, gain brand recognition, increase investor access and expand their customer base.
Mentors
Incubators and accelerators provide startups with the benefit of having a seasoned mentor. The mentor helps the new-age companies scale up faster, offer advice on critical aspects of management, market strategy and regulatory support which young entrepreneurs often struggle with.
There might be times when an entrepreneur might lose objectivity because he is too close to the project. In such cases, a mentor acts as an objective and unbiased third party. They help suggest solutions and even pivots to ensure success.
Focus On What Matters Most
Keen to help new businesses and entrepreneurs scale up in a capital-efficient manner, these programmes often offer startups with tangible resources. Besides offering initial capital, this might include resources such as accounting assistance, office space and legal guidance. Having this business infrastructure in place allows the startup to focus on what matters most – the core business and not the day-to-day administrative responsibilities.
Being part of an incubator or an accelerator can open doors for you. Making errors and learning from mistakes is a part of every young entrepreneur’s journey. As a founder, you will often find yourself in unchartered territories. However, access to a support system where you could learn from the mistakes of others plays a huge part in growing your startup. The knowledge and value that new-age companies acquire from these programmes can prove to be quite instrumental to their success.
Huddle has announced its first-ever edition of the Young Founders Forum. Slated for the 11th March 2022, the forum provides students with an opportunity to network with industry mentors as well as a chance to raise funds at an early stage.
