Startup Incubator or Accelerator: Why & How to Join in Singapore
For entrepreneurs, the early stages of your start-up’s business life cycle are often the most exciting, yet also the most challenging of times. Fortunately, along with the rise of start-up culture in recent years, there has been a growth of the start-up ecosystem generally, which includes growing numbers of start-up incubators and start-up accelerators.
With so many options available, you might be wondering what start-up incubators or accelerators are, if it is worth joining one, and how you can go about doing so. This article will address those questions and hopefully provide you with the necessary information to make a more considered decision on whether to join a start-up incubator or accelerator in Singapore.
This article will explain:
What are Start-Up Incubators and Accelerators?
The terms “start-up incubators” and “start-up accelerators” are commonly used interchangeably. However, start-up incubators and accelerators actually have quite distinct functions, and thus would suit start-ups at different stages of their life cycle.
Start-up incubators help start-ups build their business from the ground up, either by assisting in refining business ideas or providing various resources like mentorship, expertise, funding and equipment to get the business off the ground. On the other hand, start-up accelerators are best suited for start-ups in the early stages of their business that already have a refined business idea or minimum viable product. The main function of a start-up accelerator is to “accelerate” the initial pace of growth for such a company.
To illustrate, the difference between the two has commonly been described using a horticultural analogy – an incubator matches quality seeds with the best soil for sprouting and growth, whereas an accelerator works as a greenhouse for young plants to get the optimal conditions for growth.
How are Start-Up Incubators and Accelerators Different From Investors?
The main differences between joining a start-up incubator or accelerator, as compared to securing an investment from an investor, lie in the amount and type of support you can expect to receive.
While investors provide much-needed financial support to a business, they take a more hands-off approach in terms of extending non-financial support. On the other hand, start-up incubators and accelerators are structured programmes that are centred around providing non-financial support to start-ups. This support takes the form of the provision of mentorship, guidance and resources (e.g. working spaces and shared facilities) that a start-up might need in the early stages.
That being said, both incubators and accelerators can also help start-ups obtain financial funding. Many start-up incubators are funded by government entities, and hence start-ups can avail themselves of government grants.
Incubators also often have investors who are willing to provide seed funding in exchange for some equity in the company. In the same vein, start-up accelerators can help match start-ups with the right investors from the private sector, facilitating their securing of funding in that way.
What are the Pros and Cons of Joining a Start-up Incubator or Accelerator?
There are many reasons why you should consider joining a start-up incubator or accelerator, but the main pros of doing so are:
- Mentorship: Through joining a start-up incubator or accelerator, business owners can be exposed to a network of mentors, alumni or other start-up owners. This facilitates an exchange of ideas as well as potential collaboration opportunities.
- Access to funding: As mentioned above, joining a start-up incubator or accelerator can also help you to obtain funding, either through direct investments by the investors behind the incubator or accelerator, or through connecting you with potential investors.
- Credibility: One more intangible benefit of joining a start-up incubator or accelerator is the credibility that your business gets from being associated with the incubator or accelerator, especially if these are well known. This might help your business gain more attention and also help increase investors’ willingness to invest in your business in future investment rounds.
As with every decision, there are potential downsides to consider. The same goes for joining a start-up incubator or accelerator. Some cons that should be considered are:
- Cost: For some start-up incubator and accelerator programmes, there might be an admission fee, either by way of a fee that you have to pay to join the programme, or a requirement for you to give up a slice of equity in your start-up. This is so that they can cover the cost of the services rendered. Either way, you should consider whether paying this fee would be a worthy sacrifice in terms of the value that you will be getting from joining the programme, and whether you are willing to give up equity in your company in exchange.
- Time: Start-up accelerators programmes often have a fixed duration of about 3 to 6 months. During this period, you might have to participate in mandatory events as part of the programme, such as social or networking events, which might come at the expense of spending time on making sales or further refining your product. Therefore, another factor to consider is whether the time spent on the programme would be worth it, or if you have other business priorities that you would prefer to attend to.
How Can You Join a Start-up Incubator Or Accelerator in Singapore?
Depending on which incubator or accelerator you choose to join in Singapore, the application process, documents and fees involved, as well as eligibility criteria would be different. However, the typical application process consists of a few main stages:
- Application: In your application, you would most likely have to state the specifics of your start-up’s idea or product, the size of your team, the size of the market and so on.
- Assessment: After receiving your application, your application will typically be assessed based on factors such as the strength of your product or idea, the investability of your business and its potential for growth or revenue generation.
- Interview: At this stage, the team behind the incubator or accelerator will be trying to find out more about you and your team, your goals, as well as what you are hoping to get out of the programme.
- Evaluation: The penultimate stage is usually a due diligence stage, where you would have to provide documents to prove your claims on your revenue, the legal status of your company or products, or any other claims that you may have made about your start-up.
- Acceptance: Finally, after completing the evaluation, the team behind the incubator or accelerator will usually arrange a meeting to finalise the terms or duration of the programme. There will usually be a start-up incubator or accelerator agreement that you will have to sign to formalise your acceptance and entry into the programme. This agreement will contain the terms of your participation in the programme, such as the fees (if any) and conditions for early withdrawal from the programme.
Depending on your specific needs, there are many start-up incubators and accelerators that form part of the start-up ecosystem in Singapore. You should be able to find the programme that suits your needs via a quick search online.
As a starting point of your search, you can take a look at this list.
How Long is the Incubation and Acceleration Period?
Typically, start-up founders stay with a start-up incubator for a longer period whereas start-up accelerator programmes have a shorter duration. The average duration for an incubator programme might be about 1 to 5 years, whereas the average duration for an accelerator programme is about 3 to 6 months.
Start-up incubators and accelerators offer a great opportunity for young start-ups in Singapore to kick-start or accelerate the growth of their business. However, much of the benefits and cons depend on the incubator or accelerator that you choose. In general, the two decisions that you will be making involve:
- Do you need a start-up incubator or accelerator programme, i.e. do you have actionable goals planned for your business that you do not think you’ll be able to achieve without the programme? Examples of actionable goals that can be achieved with a start-up incubator or accelerator programme are meeting potential team members for your start-up, or launching your product to the market within a year of joining the programme. When considering your business goals, you should also take into account other factors like what stage your business is in.
- If yes, which incubator or accelerator programme is right for you, i.e. which incubator or accelerator programme should you join? To answer this question, you would have to do your due diligence about the perks and track records of the programmes available, as well as other factors such as their cost and duration, so that you can weigh the pros and cons of joining a particular programme.
If you require assistance in reviewing a start-up incubator or accelerator agreement that has been offered to you, or need advice on any subsequent corporate law-related matters that may come up as you run your business, you may consider consulting with experienced corporate lawyers in Singapore here.
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