Why You Should Join a Business Incubator

by Melinda Ham
Posted: November 17, 2015

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Trying to navigate the startup maze can overwhelm many hopeful entrepreneurs. Business accelerators and incubators can help with the process, but how do you find your way in?

 

Turning talented people into entrepreneurs

Australia has no shortage of entrepreneurial talent, says Alan Jones, “startup evangelist” at BlueChilli. “It’s like everyone knows someone who’s starting their own rock band. Everyone also knows someone who has a business idea. The point is there is an Australian shortage of experienced technical talent to make these businesses happen.”

So BlueChilli is bridging that gap by nurturing and transforming those promising ideas (and the people who have them!) into thriving businesses. Their team of 36 senior developers and user-experience experts can take an idea from the back of a napkin and make it a reality.

Not all the fledgling businesses that come to them are IT-focused but BlueChilli adds a tech edge because that’s what makes a business scalable [able to get bigger] and attracts investors, Alan explains.

Making startups happen

Since launching in 2012, BlueChilli has accelerated and then incubated 70 startups. In less than three years, more than half of them have funding and are on their way to success.

They offer a tiered program beginning with a 14-week online startup course, which progresses to a desk in BlueChilli HQ in York Street in central Sydney. Here budding startup founders are surrounded by other potential entrepreneurs and are invited to attend events and hear guest speakers.

The final tier is the full incubator program – BlueChilli attracts 200 pitches a month for this through its website. “Admittedly a fair percentage of them are not commercial quality,” says Alan. “We get crazy cat ladies creating some kind of strange kitchen appliance, while others we keep in touch with and watch their progress.”

Who gets picked?

Just two promising projects are chosen each month for the incubator program. “We are looking for the best possible product that is scalable and we can develop into a commercially viable platform,” Alan explains.

But once chosen it’s the full deal. The BlueChilli team works with the project’s founders to scope a plan to get to market. BlueChilli provides all the technical support and then, when the concept is market-tested [tried out on a small scale to gather customer feedback], connects the founding entrepreneur with venture capitalists and angel investors who can help with funding.

“We also take a small equity stake in the company to cover our services, air-conditioning and rent for the months we help,” says Alan. ”If we’re investing then we want you to succeed. Our goal is to sell out as soon as possible to incoming investors.” If they like your project, BlueChilli will then match up to $250,000 of other new investment.

Incubator vs accelerator? How to spot the difference

The labels ‘incubator’ and ‘accelerator’ are often used interchangeably in the startup game, but there is a significant difference.

An accelerator program is usually shorter, lasting for three or four months. It includes several participants, offers smaller amounts of investment and mentoring, and is highly competitive.

“There are already a lot of accelerators, many even within corporate environments – Coca-Cola and ANZ have them – encouraging an idea at an early stage and offering cash for equity,” says Petra Andrén from ATP Innovations. “It’s a pressure cooker environment and there can be a high failure rate.”

An incubator program puts in a lot more time, money and support for a more developed business idea, and takes a bigger chunk of equity in the resulting enterprise.

ATP Innovations started as an accelerator back in 2001 but now offers long-term incubation for companies, keeping them under their roof at the Australian Technology Park in inner-Sydney Redfern for an average of five years. It has a current stable of 70 businesses working in tech hardware, IT and life science.

It looks at up to 10 new projects a year, getting many ‘warm’ leads from angel investors and more than 350 applications on its website annually.

What an incubator wants

“It is quite clear what we are looking for,” says Petra. “Tech businesses that can’t be copied – they’ve achieved a patent or are protected in some way – and also drug or medical devices that are really different. Not lifestyle hobby companies, not apps, but ones that are meaty, scalable companies and we can add value.”

All companies incubated with ATP Innovations must move into the Australian Technology Park. “We provide a very tailored approached: everything from ongoing legals, IP [intellectual property], marketing, help with raising grants or investment, distribution and bookkeeping,” says Petra, but adds that for all this they take less than a five per cent equity stake in the businesses.

Current companies under the ATP Innovations roof include Breathe Well, a device that gives cancer patients feedback on their breathing while they are undergoing scans or radiation therapy. Patients are guided so they breathe more smoothly, allowing operators to take better medical images or target radiation more precisely. Other businesses include Propeller, a cloud-based platform that processes data from a drone into 3D models, and Sonder, a dynamic keyboard that displays different app-specific layouts on the keys depending on what you’re using.

While not all accelerators or incubators are tech-focused, invariably they opt for businesses that can deliver their goods or services as widely as possible via the internet.

Creating accidental entrepreneurs

Elisa Mokany is part of SpeeDX, one of ATP Innovations’ success stories. The company is developing gene detection technology that will lead to faster, simpler and cheaper diagnosis of diseases.

Elisa and her colleagues had previously worked as researchers in a lab at a multinational pharmaceutical group. When the global financial crisis hit and the lab was closed, the researchers decided to go it alone and patented their discoveries. They finally found seed funding, launched their nascent company and were accepted into ATP Innovations’ incubator program.

“When I was doing my PhD I always believed I would just have a future as a scientist,” says Elisa. “I never thought I could be running my own company. It’s been phenomenal.” Six years on, the accidental entrepreneurs of SpeeDx now employ 26 people in their lab and office and are poised to enter the European and American markets.

Supporting women entrepreneurs

Elisa has also benefited from the Springboard Enterprises Australia program, where successful female entrepreneurs mentor and support female-led startups.

She was recently selected, along with 10 other women founders of startups, to undergo a two-day boot camp run by Springboard where they were plunged into immersive workshops and subjected to a Dragon’s Den or Shark Tank gruelling.

“We actually call it ‘the dolphin tank’ so it sounds more friendly,” says Springboard’s general manager Liza Noonan.

“We get the women to pitch themselves and their business to a panel of venture capitalists and angel investors, in front of an audience of 100 people, then follow up with a further two months of coaching to get them where they want to go.” So far, 75 per cent of their alumni have raised capital of A$1-2 million each.

Think you’ve got what it takes to make it in the startup world? Take a look at our business courses to kick-start your career. 

 

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Melinda  Ham

Melinda Ham

Is a Sydney-based journalist and editor who has written on education, travel, business, science and innovation for the last 20 years, after formerly working as a foreign correspondent in Africa. She is an experienced researcher, interviewer, writer, editor and project manager who aims to produce engaging and compelling content. Head to Melinda's website for more information on her projects and work or go to Melinda's LinkedIn profile to connect.

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