Incubators/accelerators are starting to play a key role in the development of startup ecosystems throughout the U.S. and world. According to David Cohen, co-founder and head of TechStars, the #2 accelerator in the U.S. as ranked by Forbes, about one accelerator a day launches in the U.S. These programs provide resources that are critical to the success of any startup such as mentorship, connections, and capital.
Unfortunately, despite the rapid growth in incubators/accelerators over the past few years, the number of startups seeking help far exceeds the supply of spaces. Getting accepted into an incubator/accelerator can be more difficult than gaining admission into an Ivy League School. In 2013, TechStars Chicago, formerly Excelerate Labs, received more than 900 applications for 10 coveted spots. Overall, TechStars accepted less than 1% of the 4000 startups that applied to participate in one of their accelerator programs which are also located in Austin, Boston, Boulder, London, NYC, and Seattle. The “chosen few” receive valuable resources but where do the thousands of startups, that are rejected, go for help?
In response to this problem, a new kind of model has begun to emerge to jumpstart startups: the “excubator.” Unlike an accelerator, which typically lasts for just three months of the year, the excubator is designed to support startups from the very beginning with ideation to the very end of what hopes to be a successful exit.
This new model has already found a home in Chicago. Recently, five of Chicago’s award-winning digital service providers — Red Rocket Ventures (startup consulting & financial advisory), Ora Interactive (software development), SocialKaty (social media), Loud Interactive (SEO), and Walker Sands (public relations) — joined forces to launch the excubator “Ensemble.” Ensemble is a ‘one-stop-shop’ and brings together six key services under one roof: startup consulting, capital-raising, software development, SEO, social media marketing, and public relations.
“We felt that there was a big hole in the marketplace and the startup incubators are focused on cherry-picking ten or 12 companies from hundreds of thousands of applicants and running them through a program,” says George Deeb, managing partner of Ensemble. “And from our perspective we want to take care of everybody else that has not had a chance to get through a program.”
In addition to acting as a major source of support for startups, that are unable to gain admission to an incubator/accelerator, Ensemble and other excubators offer the following advantages:
- SUPPORT. An excubator can offer critical life-support to startups that were incubated, too. Studies show that most startups do not survive six months after graduating from the standard three-month program at an incubator/accelerator. Excubators can provide six months of additional support or more that can make all the difference in the world between success and failure.
- SAVES TIME. Excubators offer a variety of services under one roof. A startup doesn’t have to waste time shopping around for quality providers.
- SAVES MONEY. Excubators can bundle services and offer significant cash discounts. Ensemble, for example, offers either a 20% or 40% cash discount for their services depending on the offer and acceptance of equity.
- COLLABORATION. Participating companies in an excubator can share best practices and strategies that both they and their clients use.
- NETWORKING. Collectively, participating companies have a very large base of valuable contacts and can make personal introductions to key personnel and mentors.
There is one catch to the excubator, however. It’s not free. Most startups are on a shoestring budget and can’t afford to purchase their services. However, a number of companies that apply for admission to an incubator/accelerator have already raised capital and are in a position to pay for a comprehensive suite of services that can help to accelerate the growth of their new venture. In addition, a large number of startups that graduate from an incubator/accelerator raise capital and require ongoing support and mentorship. The basic Ensemble package will cost a startup about five-thousand dollars per month.
“It’s market rate for the services we’re providing,” says Deeb. “It takes a team of people to make [results] happen and we’re charging a nominal fee to cover the costs of those services.”
Only time will tell if the excubator proves to be a viable, complimentary model to incubators/accelerators. For now, the excubator is a new, unproven concept that addresses an unmet need and offers hope to the vast majority of startups that are seeking help and unable to gain access to incubators/accelerators. Hopefully, the excubator succeeds and proves invaluable in further developing startup ecosystems everywhere and helping to drive innovation and economic growth. ❒