So you’ve found a business incubator or investment scheme that fits your start-up business ambition. What next? Here’s what not to do if you want your application to succeed.
Who’s going to fund your start-up? In the world of investments, the rule of the three Fs applies: friends, family and fools. In other words, only the people closest to you or those willing to take unreasonable risks with their money are likely to invest in a brand new project. But what do you do if those resources aren’t there or have been exhausted? A variety of start-up accelerators, business incubators and venture funds can come to the aid of start-ups.
What’s the benefit of joining a business incubator?
Business incubators are an appealing option for entrepreneurs who want to move fast and get the right level of support while they grow. And, as it’s estimated that 90 percent of new businesses fail, an incubator can give you the best chance of not only surviving but thriving. Incubators or innovation programs can include state-funded projects that promote entrepreneurship, usually in technology-related fields.
Another model is an incubator based inside an established organization that can offer expertise in a related field, like the Kaspersky’s Innovation Hub for breakthrough ideas relating to information security, or The Foundry, an innovation investment and partnership by global consumer goods giant Unilever. These internal company incubators can give you significant expertise to get your products to market, with a strong potential for the incubating company to become your first big customer.
So you’ve found a scheme that fits your business ambition. What next? Well, you need to make a successful application. I’ve read hundreds of applications for our incubator, so I’ve noticed why some succeed and others fail. Here are seven things not to do during your application.
1. Don’t just focus on your home market
Many projects at their initial stages focus almost entirely on tapping their home market, but give little thought to starting out or expanding in an international market. Joining an incubator outside of your country of incorporation can yield many benefits down the line for your market expansion, as you’ll become more familiar with the needs of different markets beyond your own doorstep.
You first need to understand which markets the product is best suited to, and only then take your offer to an incubator in the appropriate country. This will substantially increase the project’s chances of finding support and getting the investment.
For instance, I know an Italian start-up project that recently applied to a Spanish business incubator, because the project already had an audience in Italy but was looking to expand into Spain.
2. Don’t knock on the wrong doors
Before approaching an accelerator, business incubator or venture fund, you should find out as much as possible about it to make sure your project is relevant. These organizations have their own specific profiles and focus on certain industries. From the numerous conversations I’ve had with investors, I can say that start-ups who don’t do their homework end up making a very bad first impression.
For example, start-ups have approached our incubator with offers to develop a product or service that has absolutely nothing to do with our focus on information security.
3. Don’t forget how to sell yourself
A balanced start-up team must have both developers and people who will concentrate on promotion and sales. Technical resources alone are not enough to succeed – business development is equally important.
And all the team members must be able to promote their idea or product. What’s more, every team member needs to keep in mind that they’re creating a product that’s going to be sold, so it has to meet the needs of its target audience.
4. Don’t present an idea instead of a business plan
We often see start-ups approach us with nothing more than an idea – no business plan whatsoever. My team has to work out how the idea can be sold, what channels to use and who their target audience is. That’s why I recommend writing a business plan or a business case to make it easier for an incubator to evaluate your idea and the potential opportunity.
There are a number of extreme cases: while one start-up may come with nothing more than idea, another may arrive with a business plan that’s hundreds of pages long! In fact, a one-page application works just fine if it outlines the key elements: the proposition, infrastructure, customer and finances. Online services like Business Model Canvas can help you create a decent business plan using a template.
5. Don’t be afraid to share
Some start-ups are apprehensive about using the services of accelerators or investment funds because they think their bright idea could be hijacked, or they may lose too much control. So they come into the application process with a protective attitude. In reality, start-up investment conditions can vary dramatically from investor to investor, and a lot depends on the status of the project. Different incubators may also have different business goals. For example, Kaspersky’s Open Innovations Program focuses on talent scouting and promoting projects – we don’t envisage owning any shares in the start-up.
6. Don’t arrive too early, or too late
It’s important that you show up at the incubator at the right stage in your project’s development. Some start-ups come too early when they’re still at the idea stage. There aren’t many incubators that will support projects that are at the proof-of-concept stage.
The latecomers are often those start-ups that miscalculated their ‘burn rate’. They borrowed money from their families but it ran out a few months before they could develop their proof of concept. By the time they arrive looking for real investment, these start-ups have usually run out of steam and investors are reluctant to get involved.
7. Don’t put all your eggs in one basket
To an extent, getting investment itself can be a numbers game. Don’t give up if you’re rejected by one business accelerator. Try another one. Try applying to investment centers in different countries.
You also need to test your idea and ‘sell’ it at industry meetups and investor meetings. Use every opportunity to get feedback from your target audience. Don’t sell yourself short. Don’t be afraid. Put yourself out there – the more, the better – to stand the best chance of finding an investor or partner who’s interested in supporting your idea.
Follow these tips, and you will stand the greatest chance of success. Good luck!