The Spectrum of Innovation

For any startup founder, external assistance by an innovation program such as an Accelerator or Venture Studio can serve as a compelling opportunity to help bring their idea or product to fruition. However, with the large number of programs that exist, many startups may find themselves unaware of the multitude of requirements and compromises that must be considered when applying to such programs. 

In our research, we’ve outlined a ‘spectrum of innovation’ that encapsulates the broad range of innovation programs. We determined the placement of these programs within the spectrum by the extent of equity given and support received. As such, we will consider three different programs in order to qualify our innovation spectrum.

Incubators

On the left hand side of our spectrum we have our Incubators. Some incubator programs include Paris-based Station F and London-based Founders Factory. Incubator programs generally do not take equity and are otherwise fee-based programs, providing office space and a network of other startup founders. Of course, there are exceptions to this generality, as some incubators may provide funding and/or take equity. These programs are generally mid-term length programs, with many startup founders attending for a couple months to multiple years. Hence, we qualify Incubators to be the left hand side of our spectrum: an innovation program that offers minimal support in the form of infrastructure and network opportunities, and receives fees or minimal equity in exchange.

Accelerators

Further down the spectrum, we have our Accelerator programs. These programs include the corporate accelerators, such as Disney’s and Amazon’s Accelerator programs, as well as open accelerators such as Techstars and Y Combinator. Accelerator programs will typically receive equity from the startup, ranging from 10-25% equity, in exchange for funding, office space, mentorship, and marketing support. Corporate accelerators also provide additional industry-specific engagement processes and tools and may also require a limited license agreement between the corporation and the startup. Since most accelerator programs are structured as cohorts, startup founders also have access to a network of other startup founders. Accelerator programs generally persist for 3-6 months, where founders must follow a strict curriculum, receive dedicated mentorship, and attend mandatory events and workshops. Upon completion, all startup founders are given the opportunity to pitch their product to investors on demo day. After demo day, the Accelerator program is concluded and the overall fate of the startup is solely left to the startup founder. Thus, we qualify Accelerators to be in the middle of our innovation spectrum: an innovation program that provides moderate support in the form of infrastructure, resources, funding, and network opportunities, and receives moderate equity in exchange.

Venture Studios

On the right hand side of our spectrum we have our Venture studios. Venture Studios specifically target idea-stage or pre-seed startups, with talents drawn through internal or external sources. These studios act as co-founders to startups, assisting in idea formation, creation, and growth with the eventual goal of achieving a marketable product and a portfolio addition to the studio. As such, Venture Studios are long-term programs, ranging from 2-10 years of length. These studios also receive a larger share of equity, ranging from 33%-50%, with more equity taken depending on the extent of support given. Thus, we qualify Venture Studios as the rightmost side of our innovation spectrum: an innovation program that provides maximal support in the form of extensive assistance throughout the idea formation, creation, and growth phases of the startup, and receives maximal equity in exchange.

What works best for you?

Innovation programs such as Incubators, Accelerators, and Venture Studios can be hard to navigate for the fledgling startup founder as needs can vary depending on the stage of the startup. A key takeaway is that the more support that startup founders receive, the more equity the startup founder will have to give. For startup founders simply looking for office space and networking opportunities, as well as acquiring the funds to pay the associated fees, an Incubator would be the best choice. Moving along our innovation spectrum, a startup founder that requires funding and a more structured curriculum and resource support, and is willing to provide a moderate amount of equity should consider an Accelerator. Finally, for the startup founder that may still be in the idea formation or pre-seed phase and requires extensive support should consider a Venture Studio, although the founder must be willing to relinquish a maximal amount of equity and allow the Venture Studio to be designated as a co-founder. Regardless, success is never guaranteed, and startup founders must consider all factors before committing to an innovation program.