The last 12 months have seen increased focus in the establishment of labs, hubs and shared spaces throughout Africa, seeking to meet the demand for innovation arising from the upsurge and uptake of technology based solutions and the birth of many startups gunning for a piece of the pie.
As we now have traction along this front, we need to have some metrics by which to measure what is on offer by the current crop of spaces, as well as create a baseline that those wishing to establish such can base themselves on. The business models these spaces adopt may vary, but the core is often a mix of an equity stake and subsidized workspace.
The move is towards more commercial models as the guinea pigs in the form of the first movers have proved that the concept is viable.
In no particular order, here are some key points to look at when choosing an incubator or shared space from which to run your startup operations.
Many times a startup needs more than just capital and it is important that the team look at the mentors that they will have access to while at the incubator. The mentors should either have cross industry appeal or at the bare minimum understand your vertical. For example, if you are in an tech based agricultural startup a mentor from the banking sector may not necessarily add value.
Scrutinize the business model on offer. If it is a mix of equity and subsidized space, deep dive into the numbers and determine how they come up with their valuation and their asking equitywise. Low initial (pre-money) valuations are to be expected as this is part of how the incubators make money; by selling off their stock at higher valuation. Are you getting any capital financing in the deal? How does the subsidized space stack up? Could you be better off still operating from your own space without the bells and whistles?
The likes of Y Combinator have a pool of successful former incubatees. Where possible, it is advisable to seek audience with former incubatees to get a firsthand account of their experiences.
Incubators are numbers based, meaning the more startups taken through the cycle, the higher the chances that a number will get decent traction and offer a good return on investment. Your time at the facility will therefore be limited. Will the time be sufficient to give you full value from their offering or help to reach your goals? Is there any support post incubation?
Incubators do have their value, which you may or may not need. Take them through the paces and have them show how they can indeed offer more than the sum of their offering.