7 common mistakes why startups aren’t accepted into business incubators.
Who’s going to fund your startup? 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 and those willing to take unreasonable risks with their money are likely to invest in a project at its very outset. But what do you do if those sources are not there or have already been exhausted? A variety of startup accelerators, business incubators and venture funds can come to the aid of startuppers. However, few projects are lucky enough to secure the support of a major company and receive enough funds to grow. Vitaly Mzokov, head of Kaspersky’s Innovation Hub, has written about some of the common mistakes made by startups when trying to get their project accepted by a business incubator.
- The home market isn’t always the best option
Many projects at their initial stages focus almost entirely on tapping their home market, but give little thought to expanding into foreign markets. It should also be pointed out that the market expansion strategy, for example, for Russia often differs dramatically from that used abroad.
You first need to understand which market the product is intended for, and only then take your offer to an incubator. This will substantially increase the project’s chances of finding support from a large company and attracting investment.
For instance, I know of an Italian startup project that recently applied to a Spanish business incubator because the project already had its audience in Italy, but was specifically looking to expand into the Spanish market.
- Knocking 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 organisations have their own specific profiles and focus on certain industries. From the numerous conversations I’ve had with investors, I can say that startuppers who haven’t done their homework end up making very bad first impressions. For example, startups have approached us with offers to develop a marketplace or apps for the B2C segment that have absolutely nothing to do with information security. Those sorts of projects are of no interest to our innovation center. At Kaspersky Open Innovations Program, we look for solutions in the field of cybersecurity. In the framework of this program, we have recently started our global startup challenge aimed at recruiting teams working in the following areas: transportation cybersecurity, IoT cybersecurity, blockchain technology and anti-fraud.
- Everyone needs to sell
A balanced startup team must have both developers and people who will concentrate on promotion and sales. Technical resources alone are not enough to succeed – business development resources are equally important. And all the team members must be able to promote the idea or product. What’s more, every team member needs to keep in mind that they are creating a product that’s going to be sold.
- An idea instead of a business plan
We often see startuppers come in with nothing more than an idea – no business plan whatsoever. The incubator guys have to work out for themselves how the idea should be sold, what channel to use, and what the target audience is. That’s why we recommend writing a business plan or a business case to make it easier for an incubator to evaluate the idea and its effectiveness. There are a number of extreme cases: while one startup may come with nothing more than idea, another may arrive with a business plan hundreds of pages long. In actual fact, a one-page application works just fine, provided it describes all the company’s business processes: the proposition, the infrastructure, the consumers, finances, etc. There are online services such as Business Modeling Canvas that can help you create a decent business plan using a template.
- An unwillingness to share
Some startups are apprehensive about using the services of accelerators or investment funds because they think their bright idea may get hijacked or they may lose too much control. In reality, startup investment conditions can vary dramatically from company to company. Of course, everything depends on the current state 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, and doesn’t envisage any share in the startup being transferred to Kaspersky. We look for different projects to promote them globally and we don’t talk about Kaspersky’s participation in the capital of startups at the early stages.
- 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 startups come too early, when they are still at the idea stage. There aren’t many incubators that will support projects that are at the idea or proof-of-concept stage.
The latecomers are often those startups that miscalculated their ‘burn rate’. They borrowed money from their families but it ran out 3-4 months before they could develop their proof of concept. By the time they come looking for real investment, these startups have usually run out of steam, and investors are reluctant to get involved.
- Just one incubator
Don’t give up after being 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 meetups and investor meetings. Use every opportunity to get feedback from your target audience. Don’t sell yourself short. Don’t be afraid. You need to put yourself out there – the more, the better – and find those who are interested in your idea.