For the last 8 years I have been working as a mentor and coach in various incubators, accelerators and co-working spaces. Each of them providing a specific value, potentially a great value… that is, if you select the model that is right for you!

Unfortunately some of the startups found in these environments are in the wrong place. Why? Maybe it is because they didn’t know better, or maybe because they selected the place for the wrong reasons. Our aim here is to raise the awareness level of entrepreneurs, especially the first-time entrepreneurs in the MENA region so that they kick-start their ventures in a good way.

Founders need access to a startup community…

As an entrepreneur and startup founder, the first question you might ask yourself is do I really need any external help to run my business and will any of these places provide enough value for me wanting to join? Fair question, and to many entrepreneurs the value is not always clear. Whether or not you should join any of these setups will actually depend on how mature your business is and what your specific needs are. Access to working space, help with setting up a business license, access to a startup community, access to funding, training, potential clients or mentors, these are all potential needs you need to evaluate to select the best environment for YOU. Usually all of these places will provide access to a certain community and network, which might take a long time for you to build-up of your own if you stay outside of this eco-system, but there are differences that are important to understand.

Key Differences between Co-working spaces, incubators and accelerators

A co-working space is a workspace that you rent out as an entrepreneur. The business model is usually a property rental, which means that you pay a monthly fee to get access to shared or dedicated office space. In a co-working space you can find all kinds of people in various stages of collaboration and the co-working space is a good place to mingle with other entrepreneurs. The essence of a co-working space is to give you cheap access to an office environment with ICT infrastructure (internet, printers) and meeting rooms. Co-working spaces also provide (often paid) access to their facilities for meetups or trainings. This creates additional value for the teams that are hosted there while also attracting new entrepreneurs.

An incubator, on the other hand, as the name states is to incubate companies. So while a co-working space does not really require you to setup a company and can be used in team formation and company formation stage, the incubator will need you to have a company or being in the process of forming a company. You get access to office space, but they can also help with other services, like for instance supporting the company setup process. Incubators have usually a strong network, both of potential clients for the startups as well as investors and mentors. The business model of the incubators vary a little, some of them would charge a monthly fee, while others would also take a little equity in your company. The time in the incubator is normally limited, remember the objective of the incubator is to help incubating and launching companies, so the time limit could be 1 or 2 years, before they expect you to fly with your own wings. Since incubators deal with established companies they also attract more mentors, investors and also become a good place for community events like meetups, hackathons and trainings where you can further strengthen your network.

An accelerator has similarities with an incubator, in the sense that they might also provide you with office space, help support in setting up the business license, have a strong network, but in addition they will provide you with various levels of seed funding and run you through a dedicated and structured 3-4 month acceleration program. The accelerator programs are normally covering aspects like strengthening the value proposition and business model, helping the startup connect with clients and launch the product if not already done, before finally preparing for investor pitching. The accelerator programs finish with a demo day, where startups graduating from the program pitch in front of investors. The business model is usually that the accelerator takes equity in your company in exchange for the seed funding. The purpose of the accelerator is really to start growing your business by getting first clients or pilots, refining your initial prototype and ultimately demonstrate that you have strong market traction so that you can get follow-up funding.

9 Tips on how to assess what is best for your startup

1. Make a list of what you need and give it a priority!

 Now this will probably depend on what stage your company is in, but try to assess what is most important for you right now. Is it to find co-founders, developers, build-up your skills, grow your business, get help with sales and marketing, learn from the startup community, seek funding: you will need to list what is most critical and start assessing various programs and setups based on your own priorities.

2. Getting connected to a good startup and knowledge community

There are a couple of things you can do to get a better feeling on each of the places and one of them is the check how many and what type of companies are registered there. This will give you an idea of the startups flowing through. Secondly, check whether there are regular meetups, hackathons and other types of events in this location. Meetups happening a few times a month in the same place is a good indicator for a dynamic community.

3. Getting access to training, programs or Bootcamps

Beside meetups, which sometimes can only brush a topic on the surface you might also want to see whether there a different type of trainings or bootcamps offered at reasonable rates.

4. Getting access to skilled resources to strengthen your startup team

You might not ne able to do everything yourself and quickly you can be faced with the need to recruit or outsource some work. Some of these setups have consultants available in-house for tasks like marketing, business development or even UX design, alternatively they can refer you to skilled resources. This can save you considerable time if you have a (temporary) gap to fill in your team.

5. Is the incorporation model the right one for you?

There are different types of licenses to consider especially in the UAE when deciding to setup your company. Some of these setups will give high costs at early stages. Think twice. Setups like BVI (British Virgin Islands) are usually a good start for founders to setup the company with proper shareholder agreement whilst having a small initial cost. This will get you started in formalizing the company setup, and the offshore setup has some benefits as well. You might or might not need a local license straight away, but this is normally required as soon as you want to sign-up your first client. You can then form a local subsidiary fully owned by your BVI company. This type of setup is common for startups in the digital space.

6. Looking for Angel Funding, Seed funding or VC funding.

When looking at funding we need to consider a few things. One is how far can you go by finding cash before actually having to start giving away parts of your company, and secondly what is your company worth when looking for external funding. Evaluate various options, including various types of grants and debt before looking outside. When looking for external funding startups sometime go for seed funding far too early. With that I mean that when the prototype is not ready and market traction has still to be demonstrated, you company valuation will be very low. I such cases you might be giving away up to 15% of your company for as little as 30K to 50K USD. When selecting an accelerator make sure you don’t select it only for the seed money but also for the support you can get in growing your business and securing follow-up funding. 

A good sanity check to understand whether the investor network is good is to check the ratio of startups that secured funding and the level of funding that have been achieved by the startups when exiting the incubator or accelerator.

Another thing to check is whether the incubator or accelerator has access to the right investors for your venture? Now this is something you need to pay particular attention to! In the MENA region many of the investors are very low risk takers and will only consider investments that can give quick returns. This is why the majority of the local investors will only invest in e-commerce and marketplace startups, where it is kind of easier to make revenue projections. So if your startup doesn’t fall into that category then make sure that the incubator or accelerator has investors that have invested in companies similar to yours in the past. Don’t be shy ask for the names of the companies invested in and ask for the investment levels.

7. How does the Mentor and Coaches network look like?

Many places list hundreds of mentors, I am not sure if this is marketing to attract startups, but what I have noticed is that only about 10-20% of these mentors a really active members of the community. Go to community events, reach out to mentors and try to understand what motivates them and what type of support they provide. Try to find places that will allow you to work with multiple mentors, and consider also working with a coach to give you a broader perspective and advice.

8. Understanding the eco-system around an incubator or accelerator

One of the reasons you would join an incubator or accelerator is because you think that they can help you getting connected to the right people for your business. Whether it is customers, government entities or investors, you need to make your assessment on whether the relations they have will actually help your business. Ask them to be specific about how they can help your business before joining. It might also be good to check whether they are connected to other international incubators or accelerators, this is important if you launch your product in one place and need support to grow it in other locations. Assess your current location as a springboard.

9. Brand, Communications and Exposure

Last but not least, in early stages it is a lot about perception. Try to understand what type of publications and sites the incubator or accelerator is regularly mentioned in, where their startups have been featured. Getting featured in magazines like Techcrunch, Mashable, The Entrepreneur or… Dubai’s Innovation and Tech Review will open doors.

Now this list is by no means exhaustive and could certainly be challenged on certain points,but I thought it would provide a good starting point for first time entrepreneurs and raise the awareness level around key needs for your startup. I hope to improve this assessment over time, but for that I would love to hear about your own insights or key aspects I might have omitted.