The hard facts of survival for start-ups

By: June 18, 2014
'There are plenty of walking dead out there. My concern is, a lot of them are getting grants, which I think is worrying because, potentially the grant pool is being used up by the wrong companies' 'There are plenty of walking dead out there. My concern is, a lot of them are getting grants, which I think is worrying because, potentially the grant pool is being used up by the wrong companies'

One of the more interesting sections of the AIB Outlook Technology Report is the chapter called ‘Cradles of Innovation’. It’s a look at Ireland’s accelerators and incubators for tech start-ups.

The authors of the report talked to ten managers from some of the country’s leading accelerators and incubators. What these people have to say about accelerators and incubators, and the role they play in bringing start-ups to market, gives some food for thought.

Firstly, it is extremely difficult to get into an accelerator or incubator programme. In Dublin the acceptance rate is just 21%. Accelerators and incubators are also male dominated. Just 30% of participants are female. However, 71% of companies will actually bring a product to market, so it seems these programmes work to some extent.

However, all of the panelists stressed that job creation was not a metric that should be used to judge the success of accelerators and incubators.

The walking dead
According to the research, the main criteria for acceptance to a programme is high market potential (90%), closely followed by the anticipated scale of the project and team experience.

Once in a programme, however, start-ups need to think quickly about sales and sending out invoices. Many start-ups get into the trap of surviving on funding, rather than chasing sales. As one of the ten managers put it: “There are plenty of walking dead out there. My concern is, a lot of them are getting grants, which I think is worrying because, potentially the grant pool is being used up by the wrong companies.”

Another accelerator programme manager talked about the importance of recognising failure quickly and moving on: “It would be great if we had more entrepreneurs that could say here are two or three examples of things that haven’t worked for me, this is why I put it down when I did. It would be enormously helpful if entrepreneurs were able to talk about failure more publicly”.

No space
The shortage of space for start-ups in accelerators and incubators was also highlighted by the report. “Most of the co-working spaces are full or can’t accommodate those companies that grow to above 10 people,” said one manager.

Cash flow
And the raw reality in terms of banking support remains the same for start-ups as it does for any company, of any size.
“How do banks interact with small nascent companies who do not have the credit history that other companies have?” asked one incubator manager. “Seems to me that the same rules apply to start-ups as apply to SMEs, as apply to corporates.”
In other words, you won’t receive any favours as a start-up and you need to have a product/service that sells before any financial institution will open its doors to you.