Business development programs such as Incubator or Accelerator programs are used to support startups and scale-ups with resources and mentorship. Entrepreneurs can take advantage of the training and financing options provided by incubators and accelerators who also facilitate opportunities for collaborations with public or private sector stakeholders. 

Business Incubators and Startup Accelerators

Business incubator programs support early-stage startups or brand-new companies to expedite profitability and success by providing valuable resources such as free office space, mentorship, a collaborative community, equipment and networking opportunities with potential funding sources such as angel investors and venture capitalists. 

Startup accelerator programs expedite growth of existing companies that have developed business models and validated products in the marketplace. They provide mentorship, free coworking spaces, legal services to help secure intellectual property, collaborative work ecosystem and access to industry influencers and potential investors. They also provide their ventures seed investment and take equity stakes in the companies.  

Both Incubators and accelerators can be divided into applicability for startups in their ‘ideation’, ‘launch’ or ‘growth’ stages ensuring that whichever stage a startup is in, they are able to find a program that suits them. 

a. Ideation stage startup incubators

These are ideal for aspiring entrepreneurs with a business idea and seeking cofounders or early startups with a team. They assist founders in navigating the foundations of entrepreneurship and commercializing their ideas. They also offer programs for startups involving world-class training and coaching, accountability and discipleship and financial access for a startup journey. In Kenya, MBM Africa and Sinapsis are ideation stage startup incubators for flexible and adaptable founders willing to venture into various sectors. 

b. Launch stage startup incubators and accelerators 

Antler Kenya, Villgro Africa, The Land Accelerator, Nailab, MEST, @iBizAfrica, Catalyst Fund, Pangea Accelerator and The Baobab Network are some of the launch phase incubators and accelerators in Kenya with each focusing on different sectors and having different programs and strategies for growing businesses. Generally, they enable founders validate their business models, determine a go-to-market strategy, build brand recognition and acquiring customers and preparing for seed or next-round investment. They help entrepreneurs become investment-ready and prepare a presentation deck and proposals that will entice investors, consumers and potential partners. 

c. Growth stage accelerators in Kenya 

They provide startups with entrepreneurial skills, access to resources and a network of global investors that will allow them to expand their businesses. They may be sector agnostic where they assist startups expand by helping them develop a deeper understanding of their own businesses, articulate growth challenges and identify and craft a growth strategy. Some of growth stage startup accelerators in Kenya include Multichoice Africa Accelerator by C3, iHub and GrowthAfrica Accelerator.  

Incubator and accelerator programs are highly selective and the application pool is competitive. Entrepreneurs must meet an incubator’s specific criteria and submit a viable business plan as part of the application process. They also require evidence that one’s business has high potential to scale up at an exceptionally fast pace. 

Differences between Business Incubators and Startup Accelerators 

They both offer early-stage companies support and mentoring. The following are the key differences between these business development models: 

a. Stage of the venture 

Incubators focus on early-phase startups that are in the product-development phase yet to have a developed business model. They focus on speeding up growth of existing companies that already have a minimum viable product in the hands of early adopters with an established product-market fit. 

b. Seed funding 

Incubators do not typically invest capital into ventures but may ask for an equity stake in exchange for the valuable resources they provide. It is standard practice for accelerators to provide ventures with a seed investment in exchange for an equity stake in the company. 

c. Program timeline 

Incubators take a slower timeline taking one to two years to develop their ventures with the goal to incubate a business idea long enough to build a successful company. Conversely, accelerators run like a startup bootcamp and tend to have a set time frame of only three to six months. 

Should you use an accelerator or an incubator 

Specific needs of the company have to be accessed to help in deciding which business development program is best by identifying whether one is an early or late-phase startup. One needs to: 

a. Identify funding needs 

Incubators are an ideal choice for businesses undergoing setting up and building up their business models while accelerators support businesses looking for seed investment to help them scale up. 

b. Assess the sate of their business’s product 

Incubators are ideal for new businesses with no established viable business model that are still developing a product idea. Accelerators tend to be ideal for early-stage existing companies that already have a minimum viable product.  

c. Determine the timeline of your business 

Incubators help to support businesses over a longer period of time while accelerators work with businesses to scale up rapidly within a matter of months. 

Conclusion

Kenya’s well-established reputation as a pioneer in Africa’s innovation industry presents great future prospects for startups. At Netsheria International LLP, we are excited to see the Kenyan startup ecosystem improving and expanding further via knowledge-sharing and collaboration between local and foreign firms, government bodies, institutions, and startups through these accelerator and incubator programs in Kenya.  

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Introduction 

Netsheria International LLP team was recently involved in a panel discussion by Agema Analysts at iHUb in Nairobi dubbed “Key Aspects to Consider when Scaling Up Your Business”. The event primarily encompassed startups and small and medium enterprises who were provided with advisory on strategic local expertise and analysis capability to critical investment and risk areas for successful, safe and compliant running of their businesses. 

Scaling up your business

For most entrepreneurs, getting their business off the ground may have been challenging but scaling up tends to bring a whole new set of issues. The reality is that scaling up a business requires a different skill set to the ones employed when getting it off the ground in the first place where there is need to manage both growth and risk.  

As such, it calls for meticulous planning by entrepreneurs toward where they want to see their business to ensure it has sufficient resources in place to service the needs of clients and customers whilst ensuring these resources are managed properly. 

Aspects to consider when scaling up your business

1. Does your startup have the right setup? 

Essentially, this refers to the initial stages of conjuring your business towards operations. This entails evaluating the business idea, making of a business plan, securing funding, making sure the business adheres to legal requirements, establishing a location whether physical or online, developing a business plan and building a customer base. Once the essential details are confirmed and necessary documentations prepared, entrepreneurs should undertake registration of their business to ensure they can legally start operations. 

2. Tax considerations when starting your business 

Many people have an interest in starting a business of their own but do not investigate tax considerations. This can be the case if they do not understand the taxation effects of starting a business. As such, they need to consider: how starting their business affects their tax obligations, how to prepare their business for taxes and cost implications, how and what taxes are payable per their business model whether a company, partnership or sole proprietorship, tax exemptions, separation of business and personal taxes, who can help them in the process and penalties for failure to adhere to tax obligations. 

3. Are your startup Intellectual Property rights protected? 

Startups depend on their IP to confer a competitive advantage and to act as a container to hold the goodwill they create in the market. Basically, one should consult with an IP lawyer or an expert to determine which category applies to their startup and how to register or enforce their IP rights. This will help them develop an IP strategy that allows them to make informed decisions. Startups can formulate their IP strategy by identifying the different types of intellectual property and how they can best be used while incurring minimal legal expenses. 

4. Does your startup meet minimum corporate governance and corporate compliance standards? 

The lack of a corporate governance framework or adoption of basic governance practices often impact startups and SMEs who are at the cradle stage due to lack of knowledge of the concept of corporate governance. Non-compliance usually leads to reduced chances of funding either via equity or debt. Corporate governance entails balancing the interest of the stake holders in the business including shareholders, management, customers, suppliers, financiers, government and the community. This should also include the business’ ethical obligations to consider the society they operate in toward a wider range of stakeholders. Thus, stakeholder interests are at the core of corporate governance.  

5. Considerations while onboarding investors or partners to your startup 

Onboarding a new investor or partner can help grow and transform businesses. To make the best of this opportunity, it is important to consider investor or partner expectations in the relationship, alignment of interests, duration of the investment or partnership, roles and responsibilities adopted, strategies to retain investors or partners and exit plans and considerations to be made.   

6. Key elements of investment agreements/SAFE note- Raising Capital 

A Simple Agreement for Future Equity (SAFE) note entails an investment contract commonly used by startups to raise capital from early-stage investors. It enables startups secure funding while offering investors the right to convert their investment into equity in the future. Some of the FAQs on SAFE notes worthy of consideration by startups entail: Whether startups can negotiate terms of a SAFE note agreement with investors, suitability of SAFE notes for particular startups, whether SAFE can be converted into equity before a subsequent funding round and risks associated with utilizing SAFE notes for fundraising. 

Conclusions

In the ever-evolving world of technology, businesses have not been left behind. In scaling up their businesses, entrepreneurs are encouraged to adopt technology in the growth of their business and embrace use of new features and software to simplify running of the business while aiming to maximize on profits.  

By considering the above aspects, startups and SMEs are able to shift from starting up to scaling up their business. 

To learn more about how Netsheria can help you grow your business, visit our website or contact us today.  

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