Incubator, Accelerator, Transformer?

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What are those differences between incubator and accelerator? Oh boy, sometimes they can be two confusing sisters. Under the simplistic notion of “farmhouse collecting eggs or stones to hatch little chicken for big sale”, aren’t they all “farmhouse”?

Well, according to the definition from the west, in some territories the two cross over, offering perks such as mentorship, opportunity of accessing to capital etc, but there seems a distinct line between:

-infinite time period versus fixed time period

-slow pace of growth verus fast pace of growth

-No class/cohort based versus class/cohort based

-idea development versus ready to go market

-low entry barrier versus competitive selection

-retainer model versus equity model

In the US, Y Combinator is the most glamorous startup accelerator. Period. 13 startups out of it were collectively worth over USD 50 billion. In China, we tried such concept but mostly failed. When a well-known silicon valley accelerator transplanted to China soil, it even re-organised itself as an incubator under a franchising operation model. Few here which can be under the western definition of “accelerator” are simply proud of their existence, not much of their glorious success.

For a long time, local experts have talked about why pure accelerators did not work like a charm in China. Key philosophical reasons boiled down to: different entrepreneur mentality, lack of collaborative culture, self-seeking mentors, self-contained startup ecosystem…Maybe, anyhow we just know incubators are the mainstream in China. In fact, the birth of incubators has been fecund, already over 2,000 in 2015, and estimated to surge to 5,000 by 2020, though many whispered the breakneck growth is just a bubble, so honestly no one knows how many of them will stay by 2020. For now the types of incubator here are:

-Incubator+Angel Investor

-Incubator+co-working space

-simply mixing elements from incubator, accelerator, co-working space all-together

And who are the sugar daddies powering those incubators which are teetering on the brink of burning money for nothing most of the time? The Chinese government is actually the biggest spender. According to a local research paper, 28.4% of incubators are purely government funded;22.8% are privately funded by corporations like internet giants, real estate, venture capital firm, or even media companies; 17.7% by state-owned universities (again from government), and the remaining 33.1% by miscellaneous sources of public and private capitals. The majority of the incubators are now claiming to offer co-working space and mentorship, but what really attract startups to join is a viable channel of raising money, which sadly not many incubators can provide effectively in reality.

Many sources quoted, backed by SinovationVentures, as the number 1 incubator in China. Kai-Fu Lee, former Google Inc., Microsoft Corp. executive and a cancer survivor is the golden name behind. It started out as a glaring incubator in 2009, but gradually pivoted to its core business as a VC firm, and now it insists it always walks on two legs, investment fund and incubation, plus an arm of startup school. It is said in 2015, 68% of the incubator revenue came from the services fees for its startup. In this month, SinovationVentures just raised a whopping of USD675 million. Local media hailed will be the closest thing to Y combinator in China, of course in a slightly twisted version.

We are seeing a transformation, from western defined incubator/accelerator to more blurry structures in China, often a concoction of co-working space, mentorship, training, startup service, networking event, or seed funding opportunity; some supported by a VC firm as an extra conduit of branding and pipeline, some have strong vertical focus depending on which industry corporation is behind, or some are the ultimate epitome of government sloshing money around to show-off its determination in cultivating startup innovation. But even in Silicon Valley after remarkably consistent management for the first 9 years under co-founder Paul Graham, Y combinator has seen a lot of changes in the past 2 years. It is now called the YC Group and consists of an accelerator with a much larger class, a VC fund, a research outfit, and an online education offering etc. Anything in startup scene has to evolve and adapt quickly, and in China, the momentum is often in much larger scale and in more chaotic vogue. Though the whirlwind of incubator expansion has been circulating in the country, in the eye of this storm, it is still in search of a sustainable and mature model, a transformer beyond incubator/accelerator.

Cecilia Wu

A witty, nutty and frosty writer who hopes to jot down moments of inspiration from her daily life

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