Supporting start-ups with accelerator programmes
Competition for places on accelerator programmes is intense, especially in Dublin
Sarah Dineen at the launch of UniWink. Photograph: Darragh Kane
In early 2005, Paul Graham and Jessica Livingston created a new model for funding early stage start-ups, an accelerator programme called Y Combinator.
Start-up companies on the programme would receive a cash injection and office space for three months, in exchange for a stake in their company. Y Combinator has since become the king of accelerator programmes, having sprouted two billion-dollar start-ups, namely Airbnb and Dropbox.
The rise of Y Combinator has led to the rapid development of other accelerator programmes and incubators around the world. These programmes provide new entrepreneurs with office space, mentoring, advice and practical training on legal, technical, business and fundraising topics. They also typically give money in exchange for a stake in the company.
While the terms accelerator and incubator are used interchangeably, broadly speaking accelerators offer investment for equity, whereas incubators are mainly about mentoring and don’t take a stake. At present Y Combinator offers $120,000 and three months office space in return for 7 per cent equity.
There are 27 different accelerator and incubator programmes in Ireland and competition for places on them is fierce.
Research carried out by Amárach on behalf of AIB earlier this year found competition for places on accelerator programmes in Dublin is particularly intense, with an acceptance rate of 21 per cent. Outside Dublin, this figure is higher, with 42 per cent of start-ups that applied for accelerator programmes accepted on to them.
The National Digital Research Centre (NDRC) is ranked in the top 2.5 per cent of incubators worldwide and is the only Irish incubator ranked in the top 20 of the UBI Index. The centre runs two Launchpad accelerator programmes each year, offering start-ups workspace for three months, and an investment of up to €20,000.
Investment is provided as €5,000 per start-up founder, with a minimum two founders required and a maximum of three founders, plus €5,000 project costs.
NDRC Launchpad director Gary Leyden says the programme is aimed at digital tech firms that can scale.
“We are not looking for copycat stuff. There needs to be a degree of innovation. It can be business model innovation or technical innovation,” he adds.
Leyden says the programme usually sees 150 pitches before selecting 10 start-ups for each programme, which they are coached on sales, revenue models, pitching, marketing etc.
Well-known graduates: Soundwave, Newswhip
International incubator Wayra selected Dublin as its 10th location in 2012. Its accelerator programme offers start-ups co-working space, support and expertise to get their projects off the ground and capital. Like Launchpad, the Wayra programme is also aimed at digital start-ups
“It couldn’t be a fish-farming business, but it could be a business that does data analytics for fish farming,” Wayra director Karl Aherne says. He says start-ups on the programme get €40,000 in cash and up to nine months physical workspace.
“We spend a lot of time upskilling them, working with them on innovation, and matching them with experts.”
Since the programme’s inception, 21 start-ups have graduated, with recruitment currently under way for the next batch of 10. The capital given to the start- up by Wayra is initially a loan, but that loan is converted into equity following the start-ups first round of funding.
“We never take less than 7 per cent equity, but we never take more than 10 per cent,” Aherne says.