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.
Demand for places on the Wayra programme is huge and just 5 per cent of applicants will succeed in getting a place.
Well known graduates: Trustev, BragBet
Dogpatch Labs is another international incubator, with sister offices in New York, California and Massachusetts as well as Dublin. Founded by venture capital firm Polaris Partners, the incubator has led to the successful launch of several important companies including Instagram, albeit from the US offices.
The Irish office is located down the road from Google’s European HQ on Barrow Street. It offers open-plan spaces for entrepreneurs working on new business ideas.
Lab members also have access to industry thought leaders, senior advisers with best-practice knowledge and Polaris’s network of professional contacts. More than 30 companies have passed through the incubator’s doors in Dublin since it opened in 2011.
Well-known graduates: Intercom, CoderDojo, Logentries
Propeller Venture Accelerator
Based in the heart of Silicon Docks, the Propeller accelerator programme is run by the DCU Ryan Academy for Entrepreneurs.
It was established in 2010 with funding of €1 million from Irelandia Investments. Two programmes are run each year, with six companies participating in each programme.
In return for a 7.5 per cent equity stake, participants receive mentoring, three months incubation with free office space and services and a €30,000 cash investment for their business.
Participating start-ups have access to mentors including SAP Ireland managing director Liam Ryan, Frontline Ventures partner Will Prendergast, Fantom chief executive Paul Healy and Erica Roseingrave, head of public affairs at Coca Cola Ireland.
Well-known graduates: Likewhere, VideoElephant
Ignite is the incubator programme at University College Cork. The university supports the start-ups financially and provides office space, but it does not take an equity stake.
Every year, the programme stakes on 10 start-ups, providing them with office space in UCC’s Western Gateway Building for between nine and 15 months.
They also benefit from expert mentoring, seminars and approximately 30 days of workshops.
On completion of the programme, entrepreneurs can avail of a further six months office space free of charge at the National Software Centre in Mahon in Cork.
The programme’s primary funders are Cork City Council, Cork County Council, Cork City and County Enterprise Boards and Bank of Ireland.
Well-known graduates: UniWink.com, VConnecta
Ignite experience: Sarah Dineen,UniWink.com
Sarah Dineen heard about the Ignite incubator programme while at UCC. She had an idea for a business, but knew it wasn’t as polished as it could be, so applied for Ignite.
“I submitted an online application form. I had done a lot of market research so I knew my stuff. I had never pitched before, though, and I had to pitch to a panel of five people.”
Dineen started the programme in October 2013, learning about lean business models, setting up a business, idea generation and getting the price right. “The biggest thing I learned is that you can’t have assumptions about what customers want.”
She received a €5,000 investment in her business, from the programme, which went on web development for her e-learning platform UniWink. The platform had 2,500 users across six universities.
“Students can get notes on our site,to prepare for their exams. We pay first-class students for their notes, and then charge students to access them. We want to be in all [Irish] colleges by October.”