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When starting a new blockchain startup, it’s very rare that the founding team has everything they need – be it the business infrastructure, the technical knowledge, the marketing expertise, the money – to be successful.
While some businesses will succeed, it often takes many mistakes, blunders, and recoveries before they find their way. In cases like these, start-ups need that mentor figure to help them find their way.
Be it a Yoda, a Mr. Myagi, or a Morpheus, that calm and wise voice can guide a startup to greatness.
But how can startups find their mystical mentor figure? And how can they find one with all the skill sets they are lacking? And while we’re at it, does that mentor have any rich friends looking to invest?
There are strong differences between:
- Turning a “back of the napkin” design into a minimum viable product (MVP)
- Building a scalable business around a proven innovation
- And finding the investors who are willing to risk partnering with you.
Let’s take a look at the role of blockchain incubators, accelerators, and VCs. Let’s see what problems each solves and how they benefit.
Then let’s look into a few of the emerging hybrid models that are specific to the needs of blockchain-based startups with models like the Cronos / Particle B grant program, with an active ecosystem of partners and a live chain ready to welcome the graduates; and Cryptix’s “Venture Builder”, which takes a deeper role as co-founder of the startup.
There are three traditional structures of assistance on the path from initial idea to operating (and sustainable) company: Incubator, Accelerator, and VC. Each solves a different problem, has a different timeline, and can boost a startup’s potential for success.
With an obvious term like this, it’s easy to guess that an incubator wants to start early as in, “the egg hasn’t hatched yet” early.
At this stage, depending on the company’s abilities, the complexity of the product, and at least a little “Eureka” luck can take as little as a few months to several years as the team slowly designs, develops, tests, fails, revises, and improves their product until they’ve successfully developed a working MVP that showcases the core innovation they are working to bring to life.
The incubator’s role is to understand the team’s goals and talent, and guide them through different exercises, lessons, and proven technical development methodologies until they have an MVP and a plan to further test/refine it into a true product.
The incubator may be incentivized through a non-profit organization with a mission to create economic growth or may choose to offer its services in exchange for a percentage stake in the business.
While they could also charge a straight fee, most startups needing incubator services do not have a large amount of capital. In many ways, paying with a cut of the business further incentivizes the incubator to help the startup succeed, with an “if you don’t succeed, you don’t pay” mindset.
This partnership takes place on a much more rapid scale – around 2-3 months is typical and can be in a number of forms, one of which is a series of workshops with actions for the team to complete in between (usually with support available from the accelerator).
Unlike an incubator, where the product could be in its earliest stage, or may have some development but is lacking an MVP, an accelerator typically works with startups who have a functional product, a business entity, and (hopefully) initial customers.
They have passed that rewarding milestone where someone actually wants to pay for their product. However, many blockchain startups have more technical knowledge than business modeling skills, and an accelerator is there to work with the startup to:
- Develop the infrastructure needed in the company so it can stabilize and expand
- Conduct the market and branding research needed to find a key market and position accordingly
- Develop the roadmap for scaling up the business, with strong growth goals and clear paths to hit them
An accelerator is incentivized similar to the incubator, where it may be a non-profit organization, but more likely will agree to a certain percentage of the business in exchange for their services.
Fees at this stage are more likely than in the incubation stage, but some form of a percentage stake in the company is usually included.
Venture Capital Firm (VC)
VCs usually enter the picture when a product has shown strong promise and is ready to get out of the garage/basement/coffee shop/parents’ house.
This type of scale-up takes real money, and the startup is usually at a point where they have strong momentum, but it’s clear that without proper funding, the momentum will slow down and stop.
VC’s provide the company not with guidance and hands-on support (usually), but with money. This is the lifeblood for the company to scale fast and make the investments needed, and to grow large enough that the revenue can begin sustaining the business well before the VC funding runs out.
The VC period for a company can vary depending on demand for the product, but fundraising rounds can have a quick turnaround that includes a “roadshow” pitching the company/product, negotiations about money for stock/tokens/etc., and the distribution of funds.
While each step in the process can be exactly what the startup needs, there is one glaring issue. The gaps between each step can belong, and the potential continuity is all but lost as the startup works with different groups for each step.
Perhaps this is why there are a growing number of innovative hybrid models that work to close the gap, keep the continuity, and develop much more involved partnerships during a company’s early stages.
The Cronos / Particle B Accelerator Grants Program
This innovative model from Cronos / Particle B seems like a simplistic mashup of incubator/accelerator at first glance, but is actually a holistic program that concludes with an opportunity for the startup to go live on the large Cronos ecosystem.
Grants are evaluated through an application process that includes thorough due diligence, an interview, and if accepted, a collaboration of setting key milestones and signing a contract.
The Cronos/Particle B team helps the grant winners through the incubator and accelerator steps depending on where they are at when they apply and have the ability to connect the team with VC.
This process creates cohesion that is better than most other programs, but the program shines because they help guide teams with the purpose of helping them develop a quality platform, and then help them onboard it to the large Cronos ecosystem.
Having this concrete goal helps the accelerator and VC steps since they have an approved onboarding plan, and helps to eliminate many of the key failure points that ruin many startups.
Cryptix has developed a program that in many ways is just a collection of incubation, accelerator, and VC rolled into one, but at a deeper level.
Their “Venture Builder” program can last 2-5 years, and the Cryptix team takes an active, sometimes daily role in helping startups develop and launch.
While this takes a lot of resources from the team, their business model requires they have a significant “co-founder” stake in the startup, which could scare away startups that want to retain control over their platform.
Blockchain accelerators, as well as the incubator before and the VC afterward, are designed to do one thing: Improve the odds of success for a promising startup.
While evolving models are changing the traditional process, their goal is very much the same. However, by having a mentor figure from start to finish, including a much-envied established on-ramp, startups who have truly great ideas and a talented team can launch in a way never before seen in the startup experience.