Quick reads

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Incubators and accelerators have been instrumental in readying healthtech entrepreneurs and their companies into investable, tractable businesses. For many, and even for some seasoned founders, the entrepreneurship road can be daunting. Entrepreneurs face the uphill battle of demonstrating disruptive business value in marketplaces that serve host to established players and fragmented stakeholders. In order to stay afloat in such a competitive environment, entrepreneurs require significant amounts of expertise, mentorship, networking, practice, pitching and most importantly, funding.

 

This is where incubators and accelerators come into the mix and provide the most value for emerging founders. Because most founders starting out are novices, many do not have access to all of these resources on their own. As a result, incubators and accelerators, community-based organizations of entrepreneurs, mentors, advisors and investors, run programs that provide services to these ambitious entrepreneurs looking to make an impact in their respective fields.

 

While valuable, the introduction of these programs into the startup ecosystem created a series of unintended consequences that paved the way for alternative means of these same services. Application processes for accelerator and incubator programs grew to be highly competitive – thousands of applicants would fight for ten spots in a single cohort, leaving >99% of applicants looking for new options. Even those accepted into the coveted programs fought ~20% odds of receiving follow-on fundraising. Furthermore, entry into the program is conditional upon equity exchange, something not many founders are willing to give up early on in the start-up lifecycle. These emerging needs, and more, led to the rise of peer-to-peer platforms in the ecosystem, which is the topic of our third and final blog in the Healthtech Incubator/Accelerator series.

 

Peer-to-peer platforms are online marketplaces that unite multiple stakeholders in a virtual setting. These platforms provide the infrastructure necessary to communicate and provide services between multiple stakeholders in a safe, closed environment. With respect to the startup ecosystem, peer-to-peer platforms like Gust have created newfound competition with their accelerator and incubator counterparts by introducing their ancillary services on the platform.

 

Here are four ways in which peer-to-peer platforms have a competitive advantage over accelerator and incubator programs:

 

They lower the barrier to entry: Peer-to-peer platforms reduce the bottleneck entrepreneurs face when looking for accelerator/incubator services or funding. Premier accelerator programs today accept less than 1% of a few thousand applicants to their program cohort each cycle, leaving many potentially compelling and competitive startups seeking ancillary services. While peer-to-peer platforms do screen for quality in their clients, they are not limited to a fixed cohort size like their counterparts. This means peer-to-peer platforms can engage with how ever many startups they wish, given their size, scale, network and operational capacity. Additionally, clients can range from anywhere across the startup development lifecycle, meaning they won’t be screened based on company maturity like with accelerator or incubator programs.

 

They allow the entrepreneur to maintain ownership: Peer-to-peer platforms allow the entrepreneur to maintain full ownership of their business. Accelerator programs require that founders give up some equity in exchange for seed funding and their ancillary services. Depending on the stage in the company’s lifecycle, founders may not be willing to cede equity as high as 5-10%, adding risk if they are unable to receive funding future funding opportunities beyond their initial seed investment. Peer-to-peer platforms generally take no equity in any startup and don’t take the full amount of money for a particular service upfront until the service is delivered.

 

They provide professional services on a nimble schedule: Peer-to-peer platforms allow clients to access professional services from the comfort of their own home/workspace. Without having to relocate to a new city, clients have wide-ranging access to services which include company incorporation, corporate banking, legal advising, startup fundraising, stock issuing, hiring, marketing, packaging of investor materials and more. Furthermore, these services can be accessed on-demand and without the need for an accelerated timeline – clients can work at their own pace to achieve whichever business goals they desire.

 

They create a private and secure experience: Peer-to-peer platforms foster an environment that caters to privacy and security. Generally, accelerator and incubator programs publicize progress relevant to members within their cohort. While marketing is usually a good thing, founders aren’t always willing to publicly disclose their fundraising efforts or business development initiatives. Peer-to-peer platforms give founders the flexibility to manage their public presence in the same way other professional services firms do with their clients. In addition, peer-to-peer platforms maintain quality control over the clients they engage with as to create a secure and compliant environment for all stakeholders involved. In response to crowdfunding, this is a necessary measure in order to prevent risk of interaction between accredited and non-accredited investing parties.

 

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