Business Incubators and accelerators
Accelerators, such as the well-known DBS accelerator, are good for those looking for small funding and access to an ecosystem & advice. Most accelerators are mostly run by established corporations, professional investors, and even government agencies. They do not offer direct funding, but they will host a demo day, inviting potential investors to check out your company instead.
To be part of the business incubators and accelerators program, you need to apply. If your application is approved, you will participate in a mentorship program at a specific location (usually a co-working space) for a few weeks to a few months. Accelerators last for 4-8 calendar months. Business owners need to commit their time to these programs.
The advantage of business incubators and accelerators is that it allows one to make good connections with mentors, investors, and fellow start-ups.
Similarities between Incubators and Accelerators
They both offer mentorship, business network, and some form of a structured program.
Differences between Incubators and Accelerators
Incubators are like a parent to a child. They nurture the business by providing shelter tools, training, and network to a start-up business. They assist a business to walk.
Accelerators, on the other hand, helps a start-up business to run/ take a giant leap.
It is an excellent and quick way to manage one’s cash flow in the short term. Invoice discounting is an invoice finance facility that authorizes business owners to leverage their sales ledger’s value. When the business owner issues an invoice to their customer, a proportion of the total amount becomes obtainable from the lender, providing a crucial source of working resources for the whole month.
Early in the start-up, a business owner needs information on how to come up with a valuation when talking to investors. Convertible notes for the bridge from the first event to the next round in which evaluation is established. Therefore, they are a simple and efficient way of funding for start-ups. They are useful as they contain limited rights and defer a lot of the complicated negotiations until a later round.
Convertible notes usually include pricing discounts to reward the investor for taking the risk of funding his or her start-up business. Pricing discount allows the holder of the convertible note to convert his or her loan into shares at a good discount, usually between 10 to 30%.
The valuation cap is a maximum valuation determined at the time of the convertible note investment at which the investor can convert his or her loan into shares.
Eventualities of the convertible note
Should the start-up not manage to raise around before the maturity date of the convertible note, the following can happen:
- The note holder can extend the note
- The note holder can force you to pay the loan. If this happens, the business owner can be bankrupt.
- The note holder can convert the note into equity at an agreed valuation.
In recent years, the financing options available to start-ups have grown greatly. This has made it easier for less conventional start-ups to get funding, as well as give them a chance to find a demand for their product in the pilot stages of their business.
However, deciding which option is best for your business, or even a combination of options, is now made more complicated. It can be difficult to understand and evaluate the options available. Fortunately, there are avenues for you to seek advice, and Paul Hype Page is ready to assist your financing plans, to help ensure you can start your business on the right foot.