In a great post by Jesse Rodgers of TribeHR, he mentioned the importance of identifying performance metrics for your startup incubator. This can help to determine how effective the startup incubator is (or isn’t). At the core of his message is measuring certain performance metrics at the application, in program (accepted), and out of program (graduated) stages and everywhere in between. In this post, we will show how Decision.io can serve a secondary function of tracking startup incubator success.
Startup Incubator Application Stage
This is the stage where you are collecting startup applications, and deciding who you will accept and decline. This is what Decision.io is typically used for by our startup incubator users.
Jesse suggests this is where the performance measurement needs to begin. Those you accept move into your “in program” funnel and tracked for performance within your incubator. Those you decline also need to be tracked to ensure that your startup incubator doesn’t make a habit of declining great applicants.
He suggests keeping track of them using tools such as Angel List, Crunchbase, and going back to their website a few times each year to determine what their status is. You may want to take it a step further and keep track of the founders of these startups. In doing so, you may be able to determine whether your incubator is in the habit of turning away stellar talent with the wrong idea.
A prime example of being careful to hang on to great talent with the wrong idea is Alexis Ohanian and the reddit team. They originally applied to the legendary Y Combinator with the idea of a mobile application that would allow people to order food and avoid standing in line. Decent enough idea, but it was too soon, and so they were rejected. However, head honcho Paul Graham called them back and decided to accept them because he saw something promising in the team. Paul accepted the talent but rejected the idea. They went on to create the front page of the internet.
Wouldn’t it be valuable to know that your incubator or accelerator is in the habit of turning away reddit type teams with food ordering application type ideas?
You would first use Decision.io to collect, evaluate, and decide on the applicant pool – the usual stuff. At the end of this process, you’d move all of your accepted and declined applications into two separate funnels, one for accepted or “in program” applicants, and another for declined applications. Let’s focus on the declined applicants that we tend to forget about.
You can set up multiple stages in the declined applications funnel that represent the road to success for a startup. You might focus on existence based goals (e.g. in business for 6 months, 1 year, 2 years) with the end of the funnel being a successful exit or growing into a medium sized company. The Decision.io platform is incredibly flexible, so you can design this funnel however you see fit. The result will be having a pulse on the declined applicant pool, and knowing if you’re in the habit of turning down startups that should have made it into your program. This may lead to reevaluating your intake process and criteria. The hope is that the majority of the applications you decline don’t go on to be reddits!
In Program Stage
For those accepted into the startup incubator program, Jesse has a solid list of evaluation criteria including: current customers and revenue per customer, their sales funnel, average growth per month, and advisors or mentors that they’ve met through the program. Whether or not your startup incubator sets the same milestones is irrelevant. The point is, your goal is to send healthy startups out into the world to dominate their space, and that isn’t likely to happen by accident. You create milestones and place certain expectations upon them, right? Well, since you’re already using Decision.io to select the best startups, a secondary use is tracking startup success within your incubation program.
You would move all of the accepted applications from the original funnel into a new funnel just for successful applicants. The stages of your filter would be set up to correspond with your road map to a successful startup. This could be based on reaching revenue goals, gaining funding, and then graduating. Or, it could be based on deliverables. Again, you decide and the Decision.io platform will accommodate you.
The key here is that you will see which startups are lagging behind and in need of a little fire under their behinds, and which startups are crushing it. At a glance you can gauge the success of your programming and allocate resources appropriately based on where each startup is in your funnel!
These are the cream of the crop. You may think that your job is done at this point, and you can just focus on thePR that comes from your shining stars. I would disagree as there is much to learn here!
Jesse suggests having a procedure in place to collect the same metrics that you collect while they are within the incubator on a financial quarterly basis. Whether you do exactly this or not is in my opinion irrelevant but the idea is valid – you should track startup performance after they leave.
If leaving your incubator equals impending doom, you know that yourincubator programming needs to improve.
Who fails upon leaving? Who left your incubator and exited for millions of dollars or grew up into a larger company? How did the experience between those that failed and those that succeeded differ within your incubator? Might it be valuable to know the answers to this? How can you answer these important questions if you’re not tracking these things?!
Those that enter this stage move to the final funnel for graduated startups. Your graduated funnel, just like the previous funnel, will contain stages that represent key outcomes of your graduated startups. This could be revenue goals, receiving substantial funding, being successfully acquired, and of course, going out of business. As mentioned above, this will create a visual of the end result of your entire incubator program. It can help you determine whether or not your process held onto and graduated the best applicants. It can help the strong and/or weak points of your incubator shine bright so that you can move more of the strong moving forward.
To Sum it Up
At a glance, you will be able to track:
- Whether your incubator is accepting the best startups and/or talent.
- Which startups are hitting their milestones and which startups are lagging.
- The startup incubator experience for successful and failed startups, how they differed, and working to ensure that more startups get that favourable experience moving forward.
The kicker is that this is all in addition to the primary benefit of using Decision.io, which is the collection and review of online submissions and applications for teams of all sizes. Not bad! We know that incubators often function on a shoe string budget just like the startups they help. If a product can serve more than one function and stretch each dollar further – that’s a beautiful thing.
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