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In a previous post we announced the Smart City Works Actuator and described the types of technologies we will be evaluating. But, hang on a minute, what the heck is an actuator anyway? In the spirit of “practice what you preach”, one of the things we teach innovators is how to describe their business in a 3 second sound bite (in case TV news ever asks…). So here is my sound bite for an actuator: it is a combination accelerator and incubator, with built-in path-to-market opportunities. Well…ok…so what is an accelerator and an incubator, and how are they different? This chart from AlleyWatch provides a nice summary.
Traditionally, accelerators are intensive training programs for newly formed or forming businesses, combined with some initial equity investment and extensive mentoring, and designed to position products in the market and secure early customers. Critically, the long-term success of an accelerator depends on the business success of the companies that participate.
Traditional incubators tend to be more like co-working spaces where early-stage companies of varying maturities can conduct business and collaborate with peers. Generally the success of an incubator is less directly tied to the success of the companies located there, with the implications that there is typically no seed funding or equity stake for the incubator and less of a focus on a large mentor network. More recently, these “traditional” models are converging, with accelerators providing co-working types of spaces for their graduates, and incubators more actively mentoring and even investing in a few companies using the incubator spaces.
One other distinction is important, the goals of the accelerator or incubator. Three types of programs have emerged:
- Commissioned corporate-focused engagements designed to address specific innovation needs of large enterprises, that typically disappear when the needs are sufficiently addressed
- University-based programs, often in conjunction with faculty research and educational programs; and
- Independent operations that may be focused on economic development or investment returns.
As examples, Stanford and Carnegie-Mellon have well-known university-based entrepreneurship programs, as do many others. Stanford’s program is loosely associated with Y-Combinator, an independent accelerator operator focused on investment returns. TechStars is an independent accelerator operator with a large number of “franchisees” around the globe; roughly half of their business is from custom programs sponsored by specific corporate partners. In the Washington, D.C. area, AOL Fishbowl and others provide independently operated incubator space, and 1776 represents a network of such spaces. In this categorization, CIT is an independent accelerator operator (MACH37 and EMERGE) with an economic development mission.
So, back to Actuator. The Smart City Works Actuator is a combination accelerator and incubator. That is, we expect to work with both newly forming businesses and somewhat more mature early stage companies. In our other accelerator operations, CIT has found that even the more mature of these companies can usually gain significant value from the intensive training opportunities and strong mentor network associated with accelerators in the AlleyWatch figure, while startup companies that graduate from the accelerator program continue to need the extended time frames and community support more typical of incubators. The Actuator is designed to provide both. There are also differences in the funding models indicated in the AlleyWatch figure; those will be the topic of a later post in this series.
The remaining portion of the Actuator sound bite is “built-in paths to market.” One of the reasons that Corporate engagements via accelerators or incubators have become popular is the implicit path-to-market that a Corporate sponsorship implies. Corporations typically engage because they have difficulty innovating on their own, and are looking for additional products or capabilities to fill out their product lines. And in the end, many successful entrepreneurial companies are in fact acquired by Corporations; it is tempting therefore to focus primarily on this strategic path-to-market and ignore others.
But this path is not without issues of its own, and many other paths to market exist as entrepreneurial companies enter their rapid growth phase. The accelerator approach of seeking external funding to fuel growth is of course an option. In addition to these however a core component of our Actuator is engagement with a range of testbed, pilot, and early deployment opportunities. We are putting in place a set of working agreements with Virginia Universities, State Agencies, localities around the Commonwealth and private organizations such as the Gramercy District, all leading towards direct opportunities for our Actuator cohort ventures to show their capabilities functioning in the real world.
The tagline we use for this type of emergent ecosystem is Capital, Curriculum, Community. But if someone asks you what an Actuator is, just tell them: its a combination accelerator and incubator with built-in path to market opportunities.
Next (Thursday 3/2): How did the Smart City Actuator Originate?