Incubator boom pushed to breaking point

Entrepreneurs are being encouraged to solve the world's biggest problems in the fields of the National Broadband Network, big data and big markets in order to qualify for the PushStart accelerator program, which has just been launched.

Ten start-ups will receive $20,000 and intense mentoring in the three-month program, due to start early next year, and PushStart will take 8 per cent equity in the companies.

A key factor in the program's success will be the use of 40 mentors that have achieved very recent success, according to PushStart co-founder Kim Heras, who has recruited the likes of Posse's Rebekah Campbell and BigCommerce co-founder Mitchell Harper.

Another key difference with other accelerators is that the funding has been equally sourced from the program mentors and "dumb money" from high net-worth individuals who aren't involved — a structure similar to a traditional venture capital firm.

He hopes these two factors will encourage the growth of the next Kaggle, the Melbourne-based data modelling competition website that recently secured $11 million investment from an illustrious list of Silicon Valley investors.

"We give them a push start to push start," Heras said. "The reason I reference Kaggle is I think that's a game changer. They've already demonstrated that through the companies they're helping, they're doing big data and changing these algorithms because they deliver real value to their customers, so that's a really interesting start-up."

"If we could help PushStart companies onto that path to get to the stage Kaggle's at, I would call that a success."

The incubator boom was kicked off last year with the launch of StartMate, whose model was recently validated with the sale of program graduate Grabble to Walmart. It attracted 164 applications for the second iteration of its mentor-driven investment program, double the amount in its inaugural year.

Since then the market has become increasingly saturated with the launch of Melbourne-based AngelCube, and the York Butter Factory, as well as variations on the theme such as BlueChilli, which doesn't offer any cash to its participants.

Heras said a key difference is that PushStart is targeting a broad range of founders and ideas, while StartMate is largely focused on technical co-founders with transaction-based business models.

"Their approach is they want technical founders, we want well-rounded teams."

However, Heras deliberately delayed the PushStart call for applications to avoid direct competition with StartMate, and he said there is enough room for more accelerators in Australia.

"StartMate and PushStart cross over, but we're both working to the same goal, which is helping start-ups to succeed not only locally but internationally."

Applications close on 27 January.

SWOT

Strengths

The program is targeting big markets and big ideas. It has a semi-independent investment model. Heras has worked tirelessly over the last six months to build the PushStart brand and value for the Sydney and Melbourne communities.

Weaknesses

Coming in after the StartMate program, it could miss out on the ideas and skills that have the biggest value and scale. It will take time to see obvious results from PushStart.

Opportunities

The incubator model lends itself to producing start-ups ready for acquisition, but it would be breaking new ground if it could produce something truly unique, like Kaggle.

Threats

Without any winning start-ups or obvious success, entrepreneurs might not be interested in the program.

Conclusion

Despite what others might say, the incubator market is well and truly saturated in the country. There are very limited pools of talent and mentors, and there are question marks on the value of models such as BlueChilli, which could create a bad reputation for the industry.

StartMate has secured a very important first-mover advantage, illustrated by its Grabble success and reinforced by the doubling of applications. However, PushStart will succeed because of its vision to solve problems in big markets, the investment structure and the engagement with the grassroots community.

Verdict: BOOM