Today’s world consists of competitive, high risk and high rewarding marketplace that provides the rich and breeding ground for entrepreneurs to develop innovative ideas overnight. But for anyone new to the startup space may find it extremely difficult to fit in and would lack the right knowledge or resources to go far. For the early stage startups, accelerators and incubators are two programs that offer great help to grow their businesses. Usually people think they are the same and use accelerator and incubator as a synonym which is understandable but yet incorrect.
Definitely both of the programs are able to provide guidance for the startups, build their models and strategies and groom the startup for becoming valuable in the investors eyes. Still there are differences between the both. Let’s take an in-depth look into the meaning and functionalities of both, how these benefit startups and decide which one is better for your startup, an incubator or an accelerator.
What is a startup incubator?
An incubator is a collective program which is designed for helping new startups and companies develop by providing the services like workspace, seed funds, mentorship, management, training etc. The sole purpose of startup incubator service is helping the entrepreneurs grow their startup.
A startup incubator are usually non profit organizations that are run by both private and public entities. They are also often associated with business schools or universities that allow the students and alumni to take part in these programs. There are various incubators that are collectively formed by civic groups, startup organizations, successful entrepreneurs or the government.
What is a startup accelerator?
The startup accelerators are also known as seed accelerators and are the fixed term cohort based programs, and include educational components, mentorship and culmination on a demo or a pitch event day. Unlike the business incubators that are government funded, rarely provide funding and take no equity, a business accelerator can be funded by public or private components; it covers a large range of industries. The accelerators tend to work by enrolling the startups in a fixed or monthly log program to offer office space, supply chain resources and mentorship.
Types of accelerators
The startup accelerators are different in the terms of overall goals, their niche specialization, funding structures, amount of funding, scope of mentorship quality etc. Despite of these differences there are a few trends that categorize the startup accelerators into three different groups:
- Venture startup accelerators
- Government funded accelerators
- Corporate sponsored accelerators
The types of incubators
The incubators differ on the industries the focus on a particular business model, startup incubators can be divided into the following groups:
- Virtual business incubator
- Medical incubator
- Kitchen incubator
- Public or social incubator
- Seed incubator
- Startup studio
- Venture Builder
A business incubator supports a startup during the initial phase of building the company. Since the new startups lack resources like experience, networks etc. the incubator provides them these services, support and gets through all the initial hurdles they face while establishing themselves as a business.
Whereas a startup accelerator advances the growth of the existing companies with business models and ideas. These programs are built on the foundations of startups to catapult them so as to forward to key influencers and the investors.
Duration of program
A business incubator operates with an open ended timeline and focuses more on the long-term survival of the startup rather than being concerned about how quickly the company is growing. The time a company spends in any incubation program can vary with a number of factors like the type of business, business expertise level etc. Some of the incubators even focus on benchmarks achieved rather than time periods.
An accelerator program has a set timeframe, and usually lasts around 3 to 4 months. During this time the startups build out of the business with the help of the mentors support and the capital accelerator provides and at the end of the program startups receive various opportunities for pitching their business to the investors. The focus here is on small teams and not on the individual founders of startups. The accelerators consider that a single person is not sufficient for handling all the work associated with any startup.
Application process of the program
The incubators invest their time and resources for advancing the local startups which, they generally have the task to create jobs and find new ways to license the intellectual property. They have lesser pressure for delivering startups that have a rapid growth, as the supporting and fostering local startups is a part of their work. Due to this even a less scalable or a business with slow growth rate is also a good incubator candidate.
When it comes to the application process of a business accelerator they use a more formal and traditional model to provide entry in their program. They have limited slots available and participants must apply to the program. As the accelerator program selects a limited number of startups across many applications to go for startups which are capable of scaling and can show a tendency to grow rapidly within months and therefore these are highly competitive.
Generally incubators do not provide capital to the startups and are usually funded by government universities for economic development organizations. Also they do not take any equity stake for the companies or startups they support as a part of their program.
Accelerator invests a specific capital in startups and this is done in exchange for a percentage of equity. And due to this investment the business accelerators have a greater responsibility for making the startup grow in the definite time period.
Which program is right for your startup?
Both the incubators and accelerators offer a right environment for mentorship and collaboration of a startup. Both of these programs enable the startup to occupy a space and get access to all the resources and feedback they require to scale their business. Also both of them offer mentorship from business experts and industry leaders. So when you are deciding which program is right for your business you should think of what fits your startup the best. Most of the startups can benefit from the incubator program but there are just a few ones that are right fit for an accelerator program.
Since both of the programs provide valuable benefits mentorship and resources to the startups they still cannot be considered to be the same. It can be only determined with self reflection which program is right for the business at which moment.
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