Business incubators and accelerators offer suggestions, direction, and various forms of assistance to companies in the startup phase. The main distinction between them is that business accelerators, as their name implies, shorten the time required to launch a business by acting as a sort of boot camp. Business incubators nurture the company during its startup phase and allow it to grow at its own pace, in contrast to business accelerators, which assert to help entrepreneurs get started quickly.
Since 1990, Ian Linton has worked as a freelance writer from his home in the UK. Magazines like “Marketing” and “Runners World” have published his articles on marketing, technology, and distance running. In addition, Linton has published more than 20 books and works as a copywriter for major corporations. He graduated from Bristol University with a Bachelor of Arts in both history and economics.
Startup Programs: Accelerators vs. Incubators
What is an accelerator?
An accelerator is a group of companies that offers resources to help startups and small businesses reach their next professional milestone. Typically, an accelerator works with a company for one to six months. Similar resources are offered by accelerators and incubators, and both offer extensive mentorship programs to pair startups with subject-matter experts.
Typically, a business accelerator program requires an application, and only a select few are accepted. Accelerators seek out businesses with proven business models that require additional assistance to achieve their upcoming objectives.
What is an incubator?
An incubator is a collection of commercial resources with the aim of fostering the expansion of new startups. Typically, incubators work with start-ups or entrepreneurs and place a strong emphasis on the long-term development of the business. Giving the startup essential resources like mentors, office space, funding, and development support is part of this. Incubators usually help startups for one to five years.
Incubators give startups access to a wide network and can connect them to multiple businesses at once. This networking is a crucial step in the development of a business because it enables a startup to establish contacts for future needs. Most of the time, incubators operate independently, but they may also receive funding from government organizations, angel investors, or venture capitalists.
Incubator vs. accelerator
Businesses of all sizes can benefit from incubators and accelerators. Although they both typically concentrate on promoting business growth, there are some important distinctions to keep in mind, including:
Time
An incubator is more of a tool for long-term business growth, requiring a long-term time commitment to the accomplishment of project goals. Accelerators are a short-term tool that only collaborates with companies to achieve specific, immediate goals. While accelerators assist businesses in making rapid progress in the short term, incubators can help businesses lay the groundwork for long-term, sustained growth.
Resources
Similar resources, like mentoring, funding, and networking, are offered to businesses by incubators and accelerators. Due to the short investment horizon and high return on investment, an accelerator may have access to larger pools of capital. A new company’s business plan and investor pitch are typically the main goals of incubators.
Location
Some incubators have designated spaces where they house multiple startups at once; these spaces are sometimes referred to as coworking spaces. A startup that needs an incubator’s help might have to operate there, which can promote better communication and collaboration. This means that the startup must either plan to relocate or look for incubators in the area.
Accelerators may have physical locations, but they frequently permit businesses to continue operating from their current location. Since many companies that seek assistance from accelerators are more established and already have fixed locations, it makes more sense for them to remain there rather than move.
Cost
In exchange for funding, the majority of accelerators require a percentage of a company’s equity. Companies give investors the opportunity to own a portion of their investment in return for mentoring and funding, which could result in sizable returns in the future due to their initial support. Because they only support growth to obtain funding from a network, incubators do not charge for their services in exchange for equity. As an alternative, they bill for the provided office space and professional advice.
Structure
Each option structures its program differently based on the timeline. Both begin with an application process that aids the programs in comparing businesses to the market and to one another in order to identify the best investment. Accelerators accelerate growth by putting accepted businesses into a cycle of mentoring and working capital as soon as possible, whereas incubators take more time to help a business establish itself. This may entail determining the specifics of its goods or services, creating a preliminary network, and locating suitable investors.
How to choose between an incubator and accelerator
Here are some things to think about when choosing the best model if you’re a part of a startup or new business looking for funding:
FAQ
What is an incubator startup?
An American technology startup accelerator called Y Combinator (YC) was established in March 2005. More than 3,000 businesses, including Stripe, Airbnb, Cruise, PagerDuty, DoorDash, Coinbase, Instacart, Dropbox, Twitch, and Reddit, have been launched using it.
Is techstars an incubator or accelerator?
The goal of a startup incubator is to help startups succeed in their early stages by offering workspace, seed funding, mentoring, and training. They are typically physically located in one central workspace.
What is an incubator in VC?
While both organizations assist early-stage founders and founding teams in starting and growing startups, they differ in their specific strategies. Incubators don’t co-found ventures, Startup Studios do. The Studio will enter into an equity agreement with a founding team after selecting a project.
