What’s the difference between accelerators vs. incubators? Both programs provide startups with collaborative environments and mentorships. However, they serve different purposes. Learn more about accelerators and incubators, and know which program suits your startup best.
As a startup founder, you know how critical the early stages of your business are. It is also during these early stages of your venture that your business needs guidance and startup funding the most. During this stage, many founders need to decide between the accelerator or incubator routes.
Both startup accelerators and incubators aim to help grow startups. Often used interchangeably, the two programs are different and should not be confused. What are the similarities and differences between the two programs, and how can they help your business? Let’s start by defining each program.
What is a Startup Accelerator?
An accelerator is a program that aims to accelerate years of growth for a startup in a span of a few months. It is designed to be an intensive educational program to help startups become market and funding-ready.
Accelerators prefer to take on startups that are market-ready and have strong founding members. Some of the well-known startup accelerators are Y Combinator, Techstars, and Brandery.
What is a Startup Incubator?
Incubators are known to foster “disruptive” ideas and refine them to develop a viable business plan. For example, incubator, IdeaLab focuses on mentoring and helping innovators and entrepreneurs in technology to test their ideas.
Both startup funding is designed to help new businesses to succeed and proceed to their next development stage. By identifying the differences between accelerator vs. incubator, you will know which is best for your startup.
Accelerators vs. Incubators: The Key Difference
Many startups collaborate with either an accelerator or an incubator. However, both programs have some similarities in that they are often confused with each other. So, which startup funding program can offer your business the most? Take a look at the differences between accelerators vs. incubator:
Startup incubators are usually non-profit organizations. They are collaborations between public and private entities such as universities, governments, civic groups, venture capital firms, and other organizations. Meanwhile, startup accelerators are financed by existing companies, angel investors, and venture capital firms.
Accelerators have a fixed timeline, three to six months, to get an early-stage startup ready. As the program has a set time frame, startups who apply to join accelerator programs have done the legwork to prove that their products are viable. After undergoing intense mentorship and growth, startups should be able to attract investors.
On the other hand, incubators are more open-ended. These programs are more focused on nurturing and mentoring startups for a longer period. Startups are under incubator programs for an average time of two to three years.
Accelerators aim to help new startups to scale their business. This means that accelerator programs cater to existing businesses in their early stage. While incubators focus more on helping develop disruptive ideas that will become innovative business models in the long run.
Assessment of Applicants
Application for accelerators is very competitive. Accelerator programs accept around 45 to 90 startups every year. Applicants must undergo a process that includes application, assessment, interview, and evaluation before acceptance.
For incubators, however, the application is not as competitive. Unlike accelerators, which accept applicants from all over the world, incubators focus more on helping local startups and businesses.
What do they provide?
There are many differences and similarities between the two startup funding programs. By comparing what accelerator vs. incubator provides, you will have an idea of which to choose. Here are a few of what they can offer to your startup:
Incubators provide office space (usually co-working space) for startups, access to partners that can provide general legal and business services, consultation with experts, and sometimes funding. The program offers a more relaxed collaborative working environment.
While accelerators offer personalized guidance and consultation from serial and seasoned founders, angel investors, venture capitalists, and other experts. Startup accelerators also provide a platform to collaborate and partner with fellow startups in the class. Aside from those, accelerators also provide validation of business ideas through mentoring and potentially seed funding.
Startup incubators don’t usually provide seed funding for startups that enroll in their program. Incubators don’t require businesses to give them a share of their startup equities. They focus on providing office spaces, mentoring, and business networking.
On the other hand, most startups seek to join accelerator programs to acquire much-needed capital funding. Each accelerator program has its capital for the equity percentage scheme. Some accelerators like TechStars will ask for up to 10% of the startup equity for a certain amount of capital investment.
Who are Accelerators and Incubators looking for?
Both programs look for very promising startups. However, each program has a different focus. That is why they differ on some criteria. For incubators, they look for startups with great “business ideas.”
They don’t require these startups to have a robust business plan, minimum viable product (MVP), or if they achieved market fitness already. Incubators are in for a longer term. That is why they want startups with great “business ideas” to develop and nurture.
That said, accelerators have more stringent acceptance criteria. They will not take on startups that only have great “business ideas.” Therefore, applicants must already have validated their MVPs and have solid business plans to be considered. They are looking for startups that are looking to scale up but lack capital funding to do so.
What is the Best for Your Startup?
Accelerator vs. incubator, how do you choose? Selecting which startup funding program to apply for will depend on two conditions: 1) what type of help does your startup currently need, and 2) what stage is your startup?
A startup accelerator will be the best option for your business if it has already proven viable and only needs an infusion of more capital to accelerate its growth for expansion and scaling up.
However, if your business venture is still at its early stages and if you are a first-time solo founder, your best option is to enroll in an incubator program. You will need more of the mentorship and guidance that startup incubators offer.
Each program offers different types of benefits to a startup venture. Comparing accelerators with incubators and knowing what each offers is a prudent step that an entrepreneur should take. By differentiating each program and identifying your needs, you will know which best suits your business needs.
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