Everyone knows that startup life isn’t a piece of cake. As an entrepreneur, you’re constantly juggling between making important business decisions and your personal life is nowhere to be found. One of such decisions you find yourself strung-up in is whether to turn up to an accelerator or an incubator for help.
In the startup industry, these two terms are often used interchangeably as synonyms – especially by people new to the community. What many fail to see is the blurred line that separates an accelerator from an incubator. That is why just because of a mere confusion around the two terms, it becomes challenging to know which option will suit the best for your organization.
Though both accelerators and incubators seek to help startups grow and attain success, it is important to understand the definitions and main purpose of startup spaces to help you make the right decision on which one to go for.
In this blog, we’ll take a brief look at the differences between accelerators and incubators. Hopefully, by the end of this guide, you’ll understand which is better for your startup’s needs.
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Accelerator VS Incubator
Incubators and accelerators are programs popularized in startup hubs like Silicon Valley and are now found in places all around the world. Both provide startups with good opportunities from the very early stage and founders often better their chances of attracting a top venture capital (VC) firm to invest in their startup at a later point. But while they both have similar purposes, they’re designed to serve different company stages in mind.
What Is An Incubator?
As the name suggests, a startup incubator is a program that incubates (or nurtures) an idea or innovation until it is able to sustain itself in the market. They assist businesses in the form of office space, resources, mentorship, and access to experts in the startup community.
To put it simply, an incubator incubates new ideas to help new entrepreneurs and founders to convert their ideas into a business model and eventually to a working business. This makes work easier for early-stage startups as an incubator creates the best conditions for survival and growth by making sure your business lives. A startup incubator receives its funding from different sources such as angel investors, venture capitalists, government entities, multinational corporations, etc. These entities work behind the incubator itself to provide help to the startups. In exchange for this assistance and mentorship, the investor or investing group will receive a key percentage of equity in each company.
Most startup incubators focus specifically on a particular industry or vertical such as fintech, marketing, or healthcare technology. There is usually no time limit. A company is brought along at its own pace until it becomes fully self-sufficient to operate independently.
The Right Time To Join An Incubator
Incubators are generally designed for companies who just started out and are new to the startup ecosystem. Most founders and entrepreneurs who seek out an incubator have nothing more than a great idea and are still figuring out the market, product development, and the right elevator pitch. The best time to join a startup incubator is when you’re putting together everything piece by piece.
The things to consider while applying is whether they have a good selection of mentors or not. Are the mentors specific to your niche? Look at the past success – especially with projects similar to yours. Once you’ve found the right startup incubator, it’s time to understand the application process so you can give your absolute best to get selected. You should also be cautious about incubators if you need funding as unlike accelerators, most do not offer investments.
What Is An Accelerator?
If an incubator helps companies at “infancy”, an accelerator assists them in their “preschool” period.
An accelerator program aims to speed up (or accelerate) a startup’s growth by putting the required funds to support that early-stage expansion. Accelerators are great for companies who have a business plan and a basic strategy in place. An accelerator is a program that helps fledgeling startups improve (or accelerate) their growth, though usually only those which already have a business strategy in place and want to see fast and efficient growth.
Accelerator programs can often be very competitive since there are many applicants that sign up. They also operate in a specific timeframe (usually a few weeks or months) which makes it more constrained than that of an incubator. During this time, you get access to a range of mentors and other forms of help to guide your company to reach its full capabilities. Once you’ve reached the end of your accelerator program, you’ll take part in a demo day where you’ll pitch to investors.
In easy words, an accelerator upscales your business so that it can reach its full potential in a short amount of time.
The Right Time To Join An Accelerator
In contact with an incubator, an accelerator is designed for more established businesses who have a plan and company vision in hand. If your business is at the MVP stage and has solid financial planning, but needs expert mentorship and support to move onto the next stage, an accelerator is a way for you! But if your business has just entered the scene with nothing more than just a logo, then joining an accelerator can be too much for you.
Since there are a lot of applicants, the competition is a lot more fierce. You need to have something interesting to offer investors. It becomes even harder to get selected if you apply for an accelerator programme as a new business.
The right time to apply for an accelerator programme will be when you have an established team with roles and responsibilities in place. If an accelerator might be too soon for you, an incubator may be the better choice.
Important Factors To Consider
It’s difficult to choose between an incubator and an accelerator as they both have distinctive advantages for a startup. This section will help you identify the things you need to consider before you choose one of the two startup programmes.
• An incubator requires you to work in a coworking space.
Coworking is a big part of an incubator experience. So if a private office space is an important aspect for your startup, an incubator may not be the best option or you.
“If you need private space, most incubators are open seating, and this can be distracting for larger teams,” TechStars mentor Troy Henikoff said. “The economics are usually on a per-seat basis, which is great for the first few people, but at a certain point it may be less expensive to get your own office.”
On the other hand, most accelerators provide companies with office space for their own.
• Accelerators work at a relatively short span.
Accelerators often come with a time frame of a few months whereas there is no such time limit. You also need to have something ready to pitch by the end of the program on demo day. Do you think your startup can work in such a time constraint? If not, maybe an incubator is better for your business.
• An incubator doesn’t have an end goal for a startup.
Incubator’s main purpose is to nurture a startup idea and help them with their business plan. Some have a goal of preparing a startup for the accelerator phase but apart from that, incubators don’t have a fixed goal. A startup accelerator, on the other hand, has an end goal for startups which is to raise further funding.
Where are you headed?
Hopefully, this guide helped you steer clear of all the doubts you had about incubators and accelerators. Now that you have understood the roles that these programs play in helping a startup grow, which one do you think is more suitable for yours?
In conclusion, both incubators and accelerators provide great opportunities for young businesses and ideas to go in the right direction. We hope it helps you too and may you find the best incubators and accelerators for your startup. For more entrepreneurial advice, check out our other blogs and if you have any further queries, drop them down in the comments below!
Aayush Narang is the founder of Spark Eighteen Lifestyle Pvt. Ltd a Web Design & Development agency in Delhi. He is a Startup Evangelist. Entrepreneur. Business and Tech Enthusiast.