Startup founders often turn to accelerators or incubators for guidance, and to fast track their learning process. Most people assume that both ‘accelerators’ and ‘incubators’ represent the same concept.
Accelerators and incubators both help startups steer clear of mistakes new businesses make, and help connect them to appropriate parties that can help them further. However, there are key distinctions that first-time startup founders should be aware of if they are planning on signing up.
The Important Differences
An incubator is for startups in the beginning stages that possess an idea but no business model. Whereas an accelerator is an option further along the startup’s life cycle advancing the growth of existing startups that have an idea and business model.
Accelerators are usually ‘cohort-based’ programs that have a specific time limit. For an ‘intake’, a number of startups will be chosen and start the acceleration program together for a period of 3 to 6 months. Incubators have a different structure and each startup works at the pace that is suitable for them operating on an open-ended timeline.
It is recommended that startups join both organizations, but not at the same time, to guarantee a higher chance of success and faster growth.
Incubators will help startups with almost every aspect, saving them a lot of time and energy. For instance, incubators can assist with turning an idea into a business plan, providing training and workshops to enhance a startup’s business skills, and to connect startups with industry experts that can aid them in refining their startup idea. Moreover, some incubators also provide startups with spaces to gather and work on their ideas
The common areas where incubators can help are:
- Defining objectives and strategic positioning
- Feasibility studies and market research
- Developing a business and marketing plan
- Networking with relevant authorities and educational institutions
- Connections to sources of funding
These areas above are designed to assist startups in gaining experience and having a mentor from their own industry who has in depth knowledge of the market they are working in. They provide effective business mentoring and technical assistance for startups that want to develop or expand.
Startups planning to apply to an incubator must know how to sell their startup, prove their startup is worthy, describe how their startup is different from others and introduce their team and highlight their skills and expertise.
Incubators do not traditionally provide capital to startups and are often funded by universities or economic development organizations. They also don’t usually take an equity stake in the companies they support.
Accelerators take startups in batches and provide them with a workspace as well as the training, mentorship, workshops, networking opportunities and any other support they need. Startups are provided with support in almost the same areas as incubators as well as other areas such as finding product-market fit and pivoting when needed.
While startups can be accelerated at different stages of their journey, accelerators were originally created to accelerate startups with a MVP (minimal viable product) or that are at growth stage.
Every accelerator has its own eligibility criteria, program duration, and performance criteria for a startup to continue in the program and graduate. Moreover, most acceleration programs compel founders to leave their jobs and commit all their time to their startup.
Accelerators do invest a specific amount of capital in startups in exchange for a predetermined percentage of equity. Due to this investment, the accelerators bear a greater responsibility in the success of the startup.