Difference Between Incubators and Accelerators
Running a business is difficult, and having the correct support network for an early-stage entrepreneur may greatly boost a startup’s chances of success.
Accelerators, incubators, and other sorts of growth programs can be quite beneficial in this situation. Many entrepreneurs rely on expert assistance to begin their businesses.
The terms “startup accelerator” and “startup incubator” may appear to have the same meaning: to assist your firm in growing. They are frequently used interchangeably, yet they are vastly different. While one assists established firms in rapidly growing, the other assists in fleshing out the intricacies of beginning a new business. Accelerator and incubator programs both help to grow startups and scale-ups. Though often used interchangeably, the two terms should not be confusing.
Let’s take a closer look at what accelerators and incubators are and how they vary.
What is an Accelerator?
A startup accelerator, or business accelerator, is an organization that helps your developing startup grow by providing structured guidance, mentorship, access to investors and other support.
Accelerator programs help founders -who demonstrate potential for rapid growth – with expert advice, training, mentoring, networking, and often financial support, too.
An accelerator helps young startups and businesses grow quickly during their starting stages by providing years’ worth of learning in short periods of time rather than letting them learn from scratch. They also often provide funding to startups to kickstart their growth.
The nature of the functioning of accelerators means that they are usually run by established, successful companies and are usually for-profit.
Usually, startup accelerators work with founders for a set timeframe – typically between three to six months – to ‘accelerate’ their growth and help build a business to the point where it is investment-ready and scalable.
In the early stages, startups are often given a small seed investment, which can be used to fund research, marketing, fine-tune a product, or hire new team members. In return, accelerators will usually receive a small share in the business.
By becoming part of an accelerator program, startups can gain access to investors, networking opportunities, skills development, and advice from industry experts.
Purposes of Accelerator Programs:
A startup accelerator or business accelerator helps early-stage startups become successful and accelerates their growth by providing them with structured guidance. This guidance is usually taken from the practices followed by other successful ventures and molded to fit the current startup and help boost their growth and sales.
Apart from the structured guidance, accelerators also provide businesses and startups with –
- Resources focused on achieving increased growth within a short period of time. This includes infrastructure, mentorship, seminars, and workshops.
- Funding in exchange for equity in the company.
- Legal guidance
- Networking opportunity
Accelerators, on the other hand, accelerate already running businesses that have some potential.
What is an incubator?
A startup incubator, or business incubator, is a collaborative program designed to help your very early-stage startup develop until it is able to sustain itself in the market.
One key aspect of incubators that sets them apart from accelerators is that they often work with founders at the idea stage, and they don’t always have a fixed timeframe. Founders spend their time during an incubator networking with other entrepreneurs, building on their ideas, determining product-market fit, and getting investment-ready.
These programs typically fall into one of two types: ideas from within an organization, and those that recruit early-stage founders to work on an existing idea with support and mentoring.
In simple terms, incubators incubate new ideas and help new entrepreneurs convert their ideas into a business model and eventually into a working business. Incubators usually don’t provide any funding to startups. While there are some independent incubators, they can also be run by investors, government entities, and major corporations to advance their innovation agendas. It is also important to note that startup incubators are usually non-profit organizations. This fits their line of work quite well, and this means that they are usually run by academic or government institutions.
Purposes of Incubator Programs:
Startup incubators help new entrepreneurs flesh out their business ideas by providing them with the following resources –
- Infrastructure
- Networking
- Financial advisory/ Intellectual property teams/ Legal advisory
- Contacts for potential investors
- Manufacturing
- Initial financial support
- Training and guidance
Incubators incubate very early-stage businesses by helping them convert their ideas into businesses with a proper business model.
Business Accelerator vs. Incubator
1. Accelerators are funded by existing companies. Incubators are often independent but can have connections to venture capital firms or funds, or universities.
2. Accelerators are aimed at accelerating companies and scaling them up. Incubators focus primarily on stimulating innovation (they incubate disruptive ideas). To make things a little more complicated, in some cases, incubators function as preparation for accelerators.
3. For accelerators, a clearly delineated time frame of a few months is usually set. Incubators are longer term—in many instances, even taking years—and are more open-ended.
4.Mentoring by the legacy firm is a distinguishing feature of accelerator programs. In addition, the established business will frequently purchase a modest ownership position in the startup or scale-up. These are two of the reasons why acceptance into an accelerator program is so difficult. Incubators, on the other hand, focus on a greater number of people and are less discriminating.
5. Accelerators have a much more organized program than incubators and attempt to build some sort of coherence among the businesses. Incubators are more concerned with developing a collaborative environment.
6. Due to the nature of incubators and businesses in general, joining and working with incubators usually means that both works together for longer periods. Incubators look to get a new business started from scratch. Incubators also tend to work on an open-ended basis—they tend to keep in touch with and provide help and resources even after the business has been established. Accelerators are usually laser-focused on achieving high growth numbers quickly. Hence, they tend to take the best and optimum approach possible in the shortest time, leading to accelerators working with businesses and startups for much shorter periods of time compared to incubators. Accelerators tend to work on a more closed-ended basis, the businesses or startups are required to present their growth numbers at the end of the accelerator program. Once the specified growth target has been achieved, it tends to focus on the next business at hand, and long-term support varies according to the accelerator.
7. Joining a business incubator usually means sharing a coworking space with other soon-to-be-launched businesses. Joining a business accelerator frequently does not mean a change in business operations but rather requires the founders and employees to commit the bulk of their time to implementing the accelerator’s plans, which are produced after thorough talks and analysis. To be selected by an accelerator, a company or firm must be up and running with some early momentum. Startups and organizations that have identified an MVP are also preferred by accelerators.
8. Startup incubators typically do not prioritize raising funds, especially in the early stages of establishing a business concept. Though it acts as a networking platform for entrepreneurs and businesses to meet potential financing partners, the process of acquiring funds is postponed until later stages. Incubators, on the other hand, concentrate on refining the concept into something that would pique the interest of investors while also providing entrepreneurs with the necessary training and preparation to acquire funding.
Because of their shorter time frames, accelerators frequently concentrate on the process of collecting funding quickly after articulating the required course of action for the company or organization.
9. Incubators often accept very little or no equity because they are non-profit organizations that do not invest in your companies. Because accelerators give capital to businesses, they also assume stock in them.
10. Most business incubators are non-profit organizations that get funding from the government or educational institutions. A business accelerator or startup accelerator is often run by other well-established organizations and businesses, allowing them to provide the necessary guidance and help based on past learning experiences for faster and more rapid growth.
To recap, incubators help with the conception and launch phases, but accelerators help younger enterprises expand quickly, with a focus on rapid development from the beginning. If you want to flesh out your business idea, an incubator is your best bet. Incubators give a platform for newcomers (and even established ones) to connect with like-minded individuals and businesses. This has always been shown to be advantageous over time. Accelerators can help you alter your current business model, but they can also help you increase its performance by utilizing prior expertise from successful businesses to create sales and expand your startup/company.
In the end, whether you join an incubator or an accelerator depends on what you want to achieve: create a firm or swiftly develop an established one.