Startup organizations looking to start off on the right foot often turn to incubators or accelerators for help. The terms “incubator” and “accelerator” are often used interchangeably and assumed to represent the same thing. But, in reality, they are two very different processes with key differences that every startup founder should be aware of if they are planning to take their help.
While both accelerators and incubators offer startups good opportunities to take their business forward early on, they have different frameworks when it comes to how they operate.
But before diving into the differences, it is important to understand what they are and how they work.
What is a startup incubator?
Similar to how a new born baby may be placed in an incubator to provide a protected and controlled environment for their care and growth, an incubator assists early stage startups in developing their idea, gauging the market, building the team and receiving necessary feedback. Incubators may accept companies from different backgrounds or they may focus on a specific market or vertical.
What is a startup accelerator?
A startup accelerator is a highly competitive program that helps to improve the odds of success for startups, in exchange for equity stakes in the company. Basically, an accelerator prepares startups for a larger investment (funding) upon leaving the accelerator. It provides an excellent opportunity for the startups to receive mentorship and networking, that are required to kick start their business.
Now, moving on to the differences, find below the key factors that set them apart-
Incubators tend to have varied timelines, and they can run for months or even years. Accelerators, on the other hand, are brief and intense. They have shorter timelines limited to a 3-4 month period.
A majority of accelerators prefer investment for equity with the goal of ‘accelerating’ the growth of startups through proper guidance and mentor driven support. They aim to boost the value and size of the company at a fast pace in preparation for an initial round of funding. On the other hand, incubators do not have a specific goal in mind. In fact, most incubators focus less on quick growth and more on building a solid foundation upon which they can grow and build later on.
Most accelerators are independent entities who offer funding in return of three to ten or more percent ownership of a startup company. Incubators generally take no share in the company, and they can afford to, since most of them are funded by the government, universities, VC firms or major corporations.
Since accelerators have short durations, they tend to accept ventures in batches, usually once or twice a year. But incubators keep accepting and graduating new startups on an ongoing basis. The selection process of both the programs are pretty rigorous, where they accept applications from a wide, even global pool and then proceed to shortlist only a handful of ventures.
It’s important to note that in spite of these differences, both are complimentary to growing businesses, and even more so to growing ideas. These programs have the power to make all the difference in a startup’s development, from helping to expand its network to providing a favorable environment to develop its idea.