Startup accelerators vs. incubators: Which one is right for you?
Starting a business is hard, and as a new entrepreneur, you're bombarded with ideas, strategies, and support systems that promise to help.
But the question is: what kind of support do you actually need as a founder? There are ample programs available for startups, like accelerators and incubators. But what are the differences between these two startup support systems? How do you know which one is right for you?
We're here to break down the major differences between accelerators and incubators so you can figure out which one makes sense for your business.
Incubators help young startups shape their business ideas, whereas accelerators move more mature startups quickly towards larger growth.
Incubator programs usually offer more leeway around time and how they're run. Accelerators, on the other hand, stick to a fixed schedule and use a more orderly, group-centric model.
Most incubators provide funding through grants or loans. Accelerators, however, tend to provide initial (seed) investments for part-ownership in the startup.
When choosing between an incubator and an accelerator, startup owners need to think about their business's current phase, financial needs, timeline, and the type of guidance they want.
What is a startup incubator?
A startup incubator is a kind of program that offers help, resources, and advice to very young startups. Incubators help these businesses refine their ideas and grow naturally over time. The ultimate goal of an incubator is to build a supportive atmosphere for startups, allowing them to verify their target audience and establish a solid base for long-term success.
These incubators are often set up by universities and business schools as part of a larger educational environment. Although technically, they don't make any profit, they do enhance the universities' reputation and help forge connections between students and successful alumni.
- Time & structure
Incubator programs typically offer flexibility, lasting anywhere from a few months to a few years. This flexibility caters to the startup's needs and availability. Incubators allow startups to work at their own speed and focus on what they need to. They generally offer shared workspaces, access to essential resources, and regular advice.
- Advice & resources
Incubators provide mentorship and resources designed specifically for young startups. They can guide and offer advice from experts in the field, successful entrepreneurs, and other professionals. Incubators focus on areas such as product development, market research, and creating a business plan. They may also offer tools, software, and other resources that startups could use to develop their products or services.
- Money & ownership
Startup incubators may offer financing for the startups in their programs through grants, loans, or other non-dilutive means. Some incubators might provide initial funding in exchange for a small ownership portion of the startup.
- How to apply
Usually, incubators ask startups to fill out an application form online, providing information about the founders, the business idea, and its target market. They accept new startups throughout the year and boast a more flexible selection process than accelerators. Once accepted, the startups learn about the program's flexible structure, letting them work at their own pace.
What is a startup accelerator?
A startup accelerator is a type of program that attempts to quickly grow startups by providing advice, resources, and money. Accelerators usually have a rigid and intense program designed to speed up a startup's growth within a short time. Their main goal is to help startups grow quickly, improve their business model, expand their customer base, and get ready for possible future investments.
One big difference between startup accelerators and incubators is that accelerators aim for profit. So, when startups join accelerators, they often have to give up part of their ownership.
- Time & structure
Accelerator programs usually have a set duration and a structured model. They run workshops, seminars, and advice sessions regularly throughout the program. At the program's end, startups often participate in a presentation day where they pitch their business to potential investors and industry experts.
- Advice and resources
Accelerators also provide advice and resources, but their approach is more intensive, focusing on fast growth. They deliver classes on topics such as business strategy, sales, marketing, fundraising, and product development. Besides their structured programs, accelerators often provide office space and access to a wider network of potential investors and other entrepreneurs.
- Money & ownership
Accelerators usually fund the startups participating in their programs. They usually provide the funding in exchange for part-ownership in the startup. The exact amount of funding and ownership can vary. Beyond just money, accelerators provide resources and advice aimed at helping startups grow quickly and attract future investors.
- How to apply
Startups planning to join an accelerator need to fill out an online form giving details about their business. With strict selection criteria and deadlines, accelerators look for proven startups with the potential for rapid growth. Once accepted, startups receive program details, including the start date, duration, structure, and any equity or funding agreements.
Choosing between accelerators and incubators: What's best for your startup?
Here are some things to consider when deciding between an incubator and an accelerator for your startup:
- Development stage: Incubators are generally better for startups still in the idea stage, while accelerators are better for startups with a clear growth path.
- Funding needs: If your startup needs a lot of financial support, an accelerator program may be a better option since it typically offers funding in exchange for equity.
- Timeline and structure: Incubators offer more flexibility, while accelerators stick to a tight schedule. Consider what would work best for you.
- Advice and resources: Think about the kind of advice and resources offered by both incubators and accelerators and decide what would be most helpful for your startup's growth and development.
Both startup incubators and accelerators play important roles in the entrepreneurial world, but they serve different purposes. Incubators help nurture early-stage startups, helping them to establish a solid base for future success. On the other hand, accelerators help quickly grow and scale startups already in operation. Both offer intensive programs, advice, and funding to help these startups succeed.