It’s not uncommon for aspiring entrepreneurs to think a startup incubator and accelerator are the same concept. Which does what, exactly? Do entrepreneurs need both in order to succeed?
Incubators and accelerators are designed to help guide entrepreneurs and their businesses to success. However, not every startup may be the right fit for both an incubator and an accelerator.
Let’s take a closer look at the meaning behind each term, the benefits each offer entrepreneurs, and how to determine which is best for your business.
What is a startup incubator?
A startup incubator is perfect for the entrepreneur who is just starting to build his or her company. Some incubators admit startups through an application process, while other hubs bring in startups that are all within a specific industry, or at the same early stage. Once a startup is accepted into an incubator, the company can begin working on growing and refining its business.
Sometimes compared to a “school” for entrepreneurs, startups admitted to an incubator do not need to remain there for a prolonged period of time. Many operate under membership plans, which may be on a month-to-month basis. Much of this, ultimately, will depend on the growth of your particular startup.
Incubators provide members with a collaborative environment, and one of the biggest benefits is mentorship. Mentorship is typically provided by entrepreneurs in the same field to aspiring entrepreneurs in similar fields, ensuring that the advice is specific to the business type. These mentors help answer questions and teach entrepreneurs the ins and outs of running a startup in that field.
Membership in an incubator provides great networking benefits, too. Name drop your membership at “x” incubator, and instantly build credibility while showing fellow entrepreneurs you’re serious about the future of your startup.
What incubators do not offer startups
It sounds obvious, but the answer is capital. One shouldn’t join an incubator under the impression that their startup will receive funding. There are some incubators that offer pre-seed investments for a stake in accepted startups, but this is not applicable to every incubator.
It’s safe to say that your startup won’t be funded by taking part in an incubator. You will actually be the one paying the incubator for being a member!
What is a startup accelerator?
If a startup has graduated from an incubator, or is a particularly high-growth business from day one, its next move will often be to head into an accelerator program. Accelerators move faster than incubators: there are more mentors to work alongside, the timeframe is shorter (which, at the longest, lasts a few months) and additional training is provided.
Yes, accelerators do offer money
Unlike incubators, accelerators do provide startups with a bit of capital. Typically, this funding is merely a small seed investment — and yes, the startup does need to provide a small amount of equity in exchange.
How do you graduate from an accelerator program?
The stakes are much higher with an accelerator because startups have to prove they can make it to “graduation day.”
Much like incubators, startups must apply for accelerator programs. However, accelerators are more selective with the companies they bring on to their programs. Think of them as the Ivy Leagues of the startup world. Some accelerators receive thousands of applications, and only bring on a handful of entrepreneurs who are ready to advance to the next level.
Over the course of several months, entrepreneurs and their teams work toward a demonstration day, which is essentially graduation day. Also called demo day, the event is attended by investors and members of the media. Entrepreneurs demonstrate what their startup does, its scalability and what makes it worth investment.
Does your startup belong in an incubator or accelerator?
Still trying to decide which program is the best fit for your startup? If you aren’t sure, the best thing to do is do a little extra homework. See which types of programs are available in your area, and consult with mentors and business advisors to ensure that you’re on the right track, too. After further research, you may be surprised to find that you’re a better fit for one program than the other.