In the past 10 years, there has been a sharp rise in the number of startup accelerators, incubators, and coworking spaces in the U.S. and around the globe. In fact, the number of accelerators in the U.S. jumped by an average of 50% every year from 2008 to 2014. The National Business Incubation Association has more than 2,200 members across 62 countries. And coworking spaces are even popping up in the suburbs, away from the more traditional downtown locales.
However, the differences between these three startup resources are varied and are frequently confused:
Accelerators are meant to promote growth. As such, startups only participate in an accelerator for a specific timeframe (usually about three to four months) with the expectation that they will “graduate” and continue to attract additional investors and gain traction. The application process is highly competitive, with acceptance rates as little as 1% to 3%. Accelerators do invest in the startups selected for the program, in exchange for equity, and provide intensive mentoring and business development tools to each startup. Unique to accelerators is a Demo Day, which allows each startup within the cohort a chance to pitch to prospective VCs and angel investors.
Incubators are designed to provide startups with office space, networking opportunities, and strategic partnerships as well as advice with business development, marketing, accounting, and compliance, among other services. Entrepreneurs typically must apply for admission into an incubator, like an accelerator program, but these often focus less on quick growth and are more likely to help guide a startup for upwards of a year or more. Also unlike accelerators, incubators do not provide upfront capital and therefore take little to no equity from its startups. In fact, many incubators are funded by grants through universities, economic development organizations, or other institutions.
A coworking space is simply a shared workspace. Typically, an entrepreneur can rent a desk, office, or other space within a larger venue for a monthly fee. The coworking space would provide internet access, printers, meeting rooms, and other necessary operational resources but would not offer the same level of business support or mentorship that accompanies an incubator or accelerator. That said, it would naturally offer networking opportunities with entrepreneurs who are housed within the coworking space.
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