Startup accelerators and startup incubators assist entrepreneurs in the journey toward becoming successful companies, but each in their own way. However different these two processes are, many people confuse the two and use the terms interchangeably.
What is a Startup Accelerator?
The most distinct difference between accelerators and incubators is the time frame of each. An accelerator works with startups for a short and specific amount of time, usually from 90 days to four months. Accelerators also offer startups a specific amount of capital, usually somewhere around $20,000. In exchange for capital and guidance, accelerators usually require anywhere from 3 to 8 or more percent ownership of your company. As you’ll see below, these features make accelerators much more structured than incubators.
The accelerator journey is not an all-inclusive road to success. Rather, it is meant to help you get to a point at which you’re ready to raise larger amounts of capital. The goal of accelerators is to grow the size and value of a company as fast as possible in preparation for an initial round of funding. This closely aligns with the equity accelerators require in exchange for their guidance and resources. Some common and increasingly popular accelerator programs that you may have heard of include: TechStars, Y-Combinators and Dreamit.
What is a Startup Incubator?
With mentorship periods often lasting more than a year and a half, incubators focus less on quick growth and have no specific goal in mind for your company other than to become successful at the right pace. In fact, the goal of some incubators may be to prepare your company for an accelerator program. Incubators take little to no equity in your company, and can afford to because they do not provide upfront capital like accelerators. Many incubators are funded by grants through universities, allowing them to provide their services without taking a cut of your company.
Because many entrepreneurs are attracted by the opportunity to keep control of their startup and the absence of a 90-day time limit, you will most likely encounter more difficulty getting into an incubator. It may also be difficult to get accepted by an incubator if your networks aren’t connected in some way, as many only accept pitches from entrepreneurs with whom they already have a relationship. If your goal is to gain the mentorship of an incubator, be prepared to perfect and utilize your networking skills.
Advantages of being part of an Accelerator or Incubator
Whether you work with an accelerator or an incubator, there are pros and cons of both. For starters, the advice and guidance of mentors can help you avoid mistakes that could cripple your startup if you were trying to go your own way. Both options also provide access to capital that may have been otherwise unavailable, whether it’s during or after mentorship. Additionally, both accelerators and incubators provide the space to develop your idea. Lastly, being a part of an accelerator or incubator can provide invaluable connections, and some may also have networking events to help you boost your exposure.
Disadvantages of being part of an Accelerator of Incubator
Many advantages of incubators and accelerators come with an opposing disadvantage. For example, your routine and your vision are completely your own when working with only your team members. Working with an incubator or accelerator can impose the opinions of your mentors and take your idea in a direction your team doesn’t completely agree with. Working with these mentors is also a big time commitment, and will likely require you to spend time away from developing your product by attending meetings with mentors and/or investors. Additionally, your schedule depends on your mentors. Sometimes you may have to spend time speaking with mentors when you just want to get down to work without any outside influence, and sometimes you may want advice from mentors while they are busy helping other teams.
How do you choose?
Choosing whether to pursue the mentorship of an accelerator or incubator is a tough decision. First, you need to decide whether you need the guidance, capital, and other assistance they have to offer. With so many different accelerators and incubators out there, you have many options to find the one that best fits your company. Even so, an accelerator or incubator may not be right for your startup. For instance, if you’re only looking for capital, you may be better off reaching out to an expert to help you raise instead. Or if you have enough capital but need mentorship, you might want to utilize your network to acquire the mentorship of a veteran.
After choosing to pursue one of these mentorship programs, you need to decide whether you’ll benefit more from the quick growth offered by an accelerator or the unstructured progress of an incubator. In the end, only you and your team know what’s best for the future of your startup.