Accelerator vs Incubator: what suits your startup?
As an entrepreneur learning the ropes of managing a startup, you may often come across terms like accelerator and incubator, which both refer to startup programs. Those new to the game would often use these two words interchangeably. But while these programs both offer guidance to startups, they are inherently different when it comes to their approach. If you're deciding which of these two is the better option for your startup, consider these 4 aspects.
Objective
Both accelerators and incubators are designed to give startups a needed boost but each program has a different focus. The main difference pointed out by The Startup is in the stage the new business is currently in at the time of engagement. For instance, incubators usually support the ideation process of startups. They take in new businesses that have an idea that they would like to bring into the marketplace but have yet to develop business models or directions towards making the idea into a reality. Meanwhile, accelerators work with startups that are already in the early stages of implementing their idea and the business model. The main mission of the acceleration program is to help startups get through "the Valley of Death" — that period between the first funding that company receives and the steady revenue phase. How is it happening? — By helping businesses grow and scale their product or service internationally through mentorship, training, networking and sometimes also investing in a startup.
Startup Development Phases
Accelerator Pros:
Recommended at the early stage
Incubator Pros:
Recommended at the ideation stage
Environment
Accelerators and incubators offer similar environments that encourage collaboration and mentorship. Incubators typically function as co-working spaces, where they give startups access to their network of resources, mentors, and other helpful events. But accelerators tend to offer a bigger network of mentors, given that their programs are structured. Hence, they are the preferred grounds for networking. Startups can already do networking even before the program begins. Menlo Coaching explains that applicants should already establish relationships early on, because it may enrich one’s understanding of what to expect from a program. It would also give ideas on what startups can do to perform better during this time, which can translate to a better understanding of business and, as a result, better choices, down the line.
Accelerator Pros:
- Offers a solid network of mentors and investors
- Offers helpful resources
Incubator Pros:
- Co-working spaces
- Offers helpful resources
"Floor to the coach". One of the Pitching workshops during xEdu Spring '18 acceleration program
Duration
How quickly do you want to get your show on the road? Because that will also come into play when choosing a startup program. Incubators are not pressured by how fast a startup grows, which is why they operate on an open-ended timeline. Businesses in incubators would typically last up to more than a year and a half. On the other hand, accelerator programs work within a specified timeframe of a couple of months. During this time, accelerators use all their resources to help startups to grow quickly. In the end, these startups usually are given the opportunity to pitch their solutions to investors. In fact, Singularity Hub discovered that accelerated startups have higher chances of securing investment funding. When choosing a program, you should also check the alumni benefits that incubators and accelerators offer.
Accelerator Pros:
- Business growth is assured in a few months’ time
- Opportunities may await startups at the end and after the program
Incubator Pros:
- No time pressure
- Startups can work at their own pace
Application
Startups would need to go through an application process to be accepted in incubator programs. But since incubators are not pressured into delivering startups that can develop fast, it’s almost easy for any kind of new business to get in. However, the case is very different for accelerators. Startups also need to apply to be accepted, but since it is a highly competitive process, only a small percentage of applicants actually get in an accelerator program. Accelerators typically choose the startups with the best potential. It could mean they are scalable, investable, or can grow rapidly in a few months.
Accelerator Pros:
Highly competitive, which means startups that pass the application are guaranteed business growth
Incubator Pros:
Less strict on applications
We hope that these instructions will help you better navigate in different startup ecosystems and decide which program suits your vision and your company. If you choose the acceleration way, make sure to check our Program Manager's blog on How to make the most out of the acceleration program.
Startups that are working in the Education sector might also benefit from:
Reading our five tips to succeed from Michael Staton, Partner at Learn Capital
Applying for xEdu Fall '18 program (you can do it until 8 August).
