In 2019, new startups created over three million jobs in the United States alone. While these figures haven’t recovered from the heady days of the dotcom boom, the startup industry is still thriving.
Are you thinking of creating a startup yourself and adding to the jobs created as an entrepreneur?
Well then you may be interested in a startup incubator or accelerator.
But which one?
When comparing incubators vs accelerators, it’s easy to think they’re the same thing. And, many people, especially those outside the new biz scene or startup world, often use these terms synonymously.
Though both accelerators and incubators are programs designed to help your startup reach its full potential, there are some key differences.
In this guide, we’ll take a look at the differences between accelerators and incubators. By the time you’ve finished this article, hopefully you’ll know which is better for your startup’s needs.
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Incubator vs Accelerator: Purposes
Incubators and accelerators have similar purposes, but they’re designed with different company stages in mind.
What is an Incubator?
An incubator is a program that helps a startup in its infancy by nurturing (or incubating) great ideas prior to business models being in place or even a strategy for profitability.
A startup incubator can be sponsored by angel investors, a venture capital firm, a government entity, or other organizations. However, it’s important to note that these entities aren’t specifically behind the startups being incubated, but rather simply behind the incubator itself.
Many incubator programs will provide professional mentoring to the new business and its key people, though sometimes in exchange for a minority stake in the startup.
Many business incubators are focused solely on one particular industry or vertical, such as fintech, marketing, or healthcare technology, for example. Many incubators require participating startups to relocate, with coworking spaces a particular favorite.
What is an Accelerator?
An accelerator is a program that helps fledgling startups improve (or accelerate) their growth, though usually only those which already have a business plan and basic strategy in place.
If an incubator helps “infant” companies, then an accelerator assists “toddler” startups.
Accelerators are great for companies that have more than just an idea and want to see fast and efficient growth in the near-term. They can be very competitive, as there are often many applicants for each space in the accelerator. They’re also usually more constrained, because accelerator programs usually operate in a specific timeframe, compared to the more open-ended nature of an incubator.
During this time, you’ll work with mentors to help your company reach its capabilities. Often in exchange for equity, an accelerator will offer investment and access to a range of mentors.
Unlike many incubators, instead of having your startup relocate into a coworking space, accelerators may offer private office space. When you’ve finished the accelerator program, you’ll take part in a demo day where you’ll pitch to investors.
Put simply, an accelerator is there to help your company grow a lot in a short time.
Which Is Right For Your Startup?
When choosing between an incubator or accelerator, it’s important that you make the right choice for the current state of your startup. Going into an accelerator too quickly can cause problems for your startup, eventually leading to failure. And joining an incubator too late can hamper your company’s progress.
Let’s take a closer look at when to choose incubators or accelerators:
When to Join a Startup Accelerator
A startup accelerator is designed with slightly more established companies in mind, compared with those seeking an incubator. If you’ve recently started your company and haven’t really solidified more than a logo, joining a startup accelerator could be too much, too soon.
Also, competition to join a startup accelerator can be fierce. You need to have something interesting to offer investors. If you’ve started recently, you’re much less likely to make it into an accelerator program.
Apply to join an accelerator when you already have your core team together. While new hires may always be welcome, you should have an established team, roles, and responsibilities in place.
If an accelerator might be too soon for you, an incubator may be the better choice.
When to Join a Startup Incubator
Incubators are designed with smaller, newer companies in mind. And, when we say “companies” here, we’re being quite generous, as most who seek out an incubator have little more than a cool startup name and a potentially powerful idea.
Join a startup incubator when you’re still putting your dream team together. When considering an incubator to apply to, research the mentors that are available. Is there a good selection of mentors who specialize in your niche, industry, or vertical?
You should also be wary of incubators if you need funding. Many incubators do not offer investment, unlike accelerators. However, they do not usually require relocation, either, so budget accordingly.
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Other Important Aspects to Consider
It’s not easy to choose between an incubator and an accelerator. They both have distinct advantages and disadvantages for startups.
In this section, we’ll take a closer look at other things that you should consider before choosing between these two startup programs.
Do You Value Your Own Space?
Whatever stage your startup is at, it’s important to take office space into account. Do you and your colleagues value privacy and the professionalism that comes with a traditional closed office?
If you do, an incubator that requires you to work in a coworking space may not be the best choice for you. Conversely, if you are happy working in a coworking space, it offers some great advantages to new companies.
Can You Thrive Under Tight Time Constraints?
Accelerators often come with tight time constraints. You need to have something ready to pitch by demo day. Are you confident that your startup could do this?
If you’re not, an incubator offers a much more open-ended timeframe that could be better for your business.
Do You Need Access to Technical Services?
Incubators tend to offer startups a wider array of technical services. When you join an accelerator, you’re expected to have these yourself. If you don’t have the budget to afford some technical equipment or services, an accelerator probably isn’t the best choice for your business.
Need More Help Deciding?
If comparing incubators vs accelerators was making your head spin, hopefully this guide has helped you out.
But, if you need more entrepreneurship advice, check out our blog! We’ve got many great articles for entrepreneurs to help you out.
Well, that’s our article on incubator vs accelerator, and we hope it helps you choose the startup business program that’s right for you! Got any questions, feedback, or other points to add about the difference between accelerators and incubators? Let us know in the comments below, and thanks for reading!