Accelerator and incubator have a lot of differences. Most of the time the entrepreneurs would get confused in choosing the right programme. Understanding the key differences between the two will help you choose the ideal programme for your startup.
Below are the key differences between Accelerators and Incubators
Accelerator fund companies that have a proper idea to execute
Accelerators are funded by an existing company. Big companies fund the new startups helping them to grow the business on a large scale. It is normally the top companies funding the smaller startups. Accelerators fund the existing companies that have a business model and a proper idea to execute.
The main aim of the accelerator would be to scale the company and increase its productivity. They will be focused on accelerating the company. Mostly they would help the startups in increasing their presence in different areas and making their services and products more affordable and available easily to the end consumers.
Accelerators have a fixed period of time
There is a fixed period time for accelerators. Usually, an accelerator would give the companies few months to scaleup which would be around three to four months. At the end of the four months, they will provide the company a platform to pitch their business idea to different investors. They work on a time frame which is set by the accelerators.
Accelerator monitor the companies by purchasing a small stake in the company
Accelerators monitor the companies. In the majority of the cases, the accelerators would buy a small stake in the company and monitor them. They provide mentorship and feedback to the startups. The startups also get access to a lot of resources which will help them in scaling up.
The programme of an accelerator is structured. Their focus will be to create an alignment and understanding with the startups. Since accelerators invest a specific amount in the startups and acquire equity stakes, they will take up more responsibility and the success of the startup would be their need.
Accelerators use a more traditional approach for applying to their programme. The application process for accelerators is much more formal. Hence, there is a high threshold for being accepted into the accelerator programme.
You will have to apply for slots in the programme and the slots would be limited. The accelerators will later identify the top startups among the applicants. They will select the startups which can be invested in and the scalable ones.
The startups will have to show that they have the ability to grow in a fast-paced environment within months.
Incubators are Independent
Incubators are mostly independent. They will have connections with universities or venture capitalist firms for funds. They support the startups who are in their beginning stages. They help the startups in building their company.
Incubators help the ideas to turn into reality
Incubators normally fund ideas. They will help the people who have a new idea that will shake the market. Most incubators fund startups who have an idea with no proper business model. They will help in transferring the ideas into a specific set of actions.
Incubators primarily focus on developing innovations. In a few cases, incubators work as a means to develop the company so that the accelerators can take them up.
Incubators doesn't buy a stake in the company
Incubators provide mentorships and feedbacks to the developing companies. Incubators also monitor the companies but unlike Accelerators, they don’t buy a stake in the company. Incubators mostly provide capital to the companies. They are mostly funded by universities or certain economic developmental organizations.
Incubators are not bounded by time
Incubators normally operate in an open-ended time frame. They do not have a specific time period. Commonly they mentor the startups for more than a year. They would want the startups to run for a longer period of time, focusing on longevity.
Incubators are less concerned about how quickly the startups would grow. They invest their time in developing local startups. The startups will get access to various resources. Incubators focus on creating more jobs. They also help startups in licensing intellectual properties.
Even a slow-growing and startups that are less scalable can approach incubators since they are not concentrated in fast-growing and scaling up the business. Incubators are concentrated on the sustainability of the business.
Incubators are concentrated on creating a creative environment for the startups than having a structured programme.
Which one is right for your startup - Accelerator or Incubator?
Incubators would be your choice if you just have an idea that should be developed or a solution that is not much scalable.
Once you have placed your idea into action and want to scale your startup you can apply for the accelerator programme or if you have a startup that you would want to scale then you can do the same.
If you want to enter into an accelerator programme, you will have to show that your startup has the potential in scaling it up. In simple terms, you have to prove that your startup will be an asset to them.
What does a Startup Accelerator do?
A startup accelerator is an organization that helps early-stage companies develop their product and connect them with investors.
What does an Incubator do?
Incubators are an organization, or team of experienced professionals that helps startups bootstrap during its early stages and often provides mentoring, guidance, co-working space and also at times some funding.
Do incubators take equity?
Many incubators take little to no equity, as they are funded by grants through universities, allowing them to provide their services without taking a cut of your company.
Although no one really knows what is good for them until they try it, choosing right incubator and accelerator is crucial. Many soonicorns and unicorns have their base in incubators and accelerators.
If you are not sure, you can always consider with someone who has experience or take help of professional business coach.
Must have tools for startups - Recommended by StartupTalky
Subscribe to Startup Talky
Get the latest posts delivered to you right in your inbox