Difference between Startup Incubator and Accelerator

Key Difference: Startup Incubators, also known as Business incubators are systems that aim to help startup and early-stage companies. They then provide office space and shared administrative services to the venture, as well as help with business basics, networking activities, marketing assistance, mentorship, etc Accelerators, on the other hand, help ventures define and build their initial products, identify promising customer segments, and secure resources, including capital and employees.

Instead of doing the daily grind of 9 to 5 in somebody else’s company, many people choose to instead focus on building their own company. The most important thing in starting your own business is to have a viable idea. The second is to have or get money to develop the viable idea. Also advice and guidance helps. Startup Incubators and Accelerators are two such things that can help an entrepreneur get all of those things.

Startup Incubators, also known as Business incubators are systems that aim to help startup and early-stage companies. They accept a certain number of budding entrepreneurs that have feasible business ideas and a workable business plan. They then provide office space and shared administrative services to the venture, as well as help with business basics, networking activities, marketing assistance, mentorship, etc.

Business incubation has been identified as a means of meeting a variety of economic and socioeconomic policy needs. This may ‘include job creation, fostering a community's entrepreneurial climate, technology commercialization, diversifying local economies, building or accelerating growth of local industry clusters, business creation and retention, encouraging women or minority entrepreneurship, identifying potential spin-in or spin-out business opportunities, or community revitalization.’ This is why about one-third of business incubation programs are sponsored by economic development organizations.

Accelerators, on the other hand, help ventures define and build their initial products, identify promising customer segments, and secure resources, including capital and employees. They provide a working space, and may also provide a small amount of seed capital. They allow for networking opportunities, with both peer ventures and mentors, such as successful entrepreneurs, program graduates, venture capitalists, angel investors, or even corporate executives. The program usually ends with a “demo day” where ventures pitch to a large audience of qualified investors.

 Both Startup Incubators and Accelerators aim to help nascent ventures during the formation stage, essentially providing them with early guidance and a workplace. They may even provide a small amount of seed money, until the venture can get a proper source of investment. However, as compared to startup incubators, which last over a period of years, accelerators are for fairly short amount of time, usually about 3 months.

The advantages of both startup incubators and accelerators are that they provide shared learning and mentorship that helps new venture avoid typical startup pitfalls. They also help speedup the ventures efforts, as well as increasing access to capital investment. These programs also help the venture gain PR value and exposure.

However, like everything in life these programs can also have disadvantages, which include bring confusing at times, as one can get too many different opinions from different mentors. These program are also at risk for being distracting, at times, with lots of related meetings and events with mentors and investors rather than focusing on the product itself.

Comparison between Startup Incubator and Accelerator:

 

Startup Incubator

Accelerator

Description

Startup Incubators, also known as Business incubators are systems that aim to help startup and early-stage companies.

Accelerators help ventures define and build their initial products, identify promising customer segments, and secure resources, including capital and employees.

First started

1959

2005

Features

  • Help with business basics
  • Networking activities
  • Marketing assistance
  • High-speed Internet access
  • Help with accounting/financial management
  • Access to bank loans, loan funds and guarantee programs
  • Help with presentation skills
  • Links to higher education resources
  • Links to strategic partners
  • Access to angel investors or venture capital
  • Comprehensive business training programs
  • Advisory boards and mentors
  • Management team identification
  • Help with business etiquette
  • Technology commercialization assistance
  • Help with regulatory compliance
  • Intellectual property management
  • Privately or publicly funded
  • Focus on a wide range of industries
  • Fixed-term
  • Cohort-based
  • Include mentorship and educational components
  • Culminate in a public pitch event or demo day
  • Application process is open to anyone, but highly competitive
  • A seed investment in the startups is usually made, in exchange for equity
  • The focus is on small teams, not on individual founders.
  • Intensive mentoring and training
  • Expected to iterate rapidly

 

Duration

1-5 years

3 months

Cohorts

No

Yes

Business Model

Rent/non-profit

Investment. Can be non-profit.

Selection

Non-competitive

Competitive, cyclic

Venture Stage

Early or late

Early

Education

Ad hoc; HR & Legal Aid, etc.

Seminars

Mentorship

Minimal and tactical

Intense, by-self and others

Venture Location

On-site

On-site

Image Courtesy: 365barrington.com, aadf.org

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