In recent years, with the popularization of growth programs for startups, the two terms Accelerators and Incubators are being used synonymously. As these two types of growth programs had borrowed and shared different traits, it is understandable why these two are being used synonymously. In this article at Niorise, we are going to tell the differences between them and help you choose the best one for your startup.
The important thing to recognize is that incubators usually assist seed-stage entrepreneurs start their businesses, whilst accelerators speed up later-stage business development. But besides that, the expertise options are virtually infinite. Here are a few things to keep in mind when choosing which program is right for your new business.
As per a study by Ian Hathaway, a senior researcher at Brookings Institution, there had been almost 1,300 incubators and accelerators in the world as of 2018. Although New York City and Silicon Valley have a heavy number of accelerators and incubators, other initiatives have set up shops in small cities like Cincinnati, Boulder, Austin and even Boise.
Usually, all incubators and accelerators provide a location for the work to participants. The extra accommodations — like 3-D printers, maker studios, and labs — differ by program, although both accelerators and incubators typically provide some mixture of such tools for participants.
And just don’t forget to read the terms: “there could be an awesome research facility, though if it turns out you just get access to it for two hours per week … it might not be the perfect fit,” says Dr. Susan Amat, the Global Entrepreneurship Network’s vice president of education. GEN, centered in Arlington, Virginia, runs programs and projects that are designed to assist people initiate or grow a company in 170 countries.
And after that, both accelerators and incubators typically offer space for networking activities — although this coronavirus pandemic forced these gatherings online for the coming years. For instance, St. Paul-based Lunar Startups — an incubator started by veterans, women, and people of color, LGBTQ+ folks, and indigenous peoples— uses video conferences to stay in touch with their core group.
Usually, the accelerators identify agendas for their members. Meanwhile, incubators also serve as co-working offices in which entrepreneurs can come and go whenever they want, says AngelPad’s co-founder and partner, Thomas Korte.
“Incubator startups are at their very early stages, and often just they are just an idea that the founder intends to cultivate,” says Steve Hoffman, CEO of the accelerator and incubator program of Founders Space. “Accelerators are for startups that have already gone much further … they have come up with an idea, and the product is in testing phase.”
Nowadays, many accelerators and incubators are concentrated on a given sector or niche market. A specialized program could effectively connect founders to potential clients and advisors in that sector, Hathaway says.
And what is more, numerous accelerators and incubators are partnering for these specialized programs with corporate projects or large companies. For instance, Chobani organizes a foodservice incubator based in New York and Boomtown’s public health tech accelerator based in Boulder is supported by the healthcare insurance provider COPIC.
Accelerator 500 Startups, based in San Francisco, gives its participants access to the network of even more than 3,000 founders and 200 advisors. Such kind of networking power — including former grads, advisors, investors, and marketing experts — is a standard incubator and accelerator offering.
The downside is that they are not one-size-fits-all networks. Founders will make sure they interact with specific specialists in the sector they’re seeking to join, says Dr. Amat. “Recognize what you need prior to the event, and do the job.”
Exhibition to investors
Most accelerators and incubators end their initiatives with a demonstration day or proposal session where members are granted the chance to refine their proposals and investments.
Techstars — operating 29 U.S. accelerators — usually organizes demo days for their members. In the meantime, last summer in Minneapolis when Target did run its first generation Z-focused business incubator, they built a 3-day conference around the demo day.
And most of these occasions have gone digital and have seen an upswing in the participation of investors without all the restrictions of the laws on venue capacity. For instance, the 2,500 investors who enrolled an online demo day for 500 Startups on March 26—were 1,850 more than last year.
Financing and equity
In return for financing several accelerators take equity in a startup. Incubators usually do not. Techstars is selling up to $120,000 in a business for 6 per cent equity. But founders could get the funds back and get their equity back if they’re not pleased with the encounter, says David Brown, the CEO and Founder of Techstars. But he says that only about one per cent of attendees in Techstar did this.
What’s Best for You?
Think about finding an accelerator or incubator as selecting a university to attend: certain classes with particular sectors are available, although others are more challenging to get in to than others. Founders looking for places to begin or grow their startups today have a powerful range of options at their disposal. The hard part is you choose precisely what you want.