There are now more options than ever when it comes to applying to as well as choosing the best startup accelerator or incubator.
For those of you who may be new to the startup world (welcome!), I’ve compiled some helpful information to determine the difference between an accelerator and incubator, and which one might be best for your company.
Yes, all programs tout value to burgenoning businesses such as business plan assistance, introduction to other founders and mentors, and most importantly, guidance on fundraising to VCs and angels. But what’s the difference? Here’s the lowdown:
Incubators are built specifically for founders that are at the initial stages of starting their companies and don’t have set program timelines.
Unlike accelerators, incubators operate on a less structured time schedule with less programming and resources, and it’s not uncommon for a company in an incubator program to last for several months or even years.
Incubators typically offer their portfolio companies free office space, business plan advice, and mentorship.
The incubator may offer assistance in introducing your company to potential investors, but it’s not always the main purpose of the program (whereas the majority of accelerators have “demo days” where founders specifically pitch to potential investors).
Incubators are especially popular in local economies and can be run by organizations like non-profits, civic organizations, co-working spaces, and universities. Since incubators have less of a time requirement and offer less resources, you’ll only need to commit to a small amount of equity, often around 1%.
Accelerators are more focused, time-intensive structured programs for companies with a proof of concept/minimum viable product (MVP) and market validation.
Accelerators do just that: accelerate company growth for startups with proven potential to exit (either eventually sell or go public). Because of this, accelerator interview processes are typically extensive and competitive.
Most programs can last anywhere from 10 weeks to 3-4 months. With many top accelerators, you’ll be expected to move to the city where it’s hosted and spend 40+ hours a week minimum in their dedicated coworking space, and several accelerators offer housing stipends to make the move easier.
These programs typically conclude with a demo day to pitch your product to a variety of community leaders, angel, and institutional investors.
Accelerators offer exclusive access to investors, web hosting credits, other perks, and special access to program mentors as well as program alumni.
Because of this, the equity required is often somewhere in the range from 3% to 6%.
Y Combinator, one of the most prestigious accelerators in Silicon Valley, invests $150,000 in each startup in addition to its program for a 7% equity stake.
Overall, incubators and accelerators can offer extensive value for founders, but make sure to research carefully when choosing a program. Next up, we’ll talk about choosing the best accelerator for your company and founding team, so stay tuned!