What’s the difference between a startup incubator and accelerator?
Two prominent — but vastly different — ways to fund your startup.
October 16 | 5 min
Owning a new business can make you feel like a kid again. With all of the new concepts, terms, and jargon you have to learn — unless you are blessed with a background in finance or business — it can feel like you’re back in kindergarten, learning your ABCs.
So it’s totally understandable that if you’re hearing terms like ‘incubator’ and ‘accelerator’ for the first time, you probably have a lot of questions: what are these programs exactly? Which of the two is a better fit for my business? Don’t worry — we’re here to help you choose a clear winner for your startup!
To clearly illustrate the difference between the two, we’ll break it down into three parts:
1. PURPOSE — Why these programs exist in the first place,
2. PROCESS — What happens in each of these events, and
3. PAYOFF — How you and your team will benefit from participating.
Considering the purpose of this program, you can take the term “incubator” quite literally as a kind of supervised habitat for growth. Much like newborns that need nurturing in a controlled environment, new businesses need nurturing until they can stand on their own.
Incubators usually work with startups that have no concrete business model yet. This program also assists with market research, product feedback, and customer interaction.
The incubator Capital Factory, for example, hosts meetups and hack-a-thons run by credible mentors in the tech industry to help businesses get organized. They also give participants access to their Device Lab, a tech startup “heaven,” complete with tablets, phones, and other resources used for research and development, prototyping, and customer support.
You can think of this concept exactly as it sounds, like hitting your car’s gas pedal to launch it forward. Contrary to incubators, accelerators advance the growth of companies which already have existing ideas established. They focus more on customer development and product refinement than idea generation.
The Entrepreneurs’ Organization accelerator program’s mission is to “empower entrepreneurs with the tools, accountability, and community to aggressively grow and master their businesses.” But, to be able to qualify for your nationwide accelerator program, you must be the owner or founder of an operating business with gross yearly revenue amounting to $250,000 to $1 million.
Incubators are the perfect go-to programs for startups who are looking for a business “starter pack.” They provide materials that cover everything a business needs to get started: mentorship, bank loan programs, angel investor networks, lessons on business etiquette, etc.
The application process for incubator programs is typically non-competitive, relative to accelerators. Incubators have a limited number of spots, but they typically have fewer requirements to join.
These programs tend to have stricter standards when it comes to accepting participants. They expect more from the businesses than incubators do, so they’re highly competitive and highly selective. They also typically last for about three months and have a limited number of slots.
For example, Y Combinator and Techstars have acceptance rates (1-2%) well below those of top global universities like Harvard (5-6%), so you know you’re getting a tailored experience. These programs pack their three month long calendars with professionals dedicated to helping your business succeed. Yes, the injection of some cash into your business is great, but the real value of accelerators comes from their hyper-intensive learning environments.
Apart from the tangible benefits you receive from joining an incubator program, the main takeaway from participating is the knowledge that you can gain from mentors who actually have been in your place at some point in their lives.
Incubators last for one to five years, allow for slow growth, and focus on the long-term success of a business, so the support and care you receive will significantly help your business gain a foothold in a given industry.
On the other hand, accelerators are all about speedy growth, given their short time frames. Getting involved with an accelerator gives you the resources to iron out any strategic, operational, or organizational problems with fast-paced guidance.
Overall, if an incubators help businesses shift from a crawl to a walk, accelerators help businesses shift from a walk to a sprint. No matter which program you decide to choose, both offer amazing opportunities for new companies and open countless doors for growth.