Startup Accelerator? Startup Incubator? Which one is Right for your Startup?
September 07, 2018
There’s no single path to entrepreneurial success; there are many ways to make your amazing idea into a thriving business. There are, however, some programs and frameworks that can give your venture a big boost if you get into them at the right time. Startup accelerators and incubators are two options for fast-tracking and deep-diving.
What exactly are incubators and accelerators, anyway?
If you’re not sure, I don’t blame you. The terms get thrown around a lot, often interchangeably. But, there are some key differences between them, which impact whether one or the other (or neither!) is what you need to go for with your startup. Plus, depending on your and your startup’s objectives, a different option may be much more suited!
First, I want to make note that this article is intended as a resource for new or existing entrepreneurs or for our LaunchX summer program alumni to continuing learning the best path to continue on their startup foundation. LaunchX does not refer to itself as an accelerator or incubator, but rather as an entrepreneurship education summer program, where students start real companies.
Accelerators are short-term (3-6 months) intensive on-site programs meant for mostly early stage startups that need focused mentorship. Susan G. Cohen and Yael V. Hochberg, who kind of wrote the book — or rather, the paper — on seed accelerators, say the key characteristics of accelerators are that they are “fixed-term, cohort-based, and mentorship-driven, and they culminate in a graduation or demo day.”
Incubators, on the other hand, are longer-term situations, which can last up to several years. Like the name suggests, these are programs that nurture developing startups. They provide access to community, networking possibilities, plus legal, accounting, and other important resources that startups may not have the finances to hire in-house. This is more about an environment where early-mid stage startups can get their footing and grow. Incubators can also include access to funding.
How to Decide
Your decision to join either an accelerator or an incubator (or neither) should depend on the answers to a few questions.
- What’s your startup structure? Do you have complementary co-founders, are you a solopreneur, do you have a small team behind you?
- How long has the company been operating?
- Are you still in the idea stage, or have you already been doing prototyping, started on sales, formed partnerships?
- How much traction does your startup have at the moment?
- Are you looking for a community, mentorship/support, specific instruction, funding, or a combination of these things?
There are definitely benefits to both incubators and accelerators, but you only really get them if you choose the one that’s right for your startup’s stage, needs, and configuration. Let’s break down when and how to consider incubators and accelerators, and look at a couple of other options that might serve your startup at different points in its life.
Like I said above, these are best done when your company is still pretty fresh (a few months along) and your team (or you, if you’re flying solo) needs a lot of intensive direction. You have to be beyond just the idea phase, though, otherwise you risk not having enough to work with once you’re there (which, honestly, would be a waste of your time). If you’re at the point where you need a jumpstart to get you going, wanting to go all-in — at least time and energy-wise — to see if you can build some momentum and take off, an accelerator is something to seriously consider.
The benefits of an accelerator are that you do get a lot of hands-on, deep mentoring and instruction in a short span of time. These programs expose you to many aspects of running a business and help you to kick into high gear. The downside, though, can be that once you’re out of the accelerator and don’t have that structure and support, you might find it difficult to self-direct. While an accelerator is a great way to get the ball rolling, you should be prepared for doing a lot of work independently afterwards, so that you can continue building on what you started.
Pro Tip: Use your time wisely at the accelerator, not just to do the work in front of you, but to make connections with your mentors, advisors and others in your cohort.
Another thing to note is that the startups who see the most benefits (faster hitting of milestones, better access to second-round funding, etc.) are those that are part of top accelerators. So, it’s important to choose your accelerator wisely. Really do your research before you even apply, and definitely before you commit. Top accelerators include AngelPad, Y Combinator, Dreamit, and TechStars, just to name a few.
For even more community, longer term, consider an incubator (especially if you’re beyond the beginning few months). If you have an idea of where you’re going, but need some support especially with aspects of the business that you can’t handle in-house (legal, HR, accounting, etc.), this is a good setup to consider.
Incubators can be sponsored by investment firms, city governments, and sometimes large corporations, so you are also looking at getting a boost — financially and otherwise — from powerful players. Some are industry-specific, giving their participants access to hyper-relevant information and contacts.
While companies in incubators don’t have cohorts like they do in accelerators, most incubators do take place in an open plan coworking space (more on that below). They can also sometimes cost money to be a part of in the form of per-person “rent” of the space you’re using — though many times they provide some financial incentives, like seed funding — so they’re not ideal situations for large teams. They’re great for helping solo CEOs drill down on the vision and really build up their foundations, potentially find connections and staff, and much more.
There are also a number of incubators and accelerators geared specifically toward teen entrepreneurs. Check out the Tardigrade Group, Elix, Whiteboard Youth Ventures, Leangap, and the different programs from QuarterZero.
But what if neither an accelerator nor an incubator is right for your passion project at this time? If you’re either not far enough in to accelerate or past the point of incubating, you’ve got some other options:
This is for startups in the very early/idea stage. You probably haven’t nailed down your ideal customer, or gotten through to a functional prototype. But you’ve got a great idea for a product or service on which to build a business. A pitch competition gives you the opportunity to first and foremost refine your idea into something that you can easily and succinctly communicate to a panel of judges (investors, etc.). It forces you to understand the exact value of what you’re proposing, even if the reality of the way it will operate is not yet fleshed out. And it will teach you to get that across well, which will be useful later when you’re trying to get funding. Plus, if you win one of these contests, you could walk away with some sweet seed money for your venture.
These are shared office spaces where a bunch of smaller companies in various stages of their lifespans share a space in order to feed off each other creatively and energetically. Co-working spaces can create a great sense of community, and excellent opportunities to get to know others in your local startup scene. There are usually lots of organized social and business-oriented events (a Lunch presentation about Marketing, Taco Tuesdays, etc.). And they’re usually a lot cheaper than renting a traditional office space, especially if you have a small team. This type of setup might be right for you if your startup is somewhat established (aka past the stage where an incubator would do much for you), or at least not looking for direct guidance or instruction.
Making the Tough Decision
Start with why you want to join one of these programs – what is most important to you? The temptation for an accelerator or incubator may be strong, since it would have the potential for funding (pitch competition), community (co-working space), and more all in one place. Many startups choose this option because they don’t know what they need, and therefore go with the option that would have everything. But beware – just as we say that startups need to focus to ensure they are delivering on their customer needs, so too is there value in a focused solution to your specific needs. Accelerators and incubators each do a lot, which means they may not be optimized for the thing you value most. If it is right for you, though, ensure you do your research to know which type might be right for you and weigh the pros and cons deliberately.