In the complex and competitive startup scene, founders are constantly on the hunt for any kind of competitive edge. Increasingly, startups look for this edge in the mentor and investor relationships that can be found in an incubator or accelerator.
But what are accelerators and incubators, and is either right to help you grow your startup?
What’s the difference between an incubator and an accelerator?
It’s common to see the terms ‘incubator’ and ‘accelerator’ used seemingly interchangeably, but in fact there are distinct differences between the two – which you need to know before you consider applying to one.
An incubator normally supports new ventures during the ideas stage. Incubators provide access to infrastructure and an environment that’s conducive to idea developing and building your Minimum Viable Product (MVP). They can be a good source of advice for very early-stage startups.
Joining an incubator normally involves physically locating your business in one central workspace shared with many other startups. In many cases you can take a spot in an incubator’s office space for a long time period – often 12 months, but in some cases, up to several years.
If you’re thinking of joining an incubator, speak to some founders currently in the program. Find out how long they’ve been there, and what growth goals they’ve achieved in this time. You should also look at their alumni, and find out how many have gone on to be acquired, sold or IPO. This will give you a good indicator of the quality of the incubator program.
As the name suggests, accelerators help startups to accelerate their growth. To join an accelerator program, startups tend to have some initial traction, and a team in-place to work on accelerating growth.
Accelerator programs usually have a set timeframe that lasts anywhere between a few weeks and a few months, and gives companies access to their network, knowledge and (a relatively small amount of) funding.
If you’re thinking of joining an accelerator, do your research. Get stats about their alumni: how many have been acquired/sold/IPO? How many failed? Who’s in their network of mentors, and do any of these mentors specialise in your type of business? Finding a good-fit accelerator with a strong track record will be significantly more valuable to your startup than one that’s local, with no (or very few) notable alumni.
What are the Pros and Cons of Accelerators and Incubators?
- Learning and mentorship – organisations like 500 Startups and Y Combinator offer access to some of the world’s brightest business minds.
- Access to investment – either directly as part of an accelerator program, or by introducing you to a network of potential investors.
- Credibility – easy to overlook, but being a part of a big-name incubator or accelerator intake will help you ‘get your name out there’.
- Highly over-subscribed – few startups make it into accelerator or incubator programs. Y Combinator accepts about 2% of the applications it receives, and Techstars receives around 1,000 applications for only 10 spots (source).
- Mixed quality – these days it seems like accelerators are popping up on every corner. The big names provide access to the best networks, advisors and investors, but not every accelerator can be ‘the best’. Different programs have different specialisms, so the quality of your experience will vary depending on how good a fit your company is for the accelerator or incubator.
Is an Incubator or Accelerator Right for Your Startup?
Depending on the stage your startup is at, an accelerator or an incubator will be a better fit. Early, pre-traction startups will be best suited to an incubator, whereas post-traction and with a team in place to put in the leg-work, an accelerator will be a better fit.
Before applying to an incubator or accelerator program, consider two questions:
1) Can You Afford It?
As you might expect, you don’t get anything for free. To secure a spot in an incubator or on an accelerator program, you may have to sacrifice a slice of equity in your startup – or hand over hundreds or thousands of dollars to secure your spot.
Many startups are cash-poor which makes finding the money to pay for a place on an incubator program a problem, which is why handing over equity is more common. Thinking long-term, will this be a good move for your company, or would you be better off keeping hold of this 5-10%?
2) Do You Need It?
With so many incubator and accelerator programs out there, you’ll need to do your research to find the right program for you. And even if you’ve identified a program that’s a great fit for your company, you still ought to consider what you want to get out of the program.
An incubator or accelerator program is only right for you if you have real, actionable goals for your time spent with them, which you don’t think you’ll achieve without the growth-conducive environment they foster.
Would you still be able to meet your growth goals if you sought advice from other means, which would allow you to maintain control of your equity – for example from a mentor or consultant?