A business startup incubator and an accelerator might seem like they have the same goal: to get your business off the ground. But if you have the opportunity to join one, it helps to know what these structures can do for your company—as well as the advantages and disadvantages of each option. Here’s what you’ll need to know:
What is a startup incubator?
While a lot of people believe that startup accelerators and incubators are essentially the same thing, there are some distinct differences.
While a startup accelerator tends to work on a predefined frame of time in the early-stages of a business, an incubator is more about setting the conditions through which a startup might thrive. Incubators provide an environment for early-stage startups to develop a minimum viable product (MVP) and foundational business model.
Just like a greenhouse intended to help young plants grow and sustain themselves, the idea behind a business incubator is to create an ideal environment for young businesses. An incubator might work in the same space as other companies within the incubator as it works on its central vision, its business plan, and technical issues like acquiring intellectual property rights.
Here are the pros of using a startup incubator:
- The social advantage. Working in shared spaces, receiving mentoring, and having close proximity to other people experiencing the same challenges can be a great advantage to people using startup incubators.
- Infrastructure. An individual entrepreneur can find it difficult to get the right doors to open. But within a startup incubator structure, more networking opportunities will be available to them.
- Cutting the learning curve. Having access to the mentoring and training available in a startup incubator can cut the learning curve and prevent some of the obvious mistakes that other entrepreneurs make.
Here are some of the cons:
- Lack of definition. You’re tasked with setting your own goals and setting the timeline for your business’s success. Without a predefined timeframe to meet these goals, a business incubator can sometimes feel stagnant.
- Giving up equity. The advantage of running a startup on your own is that you have 100% ownership over the assets and maintain control. You give up some of this when you work within a startup incubator.
When startup incubators are best suited
A business incubator program tends to be best for those entrepreneurs who want to build lifelong skillsets and learn things they wouldn’t otherwise have access to in an independent environment. They also tend to work for smaller teams that don’t require as much space. For that reason, startup incubators tend to be for those companies that are smaller, more flexible, and have a less-defined timeline for their long-term success.
Top business incubators
Here are some of the top-performing and notable business incubators to be aware of:
- UpWest Labs
- 500 Startups
- Boost VC
What is a startup accelerator?
Startups like Y Combinator tend to work on more defined timelines. The goal here isn’t to create a sustained business environment, but to get your business off the ground—and usually in a hurry. For some business leaders, that means this is more about the numbers of the business and less about developing long-lasting skills as an entrepreneur. Startup accelerators have an application process, and your business must have an MVP to apply.
As with startup incubators, an accelerator tends to mean equity for the venture capitalists as well as access to a larger network of mentors. According to Aaron Harris, a Y Combinator partner, the best accelerators tend to work with incentives and eliminating distractions. With accelerators, it’s less about creating the ideal environment for growth and more about creating the fastest growth possible.
That leads to some obvious benefits:
- Funding. An accelerator program is looking for rapid growth, which means investors are often willing to pay for results as well. Many of the top business accelerators offer plenty of seed funding to help a startup get off the ground in a hurry.
- Scheduling. With a limited timeline, some entrepreneurs may find that a business accelerator helps knowing what to do and when to do it. This is a tremendous “crash course” in running a business.
- Connections. Just as is the case with a business incubator, you can expect that a startup accelerator will give you broader access to a network of connections in the startup community, mentors, and vendors that can help you build the business in a hurry. Mentorship is another frequent theme that comes with seed investments in many tech startups, and is something many angel investors can sometimes provide.
Here are some potential negatives to watch out for:
- Giving up company equity. With large funding comes sacrifice. You might be expected to give up a larger equity stake of your business with a startup accelerator—after all, those who are trying to help you accelerate are also trying to accelerate their bank account. It’s up to you whether losing that much equity is worth it.
- Shorter terms. While a business incubator is less about hitting each business milestone, the business accelerator might seem a little more like running a cookie-cutter operation. That means your business terms will tend to work something like a flight plan. The application process can also be a bit stifling for many businesses.
When business accelerators are best suited
When is a business accelerator better for your business? Ultimately, it will come down to when results are more important to you than your long-term development as an entrepreneur. You’ll still learn plenty about running a business, of course. You’ll learn how to be an entrepreneur. But you’ll be on someone else’s timeline. This can feel a bit constrained, even if it does sometimes produce better results. And, in some cases, the best business accelerators use incentive programs that help reward you when you do hit each milestone.
Top business accelerators
Here are some of the notable business accelerators to keep an eye on:
- Y Combinator
- Tech Wildcatters
- Entrepreneurs Roundtable Accelerator
Tips for Picking the Right Incubator/Accelerator
Ultimately, the best incubator or accelerator for your business comes down to the specific terms you can expect to get. What are your priorities as an entrepreneur? Are you looking to learn for the long-term, or do you think you have an idea that needs immediate support and tighter deadlines?
You may find that even if you have your heart set on one particular incubator or accelerator, another might offer you terms that make more sense for your business. Try to choose based on these terms—and what the incubator/accelerator can bring to that you need—rather than going in blind.
Alternatives to Incubators and Accelerators
There are ways of boosting your networks and increasing your odds of landing mentors—if you’re willing to put in the work:
- Co-working spaces are great for meeting other entrepreneurs and expanding your “business social circle” and save you the costs of your own office space.
- Online business groups might seem like a poor imitation—and you won’t get much capital here, of course—but it never hurts to broaden your access to people who are in the same boat as you.
- Investors. Appealing to good, old-fashioned investors allows you to negotiate more flexible terms and potentially gain access to the investors’ network.