When entrepreneurs come up with ideas for new startups, one of their biggest hurdles is figuring out the best funding option to get their idea off the ground. The two main options to choose from are accelerators and incubators. Though many people think these two programs are interchangeable, they do have a few differences that could give you the right connections and opportunities to get your startups going. Let’s look at the differences between what accelerators and incubators have to offer.
What is a startup accelerator program?
Before choosing this option, you may want to know the accelerator definition first. A startup accelerator program gives individual companies a set timeframe to work with. This can be only a few weeks or as long as several months, depending on the nature of the startups in question. Those in accelerators also have access to a group of mentors that help them build their business and give them advice on avoiding any issues during this process.
What is a startup incubator?
Startup incubators tend to be more for single entrepreneurs or companies who are in the early stages of their startups. They may not be operating on a set schedule at this point, so they need something a bit more flexible. Though there are independent incubators around, you can also choose one that is either run or sponsored by major corporations, government entities, VC firms, or angel investors.
Accelerator or Incubator — Which One Is Right For You?
When comparing accelerator vs incubator programs, there are a few factors to consider.
#1 — Business Goals
Accelerators are designed for existing companies that have a minimum viable product and a business model already in place. The accelerators build on the foundations of this startup, pairing them with the right investors and influencers to expand it further.
A startup incubator is the right choice for startups who are only beginning to build their company. Though these startups may have an idea, they don’t have a business model or the direction needed to go from a great idea to actual reality in the marketplace. The incubators give them the help they need to get moving.
#2 — Program Duration
Accelerators run for a set amount of time, which is usually about three or four months. During this time, the startups are paired with mentors and given capital to build their business. When the startup accelerator program ends, the startups are given the opportunity to meet with investors to pitch their business.
Incubators have no set timeline to follow. These programs are more concerned with a startup’s longevity than they are with the company’s growth. Some of them even mentor their startups for at least a year and a half, or much longer if needed.
#3 — Application Process
To get into an startup accelerator program , there is a formal application process to go through. There are only a select number of slots available, so these programs are quite competitive. Accelerators select only the top startups that can prove in their application that they are investable, scalable, and can grow quickly in only a few months.
Incubators have no application process to deal with. Instead, they spend their time and resources working with local startups to license their intellectual property and create jobs. There is little pressure when it comes to growing the company quickly since they focus more on supporting local startups, so even less scalable businesses or slow-growing companies are great candidates for these programs.
#4 — Environment & Network
Both accelerator and incubator programs provide startups with environments that promote mentorships and collaborations. This includes shared spaces with access to a variety of resources and some peer feedback when needed.
The difference is that incubators are designed with open seating, so there isn’t very much privacy, which larger groups may find distracting. Accelerators may also have some co-working spaces, though most of them offer private office space or give the startups the option of finding their own space to work.
#5 — Investment Capital
Accelerators invest a certain amount of capital in startups and in return receive an agreed-upon percentage of the equity. This investment lays the bulk of the responsibility in the startup’s success onto the accelerator’s shoulders, so they work hard to ensure that the startup succeeds.
Though incubators don’t usually provide startup capital, they do have funds available, which typically come from economic development organizations or universities.
Alternatives to Accelerators and Incubators
There are also some alternatives to incubators and accelerators that you may want to consider before making your final decision on how to proceed with your startup company.
There are several co-working spaces available for startup companies that allow you to meet with other entrepreneurs. Not only does this allow you to expand your business social circle, but it also helps you save money on office space, plus it doesn’t require you to follow any time limits other than the ones you set for your business yourself.
Some startups prefer working directly with investors, which gives them the opportunity to negotiate terms with a bit more flexibility. This option could also provide them with access to the investor’s network of business associates for a wider range of potential investors and contacts.
Online business groups are another startup option. They don’t offer much in the way of capital but there is another advantage to business groups. For example, you could access a network of people who are starting their businesses as well, dealing with the same issues and jumping those same hurdles. Moreover, these groups can offer advice for your business plan and potentially put you in touch with people who can help expand your business.
A business startup can be hard enough to get off the ground by yourself. Having options like incubators and accelerators can give you the connections, support, and space you need to get going with your idea.
Whether you have a business plan and minimum viable product already in place or are just working with an innovative new idea, these startup options can help you expand what you have and get your business where you want it to be.
Of course, you need the right program to get your startup going, so be sure to check out what each option has to offer and what they require of you before you choose one.
Looking For An Incubator?
Avalgon is the world’s first and only digital incubator. Our 18-month program is designed to maximize your opportunities of achieving a $1 billion valuation while minimizing the time needed to get there.
Unlike traditional incubators, the digital essence of Avalgon makes it open for every start up out there. Whether your startup is based on Hong Kong, Zurich or the United States, you can apply for our program today.
With Avalgon, your startup will receive an all-round support from global experts:
- Application review (Switzerland)
- Incorporation, legal & regulatory support (Switzerland)
- Technical development (Ukraine)
- Creation & launch of a Security Token Offering (STO)
- PR & digital marketing support (United Kingdom)