Incubators & Accelerators: Which Best Fits Your Needs?

Incubators and Accelerators:  In order to address these differences, we are breaking the two down and providing a description of the typical incubator and accelerator based on twelve factors.

Entrepreneurs are often confused when considering their startup’s potential participation with incubators and accelerators.  These programs vary widely making it difficult for the potential client to understand the differences between the two. Because of the applied variations related to the attributes within each, the differences are even somewhat difficult to explain.

In order to address these differences, we are breaking the two down and providing a description of the typical incubator and accelerator based on twelve factors. By comparing the attributes within these factors, the potential client should be able to garner a crisper understanding of the differences between the two.

Incubators

Objective / Focus: Incubators are usually focused on supporting the ideation and innovation efforts of the startup. They support the development of the MVP, and the build out a business model and company. Their approach tends to be one of growth at the correct pace for the startup company. Incubators tend to favor startups with long gestation periods.

Duration: Startups typically reside at incubators between 18 and 24 Months.  However, this may vary based on the requirements of the incubator and the needs and viability of the startup.

Structure: Incubators are usually “Not for Profit” organizations with many being sponsored by local, state or federal government agencies through public funding or grants. There are a few “For Profit” specialty incubators.

Program: Incubator programs are ordinarily unstructured and without formal schedules. Their services tend to be based on the needs and agenda of entrepreneur and their team.

Funding: Investment from incubators is not typical. In a few, specific cases, typically related to “For Profit” Incubators or special “Not for Profits,” with focused government programs, significant services may be provided and equity may be requested.

Equity: Equity is not typically required, especially for “Not for Profit” incubators. In specific cases as referenced above, equity may be required. If it is required, it is typically at a much higher level than that required by accelerators, as specialized services are much more robust and have a longer duration.

Selection: Invitations to join incubators are often criteria and application based. Network contacts can also have a major impact on a startup’s selection to join an incubator. Due to the community needs, the duration and the capital intensity of incubators, they tend to be more selective and more difficult to get into than accelerators.

Community: Incubators are typically tied closely with the local community and its needs.

Relocation: The startup and entrepreneur are generally required to relocate to the site of the incubator.

Facilities: Dedicated office space is typically provided on a month to month or lease term basis, in some cases at reduced fees and / or flexible lease terms. Some incubators also provide shared / co-working space as an alternative. Participation requires startups to domicile at the incubator.

Mentoring / Networking: Specific focused needs mentoring through the incubator’s network, based on needs and schedule of entrepreneur, are typically provided on an as requested basis.

Program Conclusion: The incubator program typically ends at the expiration of the formal lease period or successful completion of the startup company’s incubation stage.

Accelerators

Objective / Focus: Ordinarily, accelerators focus on scaling and growing startups.  Design, branding and strategic advice are typical components of accelerator programs. This is usually provided through a mentorship and educational program which culminates with a pitch event.  Another major component of the program is the preparation of the startup for funding. Ultimately, accelerators attempt to do in a few months what would normally take the startup two years.

Duration: The typical accelerator program lasts from 12 to 20 Weeks. However, networking and mentoring relationships usually last well into the future.

Structure: Accelerators are typically structured as “For Profit” organizations or Private / Public Partnerships.

Program: Accelerator programs are almost always highly structured, with the agendas being set by Accelerator. Accelerators are Cohort / Group driven experiences.

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Funding: Most accelerators provide a small seed investment in return for a modest equity position in the startup company.

Equity: Accelerators typically require a provision totaling 3% – 8% of the startup’s equity, depending on the accelerator program.

Selection: Invitations to accelerator programs are based on the accelerator’s criteria and are usually application based. Such application process usually includes an interview process. While some accelerators such as Y Combinator are very popular and selective, accelerators are generally less selective than Incubators.

Community: Accelerators may or may not be tied to the local community and its’ needs. They tend to be more dependent on the objectives of the accelerator, than the needs of the community, due to their “For Profit” nature.

Relocation: The startup may or may not be required to relocate, depending on structure of the accelerator.

Facilities: Office facilities may or may not be provided, depending on the philosophy of the accelerator and structure of their program. Many allow cohorts to find their own space. For those which provide office space, habitation at that space is not always required during the program.

Mentoring / Networking: Broad based mentoring through accelerator assigned mentors from a broad network of accelerator supporters is usually provided, consistent with the accelerator’s program structure and schedule.

Program Conclusion: Accelerators typically conclude with a Cohort Pitch at a Demo Day, which are attended by investors and the media.

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Tony Lettich

Tony Lettich has previous corporate venture capital experience and currently serves as Managing Director of The Angel Roundtable. He is a co-founder of FundingSage, which provides valuable information, tools and resources to entrepreneurs seeking to start, grow and fund a business.