Unless you’re already generously funded and raking in untold profits, you’ll eventually have to decide on which is best to help get your business to the next level. This isn’t a choice to be made lightly either. You’ve probably read a horror story or two, and heard dozens of opinions on why “accelerators are junk” or how “incubators ruin startups.”
The truth is, either can help get your business moving in a brighter direction. The major issue that determines their success rate comes down to whether you weigh the pros and cons of each before jumping in and seeking one out.
Also, it should go without saying that the CEOs and other team members of accelerators and incubators know what to look for in the businesses they take on. If you waste your time chasing after one or the other that isn’t right for your business model or current level of progress, your business will continue to hold at that spot until (or if) you make the right choice.
Let’s learn more about what each of these funding models are and what businesses they cater to best:
Accelerators operate on a very short time frame with their participating startup companies. Normally, businesses accepted into a reputable accelerator can expect to be with them for as little as 3 weeks, with some allowing for a 3-month stint with the accelerator and their partners. Generally, the startups that enter these programs have been in business for 6 – 18 months already as they enter the program.
The relationship starts with an application process that can last up to a month, with paperwork, video conferencing, and in-person interviews all being a normal part of the process. Top accelerators like Y Combinator and Techstars average a 1 – 3% acceptance rate from all their applications.
Accelerators are very selective, but also expect very little equity in return if you’re accepted. Equity that’s expected will vary depending on what stage the business is at currently and how much the accelerator feels they can help you, but is very low. They can offer a vast network of executive mentors and investor relationships to businesses.
Think of an accelerator’s role in your business as just what their name implies. Most have the goal of bringing your business to the two-year mark within just a few short months. These are seasoned business professionals you’ll be working with, so they won’t cater to time-wasters who just want to sit around and talk about growing the business. This is also the reason so many, like Y Combinator, have such stellar success rates to boast – they know how to pick the best startups to work with.
At the end of your mentor-ship with an accelerator, there will usually be a founder’s day event of some sort, where various CEOs also enrolled in the accelerator come to meet each other and the team of mentors, to discuss the triumphs and failures they’ve experienced while in the program. Essentially, the networking potential doesn’t end when you exit the program.
Incubators mentor and help the businesses they choose for a much longer period than accelerators. While an accelerator is focused on putting the startup on a collision course to the moon via a NASA-powered rocket ship; incubators focus on growing a business more slowly, teaching the team all the parameters they’ll need to make the business successful over the long haul.
Typically, most incubator programs last from 1 – 2 years and the contacts a startup CEO makes will be invaluable. Incubators offer more help, but may expect more equity.
Their focus is on helping you grow your business by putting you in contact with other startup CEOs in your industry, continuous funding if needed, along with seasoned mentors who can offer limitless contacts to help grow your business including investors.
Incubators do exactly what the name implies: Slowly nurturing immature businesses, much as an incubator keeps the eggs nice and toasty so the chicks can develop and later hatch.
Just as the egg incubator warms a whole coupe-full of chickens until they hatch, a startup incubator will often place importance on a startup’s willingness to participate in a co-working experience (ie., sharing office space, lease and overhead) with other participants in the program. This is very common in tech verticals, but also used in others. Please note that relocation is often part of the deal if you’re accepted, as the popular incubators have specific geographic areas they operate their programs in.
In order to get into a really good incubator, often you’ll need more than just a good idea. You’ll need some really good contacts within the incubator and its network and/or some really solid networking chops to seek out these people. Few have an established application process. Most of the best out there (ie., the ones that actually offer growth potential for your business) will only work with companies who their trusted partners have worked with and vouched for.
Strangely, many established accelerators, like Y Combinator, also have incubator programs in place. This can make it hard for an inexperienced startup CEO to decide where to start. The terms “accelerator” and “incubator” are often synonymous, meaning you have to research the application process, funding terms, and overall goals outlined by the program to determine whether it’s one or the other.
While the definitions provided may leave you with more questions than answers, now you have a more firm understanding of the differences each of these startup tools can offer your business. To gain a better understanding, I’d suggest the following resources:
- Accelerators vs. incubators: What are the differences?
- What founders should look for in an accelerator or incubator
- Startup accelerators: Pros vs. cons
- Startup incubators: Pros vs. cons
- The best startup accelerators of 2016
- 10 startup incubators to watch
In the cases of either accelerators or incubators, it must be restated that you have to know the right people in order to get into either. “Who you know” is very important. If you don’t know the right people, it’s time to put your networking cap on and start looking!
Cover photo credit: JD Lasica / Flickr