As an entrepreneur, do you know the difference between incubators and accelerators? Read this article by Nzekwe Henry to find out. It was first published on WeeTracker and has been slightly edited. You can find the original piece here.
As an individual who just came aboard the entrepreneurship train and is still learning the ropes, it might take some time to get with the program. And a crucial part of getting with the program is having a good command of the business lingo.
Well, unless you can lay claim to some kind of background in finance, however rudimentary, it might take some doing to keep up with what those business-type folks are yammering about when they begin to spill all the jargons associated with startup vernacular.
Be honest; how many times have you been in that awkward situation where you falsely nod your head in affirmation during some business conversation even though you haven’t the slightest idea what some other person is talking about? Well, if it’s any consolation, you’re not the only one.
Getting comfortable with a whole new set of terms – say from angel investor to crowdfunding, seed funding, venture capital, pre-seed funding, Series-A, and a host of others – is not exactly a cake walk.
Moving on to the crux of the matter; there’s something of an unspoken debate on the subject of incubators and accelerators with regards to what they are all about and which is best suited to the needs of startups at certain stages.
Although this gets very little attention as most people tend to just sweep it under the carpet as a ‘no-problem’ and use both terms interchangeably as synonyms that can replace each other without raising eyebrows, it takes nothing away from the fact that this is an awful misconception.
If you are an early-stage startup founder who is having a hard time getting to grips with both terms or deciding which is ideal for your startup, then this x-ray of their different features should come in handy:
What’s the difference? Purpose
For incubators, the focus is on startups that have just entered the initial stages of building their company. Incubators are best suited to startups that posses an idea that can cut it in the marketplace, but with no business model and direction through which those “lightbulb moments” can be brought to life in the form of an actually profitable venture.
The key function of an accelerator, on the other hand, is to speed up or advance the growth of a company that is already in existence and it is pretty much functioning with a business model in place. That is to say, accelerators are tailored for startups that have already hit the ground running per se.
What’s the difference? Duration
In terms of duration, an open-ended timeline is the most likely case for an incubator. Incubators are sort of in for the long haul; they place more emphasis on the longevity of the startup as against its speed of growth. It is quite common for startups to be mentored by incubators for a period spanning up to a year and a half, or even more.
As their name implies, accelerators are all about speed. They are all about putting one’s feet down on the gas and so they don’t take as much time as their opposite number – typically lasting anywhere between three to four months. Accelerators operate on a set time-frame and it is during that period that startups improve on their products and offerings with the support of mentors, as well as capital made available by the accelerator.
What’s the difference? Application Process
Incubators are designed for the long route. In these programs, a significant amount of time and resources are devoted to advancing local startups. It is not uncommon for many seemingly slow-growing or evidently less-scalable businesses to find their way into an incubator program.
Incubators generally prove their worth in creating employment opportunities or making moves to license intellectual property. And startups do serve up a path through which both can be accomplished.
On the other hand, accelerators place a premium on scalability, investment-worthiness, and high growth potential. That is, only startups that check all these boxes can even begin to fancy their chances of getting in. Accelerator programs are pretty competitive; seeing applications from a good number of startups and having to select only those adjudged to have the most potential.
What’s the difference? Environment
This is one aspect where both programs share similarities to a large extent. An environment of collaboration and mentorship is on the cards with both programs and this does a good job of bringing startups together, having them share a space, and affording them access to resources and peer feedback. And all these are known to be vital to the advancement of startups.
Incubators and accelerators also afford startups the opportunity to pick the brains of seasoned business experts and successful entrepreneurs who have been there and done that, and whose experiences can serve up invaluable business lessons.
What’s the difference? Investment Capital
It is quite common for incubators to be sponsored by universities or organizations that are focused on economic development, and as such, it is not usually the practice for an incubator to provide capital to startups. And in a similar regard, equity stakes are not usually taken by incubators in the startups they support.
It’s kind of a whole different ball game for accelerators as such programs are known to usually invest a specific amount of capital in startups for an agreed amount of equity. Thus, in some circles, accelerators are assumed to play a greater role in startup success by virtue of this financial commitment. However, this takes nothing away from the importance of incubators.
At the end of the day, it’s not really a matter of hopping on the bandwagon of any program that sounds like music to your ears, it’s about identifying what’s right for your startup and acting accordingly.
Both programs can undoubtedly be of immense benefits to startups but their obvious distinctions should never be muddled up such that they are considered one and the same. For entrepreneurs and startup owners, the trick lies in identifying which of these programs is best suited to the needs of their respective businesses at their present stages of development. And this can only be achieved through critical reflection.0