Young companies need all the help they can get. With up to 90% of startups destined to fail, getting professional mentoring and access to a nurturing environment is an immense advantage. Startup incubators and accelerators do just that – help startups survive and flourish. Wondering what both of those terms mean and how they compare? You’ve come to the right place!
What is a startup incubator?
Incubators help startups in their early days when there is no MVP, business model, or even a finalised product idea yet. Incubators are often run or supported by universities (including MIT) and non-profit organisations that aim to boost local entrepreneurship. The average duration of the time a company spends in an incubator is 6-9 months but can extend to up to two years in some cases. For example, if a startup involves complex technological and scientific research and development, incubation times can run longer.
According to Forbes’s findings, 84% of incubated startups stay in their community helping drive the economy. Also, 87% of startups that participated in incubators survive past the 5-year mark.
Startups that get accepted into an incubator can rely on receiving the following help:
- Free office space and equipment
- Networking opportunities
- Access to investors and coaches
Zen Business and Revolut are among many examples of successful startups that went through an incubator during their early years, and proof that a founder with a business idea can find a perfect incubator to help them bring their venture to the next level.
What is a startup accelerator?
Unlike incubators, startup accelerators work with companies that have already laid a foundation for their future growth and now need to expand quickly. Startups that are accepted in accelerators usually have a validated product and even the first paying clients. The typical timeframe that a business would stay in an accelerator is 3-6 months.
Because such startups already have a working business model, the help that they receive is centred around:
- Mentorship and professional business consulting
- Legal assistance for securing intellectual property (IP)
- Access to a network of investors
Accelerators also can make seed investments in return for part of the equity and voting rights on the company’s decisions. That’s why it is sometimes recommended that startups seek alternative funding options so that they can stay in full control of their venture.
Some of the most famous startups that worked with accelerators include Airbnb, Coinbase, Twitch, Uber, and Canva. And the accelerator market is only growing. Harvard Business Review identified 172 US-based accelerators that have collectively invested in over 5 000 US startups during 2005-2015. By mid-2021, the top USA accelerator, Y Combinator, alone made 3777 investments.
Incubator or accelerator – what to choose for your startup?
As you see, startup incubators and accelerators are two very different concepts, and the choice between the two is largely defined by the stage and the state of your business.
Here are the key questions you can ask yourself to identify which approach best suits you:
- Do you have an MVP or a product ready?
- Do you require funding to support the startup’s growth?
- Are you looking for slow-paced and steady or short-term intense growth?
Before you contact any of the business development programs, it is vital that you clearly understand the current state of your company, your financial needs, and have a preferred timeline.
Most incubators will ask for a business plan as a part of the application process, while accelerators will be more interested in seeing the first batch of real users real users and knowing that your idea has the potential to scale fast.
Accelerators tend to invest in their mentee startups more than incubators, but don’t let that drive your decision-making. Incubators are more focused on nurturing the business through alternative means, but they usually provide access to a network of private investors, angels, and even venture capitalists (VC).
When choosing between the two options, make sure your key criteria are the stage of the business and the time you are willing to dedicate to your startup. And know that the two programs are not mutually exclusive. It is perfectly normal for a startup to work with an incubator during its ideation stage and partner with an accelerator once they start generating first sales.
Once you’re done with and out of the incubator or accelerator, it is critical to keep the momentum going. Experienced technical partners, such as Emphasoft, will help you elevate the idea, product or even assist with building the long-term strategy. The Emphasoft tech team has the full skill set to match your startup needs. Reach out to us today and we will start working on your startup within 3 days.