Accelerator vs. Incubator: How to Find the Right One For You
Both accelerator and incubator are commonly used to mean the same thing. However, there are key distinctions founders need to be aware of. They both offer excellent opportunities to entrepreneurs early in the life of the business. They offer different frameworks, but all ensure the success of the startup and a better chance of attracting a VC firm later on. Accelerators are known to accelerate the growth in an already existing company, whereas a business incubator is used to incubate disruptive ideas hoping to build it into a business model and a company in the process. While accelerators focus more on scaling a business, incubators put their focus on innovation.
The biggest difference between these two is the program structure. Accelerators have a set time limit which the company spends working with mentors to avoid problems as they build the business. Accelerators begin with an application process and are usually very selective. The selected companies are given a small seed investment in exchange for some equity. They also get access to a network of mentors which is the biggest value a business can get.
A business incubator, on the other hand, begins with a startup from the early stages of the company. It begins even as the idea is formed into a business model. Incubators are varied, with some run by VC firms, major corporations, or government entities. A good example is Ooze Studios, which has worked with several startups that have moved on to a successful business operation.
How do you choose?
The toughest decision is whether to go with the mentorship of an incubator or accelerator. You must first identify your major needs, these may be capitalization or guidance or some other form of assistance that a business may need. Here are some points to consider when choosing.
1. The specific value added and the network access
The major needs of a startup are access to a wide and relevant network and free improved business advantages. If you cannot single out the extra advantages you may receive from a mentor in any category or incubator or accelerator, then you need to look elsewhere. The best incubators will find it easy explaining their network access and benefits to you.
2. A collaborative environment
The best allies you can ever work with our other founders in your field. They make for the best support. A welcoming and shared physical workspace, social events and the evidence of collaborations with others is a sign of a good incubator or accelerator.
Since most startups have ideas to bring to the market but no business model to transition it from an idea into a business reality, incubators come in to manage the process. Accelerators, on the other hand, work with existing companies seeking growth. These companies already have business models and a foundation on which to scale the business with the influence of the accelerator.
With incubators there is no timeline, it is more open-ended since they focus on longevity instead of how quickly the startup can grow. There are many cases of incubator mentors going for more than a year with the mentorship program. Accelerators, however, have a set timeline which is usually three to four months. The mentor provides capital and support to build the business. Once this period lapses, the startup can pitch their idea to investors. Depending on your business needs and level of building the business that you have achieved, you can choose an incubator or accelerator.
5. Application process
Incubators put less pressure on the startup to deliver growth. They invest resources and time to advance the startup, to create jobs, or find ways to license the intellectual properties of the startups they incubate. Accelerators, on the other hand, use a more traditional approach to enter the program. Participants must apply and undergo a rigorous selection process. Since these programs are very competitive, only the top startups are usually selected based on their business scalability and ability to grow within months.
Incubators may be local while most accelerators have a national appeal and put out calls for applications from many pre-vetted applicants. Before being chosen, the startup must demonstrate their willingness to relocate their business, and that they are investible.
6. Investment capital
Traditionally, incubators don’t provide capital and don’t usually take an equity stake in the startups they support. They are commonly funded by universities and economic development organizations. Accelerators, however, invest capital and take a predetermined equity percentage. This means the accelerator bears more responsibility in ensuring the startup succeeds. Incubators usually take startups that are still in the formative stages and which don’t necessarily require capital investment.
Both programs are excellent for first time CEOs and founders. They provide a quick learning curve with the help of various investors and mentors who have been there and done that. Since these groups take startups through a tight screening process, the chances of raising capital are improved significantly. Working with an incubator like Ooze Studios guarantees the selected firms a successful future since they take the innovators through rigorous on the job training to ensure that they are equipped to compete in the real world, with only a few months or years’ experience getting into these coveted programs is very competitive so one should make sure a pitch is fine-tuned, in addition to leveraging the available networks to help pull some strings. If you are not selected for incubation or acceleration check out the startup incubator models that are being tested and tried.
The most important aspect to consider when choosing which one to go for is the right fit for your business. Incubators are best placed for most startups, but some are fit for accelerators.
Once you make your choice whether to go with the unstructured incubator progress or accelerator mentorship program, pitch to the selected groups that have the best opportunities for your new business or idea. It is only you and your team that knows what is best for the future of your business.
Even though these two programs have different approaches, they both attempt to encourage breakthrough and innovative business ideas. Many innovators find themselves turned down when they seek financing, however, at Ooze Studios, once you satisfy their basic requirements, will work with great ideas and turn them into successful businesses.