Every innovative idea that enters the world’s tech market today needs a support - in either acceleration or incubation forms; nonetheless, these two often get confused and mixed up. What is the difference between business incubator and accelerator, and which one is a better fit for your case? This article highlights the key figures of accelerator and incubator comparison.
Spotify, Product Hunt and Uber - what do these three have in common? The answer is at your fingertips - these 3 amazing projects used to be startups once. With investors and businessmen worldwide all becoming “startupmaniacs”, this is none of a surprise for everybody around. The entrepreneurship that used to have an innovative flavor, now has become a Red Ocean itself - where every new project appearing on the stage has to fight for funds and existence.
Since their launch, Spotify and Uber had a long way to go up the success ladder - 6 years for Uber and 7 years for Spotify to take on the world by storm. However, with Product Hunt the situation was different from the start. Of course it all could be blamed on different services these products had to offer, but the main one is that the course of development was “incubated” with Uber-Spotify cases, and “accelerated” with Product Hunt project. Both of these approaches are applicable when it comes to a small-business-startup, but is the difference between them as huge as it seems to? As TechRepublic states : “The terms "accelerator" and "incubator" are often assumed to represent the same concept. However, there are a few key distinctions that first-time founders should be aware of if they are planning on signing up.”
Meet the Business Accelerator.
Well-aware, the verb “to accelerate” means to increase rapidly in rate, amount or extent. The acceleration process is something that does not start right from scratch, from the part where the blunt idea spurs.
An accelerator can be defined as a pressured programs that help entrepreneurs at the seed-stage of development. A great definition of seed stage is given by Fundingsage - "During this early stage, the entrepreneur approaches investors including friends, family and angel investors seeking financial support for their idea, concept, or product."
Accelerators are also a great source of individual programs for a startups willing to grow immensely within a short period of time (from 3 month and up to 2 years); the most well-known accelerator programs among them are Y Combinator, TechStars and AngelPad, as they manage to invest into more than a hundred startups yearly. On the down side, this comes with a great deal of contest - for instance, according to Techrepublic, Y Combinator manages to acquire no more than 2% of all the applications they receive (of course you need to apply first); and TechStars has to fill its 10 spots from around a 1000 applications they receive. Most of the accelerators are privately owned and non-profit organizations.
Although participating in these 10 spots is very well worth it, as the support accelerators provide your business with is unique and valuable. The first and most important thing that differentiates accelerators from the rest of the startup-serving services is an intense mentorship you get; the mentor is attached to you and observes the progress your startup makes from the start and towards the end of the acceleration program in one accelerator; however, you might be seeing up to 75 mentors during the course of other accelerators..
Another cornerstone of the acceleration program is education, mostly consisting out of seminars covering the wide range of entrepreneurial topics, with digests into economy, search engine optimization principles - and many more, depending on the program. Not only educative these seminars are - but they also provide a great opportunity for you to network and connect with speakers, who really are experts on their fields.
Basically, the scheme of accelerating works in a few little steps:
You fill-in an application form for a certain accelerating program, describing the tech used for your startup and giving a brief overall of the whole startup idea.
You pass an in-person interview, and the decision about the quality of your startup is made the very next day.
If you “hit the accelerating jackpot” - you receive an investment (120k $ is what Y Combinator grants you, for instance), but the investing part takes a 7% share of the company ( non-profit investments are excluded).
4)Then an actual part of acceleration starts; different programs have various durations (again, when it comes to Y Combinator - it is 3 month-length, but it might vary as well). The development of your business and ideas happens during this time; it is also monitored and assisted by the mentors coming from the accelerating organization.
5)At the end of which comes the Demo Day - where startups at the different development stage get to pitch their ideas to the room with more than 400 investors. [source: Y Combinator]. Once a startup gets a funding offer, it continues to collaborate with an accelerator furtner on - especially by accessing the huge network accelerator obtains.
Accelerators have been, are and will be a powerful source of financing for the startups worldwide; but what if there is no startup yet - just a blunt idea spark and no cash investments found? The answer is…
Introducing the Business Incubator.
Same as with the chicken incubator, the startup incubator rises every business almost entirely from scratch; if we draw the parallel with growing a plant, accelerator is a “greenhouse” of a sort that creates favorable situation for your “plant” to flourish; an incubator actually combines seeds of a good quality with some growth-provoking soil. Basically, incubators only work with businesses that are on the earliest point of their roadmap, providing a range of services for them.
According to Top MBA blog, the number of startup incubator’s services includes the following:
- Networking opportunities
- Marketing assistance
- High-speed Internet access
- Accounting/financial management assistance
- Access to bank loans, loan funds and guarantee programs
- Help with presentation skills, business planning and business model
- Connections to higher education resources
- Connections to strategic partners
- And many more. You can get the whole list of incubator’s services here
There are many well-heard of incubator programs, that including Alchemist, Capital Factory, 500 startups and many more. There are some workload differences between business incubator and accelerator and their processes of work.
When it comes to incubator, it works in the following order:
You apply online (no matter if it is startup accelerator or incubator, you still need to beat the fierce competition for the sake of funds).
Once you are accepted for the program, your newly-founded company moves in for the offices inside the incubator; the rent you pay for your office space is the main revenue-generating source of the incubator.
One of the greatest advantages of an incubator is that the companies kept there work on many different fields, so they are the source of network, useful connections and potential assistance for your business. No matter which kind of help you require - marketing, sales force or some tech realization, they’ll be able to support you on the way.
Eventually, incubator also supplies your company with the funds it receives from an investor. As you get the funds, company and your world-changing idea continue to progress, and this procedure doesn’t have a time limit - incubation may last from a few months and up to several years.
As the professor of Azusa Pacific University Barbara Strother has once stated, “Incubators are an excellent way for new businesses to share resources and therefore cut costs.” Therefore, an incubator might turn in life-saving for your product at the start of a day.
Startup Accelerator vs Incubator
All points considered, there are a few aspects making a difference when it comes to an accelerator vs incubator for startup, notably:
Two Types Of Business Boost.
Here they are, the strengths and weaknesses of accelerator vs incubator programs. There might be several ways they work differently at, but these business programs are united in the admirable attempt to encourage the breakthrough business ideas; especially in the world of mobile app development, where fascinating mobile application projects are sometimes turned down, often due to a lack of investments. As in Mind Studios we do find the whole incubating and accelerating processes worthy, well, who knows… maybe the Mind Accelerator is going to rise somewhere in the future. ;)
Written by Dmitry Dobritsky and Elina Bessarabova.