arijit bhattacharya

Start-up Incubators vs Accelerators Which is Best for You?

Accelerator versus Incubator: What's the Difference?

The two most common forms of these kinds of collaboration are Accelerator and Incubator programs. In many instances, there is confusion about the difference between the two. So, to decide which program can offer you the most, let's first take a look at the structural differences:

Accelerators are funded by an existing company. Incubators are often independent but can have connections to venture capital firms or funds, or universities. Accelerators are aimed at accelerating companies and scaling them up. Incubators focus primarily on stimulating innovation (they incubate disruptive ideas). To make things a little more complicated, in some cases, Incubators function as preparation for Accelerators.

For Accelerators, a clearly delineated time frame of a few months is usually set. Incubators are longer term—in many instances even taking years—and are more open-ended.
At Accelerators, mentoring by the legacy company is a distinctive part of the program. Furthermore, the established firm will often buy a small equity stake in the startup or scale-up. These are two of the reasons why being accepted into an Accelerator program has a high threshold. On the other hand, Incubators focus on larger numbers and are less selective. Accelerators have a much more structured program than Incubators and try to create a kind of alignment between the startups. Incubators are more focused on creating an environment for co-creation.

What will it be: Accelerator or Incubator?

As a C-level executive in a bigger organization, you may want to work with startups and scale-ups yourself. In that instance, you have to decide if an Accelerator program or an Incubator program better fits your objectives. Below are some questions to ask yourself:
Often used interchangeably, accelerators and incubators actually serve different purposes, have different outcomes, and accept different kinds of startups. Knowing the difference helps you focus the search for funding in the right areas, and improves your chances of success.
By the end of this article, you'll know the differences between these two important funding sources and be able to determine which is right for your business.

In this section, we'll look at the key components of an accelerator program, application process, program duration, investment capital, and main benefits compared to an incubator program.
What is a startup accelerator?

A startup accelerator is an organization that offers mentorship, capital, and connections to investors and business partners. It's designed for select startups with promising MVPs and founders, as a way to rapidly scale growth.
Is an accelerator program right for your startup?

Accelerators are for startups that already have an MVP that has been validated in some way -- that might mean a product with a few paying customers, a group of free users, or early signs of strong product-market fit.
The acceptance rate for accelerators is low since thousands of startups apply for the programs and there's a limited amount of capital, physical space, and mentorship time available.
Accelerators often take a cut of equity in exchange for program placement.
Solo founders with unvalidated ideas are a better fit for incubators than accelerators, because incubators work to help formulate a business model and team over a longer period of time.
Accelerators are right for startups that are ready to scale, not startups engaged in customer development and trying to find product-market fit.
Duration of Startup Accelerators

Accelerators are intense and fast-paced, taking 3-6 months to get an early-stage startup ready for market.
Typically, startups have done a lot of the legwork to prove their product before going into an accelerator program; startups should be able to attract investors after just a few months of mentorship and growth.
Application Process
Accelerator programs accept startups cyclically in cohorts --this means there's between 45 and 90 slots every year. At most accelerators, the application process is done in stages:

Application. An application will ask for specifics on a startup's idea, market, traction, team, and other aspects vital to success.
Assessment. Promising teams from the pre-screening phase move on to be assessed for investability, revenue potential, and overall strength of the product/service offering.
Interview. At this stage the accelerator is very interested, but wants to know about the team, product and evidence of traction. The interview process typically takes 20-30 minutes.
Evaluation. Interviewees provide documents to prove their statements about revenue, legal standing, or any claims made about the company.
Acceptance. Upon completion of the final evaluations, the investment committee will meet to finalize where the funding will go during the 12-16 week program. Roughly 30-60% of the teams that made it to Assessment phase will receive funding.
Tip: Throughout the application process, write concise answers that leave room for future conversations. Create interest in your proposal but don't try to answer every possible question.

Make it easy to access critical business information with links to slide decks, LinkedIn profiles, videos, references, and anything else you think would help investors realize the potential of your startup.

Investment Capital
Capital is a big part of why startups seek out accelerators. There's only so far expert guidance and an extended network will take you; sometimes cash is an absolute necessity to support a growing team and product.
Almost every accelerator out there provides capital in exchange for a percentage of your company's equity. For example:
Both incubators and accelerators offer an environment of collaboration and mentorship. This enables the startups to share a space, as well as have access to a multitude of resources and peer feedback. Both also provide mentorship from seasoned entrepreneurs and business experts.
Investment capital
Incubators do not traditionally provide capital to startups and are often funded by universities or economic development organizations. They also don't usually take an equity stake in the companies they support.
Accelerators do invest a specific amount of capital in startups in exchange for a predetermined percentage of equity. Due to this investment, the accelerators bear a greater responsibility in the success of the startup.
When deciding which program is right for their startup, entrepreneurs should look for the right fit. Most startups could benefit from being in an incubator, but fewer are a fit for an accelerator.
Incubators tend to take on startups which are still in formation, may not necessarily require investment capital and tend to be part of the local startup community already. The timeline to commercialization may be longer, or they are so early that some of the basics have not been addressed yet.
Accelerators have national calls to apply and pick from among hundreds of pre-vetted applicants.

These startups must be able to demonstrate they are investible and rapidly scalable businesses willing to relocate to the town where the accelerator is housed for at least the duration of the program.

The accelerator fund will be the start-up's first outside investor in most cases. While both programs provide significant benefits to start-ups, they are not to be consider one in the same. Through careful self-reflection, entrepreneurs will be able to determine which is the right fit for their business at that moment.



If you want to expand your business or looking for mentoring and investment support please be in touch.

Arijit Bhattacharyya