For startup founders looking to turn their young companies into the next unicorns, startup incubators and startup accelerators are two of the most popular sources of funding, mentorship, networking opportunities, and other resources.
While these types of startup growth programs share a lot in common, there are also some big differences that you should be aware of to determine which is right for you and your startup.
What Is a Startup Accelerator?
Startup accelerators are short, intensive funding and mentorship programs designed to help startups that already have business traction jumpstart their growth.
These cohort programs are often created and run by venture capital firms, universities, government organizations, and other institutions interested in promoting startup growth and investing in high-potential companies.
Startup accelerators are typically very competitive and accept a fixed number of applicants at regular intervals (usually every 3-6 months). If your startup is accepted to an accelerator program, you will relocate to the city in which the program is based for a set time.
During the time you spend as part of an accelerator, you’ll have access to a variety of resources to help boost your company’s growth. These typically include a chunk of initial venture capital, mentoring and advisory services, networking opportunities, chances to raise further seed funding, and collaborative office space.
Examples of Startup Accelerator Programs
- Y Combinator
- 500 Startups
- Alchemist Accelerator
- Plug and Play Tech Center
- Founder Institute
What Is a Startup Incubator?
Startup incubators are similar to accelerators, except that they tend to be longer term, less intensive, and more informal. Incubators focus on nurturing businesses that are still at a very early stage, typically in their initial ideation phase.
Incubator programs provide free or cheap resources that are essential for early-stage startups, including office space, equipment, access to mentors, and a collaborative community. Incubators also often provide other valuable business services, such as financial management, human resources, and legal assistance.
The main goal of a startup incubator is to help founders turn ideas with a high potential for growth into an actual product or service with a scalable business model. They also aim to help entrepreneurs with limited business experience do things like find their first employees and figure out local regulations and legal requirements.
While startup incubators don’t usually offer venture capital directly, they can still provide opportunities to network with potential investors, including venture capitalists and angel investors who are associated with the program you join.
Examples of Startup Incubator Programs
- Capital Factory
- The DMZ at Ryerson University
What Are the Key Differences Between Accelerators and Incubators?
1) Stage of Venture
One of the most significant differences between startup accelerators and startup incubators is the stage of growth the businesses they target are in.
Startup accelerators almost always only admit startups that already have a minimum viable product (MVP), while incubators generally don’t care about whether or not your company even has a prototype yet — you can get into an incubator program with only a good idea.
In other words, incubators focus on very early-stage startups, while accelerators concentrate on those that already have traction and are ready to scale aggressively.
That being said, both startup incubators and accelerators target businesses with high growth potential, just at different stages in their life cycles. Both types of programs also accept startups from a wide variety of industries. This means that accelerators and incubators are not mutually exclusive.
In other words, you could start out in an incubator program when you are just forming the ideas and overall strategies for your startup, and then apply for an accelerator program after you have developed an MVP and are looking for funding to continue bootstrapping your business over the next few months.
2) Seed Funding
Another huge difference between startup accelerators and incubators is that startup accelerators are quite funding focused, while incubators do not generally invest capital into the startups they accept.
If you and your startup get accepted to an accelerator program, part of the deal is usually that they will give you a lump sum upfront in exchange for a small percentage of equity in your business. For example, accelerators may offer $20,000-$150,000 in venture capital in exchange for a 5-8% equity stake in your startup.
Most startup incubators do not provide a lump sum of venture capital when you join, although they may ask for a small equity stake in return for their services. In fact, many incubator programs charge a small monthly fee to cover office and equipment expenses, though this fee is significantly smaller than what you would pay for the same resources outside of an incubator.
Even though startup incubators don’t directly invest in startups, they can still provide connections with venture capital firms, and they often run special founding-focused events, such as pitch competitions, that can lead to you and your company securing some early-stage seed funding.
3) Program Timeline
As more casual programs, startup incubators almost always run longer than startup accelerators. The typical length of an incubator is at least 12 months, with some lasting for several years or indefinitely.
If you join an incubator, you might not have an actual end date to the program. You could potentially stay in the incubator until your company has reached the stage where it’s ready to move on.
Most startup accelerator programs are either 3 or 6 months long and run 1-4 times a year. When an accelerator program ends, you must move on, whether you’ve achieved the results you want or not. The fixed terms of accelerator programs are rigorous, as they accept a whole new batch of startups for every new program term.
If you join a startup accelerator, you typically have to relocate and spend much of your time physically located in the program’s offices. Some accelerator programs may even split your time between different locations to focus on different aspects of your business’s growth.
Depending on the specific accelerator program you apply to, you may have the opportunity to spend time in multiple countries. For example, many startup accelerators in Europe are very international, and the proximity of so many other countries creates some unique opportunities for relocation.
Incubators are much more casual programs, and you would typically apply to one in your local area rather than relocating for a whole year or longer. Since incubators don’t directly provide funding, relocation would be very expensive.
5) Type of Office Space
Startup accelerators usually provide a private office space to host the founders and companies they accept. These are often located within the headquarters of the organization that runs the program, or they may have dedicated offices somewhere else in the same city. These offices come fully equipped with everything you and your startup need to do business.
One of the biggest benefits of being located full-time in an accelerator program’s offices is that the program’s mentors often work in the same building, so they’re highly accessible. Also, since you’ll be working side by side with other founders, you may be able to form mutually beneficial partnerships with other startups that are part of the program.
During your time at an incubator, you’ll have access to some type of personal office space within a shared facility, generally in some type of coworking space owned by the program in your area.
This means you’ll be sharing the space with people who aren’t all part of the incubator program, which can provide further networking opportunities that are helpful for early-stage companies. For example, you might be able to find your first employees to start building your products with.
At an incubator coworking office, you’ll also get access to all the space’s shared offices and equipment, such as conference rooms and presentation equipment. Incubators also often provide access to lots of location-independent virtual resources, including virtual office hours with mentors and special events like webinars.
Since startup accelerators directly fund the startups they accept, they are usually highly competitive.
Startup accelerator application processes usually involve you filling out an initial application form, which the program administrators use to pre-screen candidates with the most potential. If your startup passes the initial screening, you’ll then undergo a more extensive evaluation and interview process.
Accelerator programs accept only a small batch of the total number of companies that apply for each 3-6 month cohort program to receive funding and intensive mentoring and growth assistance.
Startup incubators do not have such a competitive application process. Not just anyone can join an incubator — you still need to have an innovative business idea and high growth potential — but it’s much easier to get into an incubator than into an accelerator. Since incubators don’t directly fund startups, they have less to lose if your startup doesn’t become profitable.
7) Type of Mentorship Offered
Another thing that differentiates startup accelerators from incubators is the level of mentorship provided.
Startup accelerators usually provide the founders they accept with dedicated mentors and one-on-one guidance for the duration of the program. These mentors are typically successful founders, serial entrepreneurs, venture capitalists, angel investors, and other individuals with expertise in different startup sectors.
Startup incubators are often more informal with the mentorship they provide. While they too usually have other founders, serial entrepreneurs, VC capitalists, and angel investors associated with the program, they generally don’t provide such personalized mentorship. Instead, these experts might drop by at certain times, hold open office hours, or host special events.
Note that many of the same organizations offer both startup incubators and accelerators, so their mentors may be the same. The difference is just in the level of personalized mentorship available to founders. Mentors are more invested (literally) in the companies accepted to accelerators; thus, they focus more on coaching these founders individually.
This isn’t to say that one type of mentorship is necessarily better than the other. Incubators and accelerators both offer networking opportunities with these mentors, who may even end up investing in your company (or connecting you to someone else who does) at some point down the road.
Should You Apply To a Startup Accelerator or To an Incubator?
To determine whether you should join a startup accelerator vs. an incubator, start by asking yourself some basic questions:
- What stage is your company at? I.e., Do you only have an idea, or do you already have an MVP?
- What are your primary goals for joining an incubator or accelerator?
- What does your business’s timeline look like?
The answers to these questions should help guide your decision. For instance, if you are still in the very early stages of ideation for your business and you don’t yet have a prototype or an MVP, it is highly unlikely that you will get accepted into an accelerator program. So, you could search for a nearby incubator program to join and take your company from the idea phase to having an actual product and being ready to scale.
Your reasons for joining an accelerator or incubator program are also very important to consider. For example, if your main goal is to secure funding, an accelerator is probably the better of the two options since they directly provide venture capital to the startups they accept.
However, an incubator might be just what you’re looking for if you are looking for more after other vital resources, including office space, financial management assistance, and other essential business services. Keep in mind that you can still actively pursue funding while at an incubator; just don’t expect to receive seed funding immediately.
You also need to consider the timeline of your business and how much time you’re willing and able to commit to an accelerator or incubator. If you’ve already invested significant time and resources into your business, and you want to scale rapidly and start becoming more profitable in the next 3-6 months, a startup accelerator may be of great assistance.
On the other hand, if your startup is still very young, and you need time to flesh out your ideas, develop a business plan, and create prototypes and MVPs, a startup incubator might be the perfect place to do all of this, with less pressure and time constraints than an accelerator.
Remember that startup accelerators and incubators are not mutually exclusive, and many organizations offer variations of both types of programs. So, you don’t necessarily have to limit yourself to one or the other.
There is often a lot of overlap in the resources provided by accelerators and incubators. Both can be extremely valuable to you and your startup, depending on the stage you’re at.