It’s widely known that up to 75 percent of all new startups fail within the first two to five years. One way to improve these odds is for a startup to join a seed incubator or accelerator program that is designed to help the business improve its chances for success. Even though both incubator and accelerator programs provide startups with guidance and mentorship, there are some clear differences between these two types of programs of which will be covered below.
A Startup Incubator – A Collaborative Program For Helping New Startups Succeed
When you’re in a startup incubator program, you will conduct your business from a central workspace you share with other startups. Often times, the startups in incubator programs are all venture-funded by the same group of investors. You have the right to remain in the program for as long as you need to or until your business has grown to the point where you require your own space to operate. An incubator is an unstructured program with no specific goal or time frame other than to help your new business succeed. While you’re in an incubator program, you’ll be provided you with mentorship, guidance and advice to help you avoid some of the most common pitfalls startups face.
An incubator program will take no equity (or very little) in your business and is able to do this because it does not provide you with any upfront capital. Many incubator programs obtain their funding via university grants which allows them to provide their service without taking any equity of the businesses they’re helping.
It can be difficult to get into an incubator program as many startup founders are eager to join these programs due to the fact that they can get the help they need while retaining control of their businesses. Additionally, some incubator programs only consider applications from entrepreneurs they already have relationships with, so you may need to hone your networking skills before attempting to join a particular program.
An incubator may be perfect for you if your goal is to get some assistance and retain control of your business. It may also be to your advantage to join an incubator program if you want to prepare yourself for a more competitive accelerator program.
A Startup Accelerator – A Highly Structured Program Providing Both Capital and Guidance
An accelerator is similar to an incubator but with a few clear differences. When you are in a startup accelerator, your time spent in the program is typically limited to a three to four month period wherein you’ll be learn in a very structured curriculum various ways to help you grow your business quickly while aiming for a specific goal which usually is focused on raising finances. When you’re in such a program, you may be provided with mentorship from numerous entrepreneurs with many of them being seasoned CEOs or investors looking for their next opportunity.
The goal of an accelerator program is to grow the size and value of your business as fast as possible to greatly improve your chances of raising venture capital on your own once you’re finished with the program.
The Key Differences
One of the main things that differentiates an incubator and an accelerator program is how long these programs last. While incubator programs typically do not work within any specific time frames, accelerator programs are designed to work with startups for a short and specific amount of time which is usually around three to four months.
While an incubator does not work toward any specific goal, an accelerator gets you ready for a major milestone which is usually the ability to attract investors to raise money. Accelerators also offer startups a specific amount of capital which is usually in the neighborhood of around $20,000. In exchange for the capital and guidance, accelerators usually require anywhere from from 3 to 8 percent of your company’s equity and perhaps more. The program’s goal is to scale your business quickly so that its value rises rapidly.
Should You Join One of These Programs?
Deciding whether or not you should pursue starting up your business via an incubator or accelerator should be dependent upon three things: Your personal confidence in your business model; your execution skills and your fund-raising abilities. If your business is progressing well and you feel confident that you can make it on your own, then you probably won’t benefit from such a program. On the other hand, if you are brand new to the business world and feel you could use all the help you can get, this type of opportunity could be perfect for you.