Accelerators vs. Incubators: Which One is Right for Your Startup?
Find out which program can best support your startup's growth!
For early stage startups, accelerators and incubators offer great ways to grow their businesses. Here are some of the key differences between a startup accelerator and a startup incubator.
As a startup founder, getting the right support early on can make all the difference. Accelerators and incubators are two common paths, but they’re not the same thing.
Both offer valuable opportunities to grow your business and increase your chances of attracting top venture capital later on. However, their goals differ. Accelerators help scale existing businesses quickly, while incubators focus more on developing innovative ideas into full-fledged companies. And never forget: bootstrapping is often the best decision!
If you’re not sure how to make a decision, this might be just what you need :)
Accelerators: Speed Meets Growth
First up, the accelerator – think of it as a turbo boost for your already-existing startup. These programs are designed for businesses that are ready to hit the gas pedal and scale fast. The goal? To accelerate your growth, refine your business, and get you investment-ready in a few short months.
Here’s what you need to know about accelerators:
Time-bound: Accelerator programs are typically set for a few weeks to a few months. So, you better come prepared to hustle.
Selection Process: Top accelerators like Y Combinator or Techstars are picky, only accepting a select few startups. We're talking about less than 2% acceptance rates at the big names.
Small Investment, Big Mentorship: In exchange for a small equity stake (think 3-10%), you'll get seed funding, access to a massive mentor network, and guidance on scaling your business. Some of these mentors are venture capitalists, seasoned entrepreneurs, or industry experts.
Demo Day: After the program, you get to pitch your business at a Demo Day, where investors come to scope out their next big thing. It's like the ultimate job interview, but with way more stakes.
Accelerators are for businesses that need a bit of structure, a push to move from good to great, and access to investors who can provide both capital and advice.
Incubators: Fostering Innovation
On the flip side, incubators are a different beast altogether. While accelerators focus on scaling businesses that are ready to grow, incubators take a more hands-on, long-term approach. Think of it like a nurturing environment for ideas still in their infancy.
Here’s how incubators work:
No Set Timeframe: Incubators don’t rush things. There’s no strict end date, allowing you the time to iterate, refine, and perfect your idea. It's like a cozy incubator for your business to grow at its own pace.
For Early-Stage Ideas: Incubators are ideal for entrepreneurs at the idea stage. If you have a vision but haven’t fully figured out the business model or product-market fit, this is where you’ll get the space to experiment.
Support Without a Deadline: You might not get seed funding upfront, but you’ll likely receive office space, mentoring, and the opportunity to collaborate with like-minded founders. Some incubators might even have specialized industry focus (e.g., health tech, green energy).
Community Over Competition: The incubator environment is typically more collaborative. It’s a space where founders help each other, share advice, and grow together.
The best incubators will offer resources like shared office space, mentorship, and perhaps even partnerships that can help get your idea off the ground.
So Which One Should You Choose?
It depends on where you are in your startup journey.
Accelerators are best if you already have a viable business idea and want to speed up your growth while getting valuable mentorship and funding. You’re ready to take things to the next level and need the expertise and investor connections to do so.
Incubators, on the other hand, are ideal if you're still in the early days and need time to refine your idea and develop a strong foundation. You get to work without the pressure of a ticking clock, which is perfect if you need to build and experiment.
Both can offer tremendous value. It’s just about finding the right fit for your startup's needs.
How Much Equity Do They Take?
Accelerators: Typically, accelerators take 3-10% equity in exchange for seed funding and mentorship. Not a huge chunk, but enough to keep things fair.
Incubators: Equity in incubators varies widely. Some don’t take any equity at all, while others might ask for 2-10%. It’s a good idea to read the fine print.
If you’re not sure how to decide, I would always suggest keeping as much equity as possible for yourself. It’s the only part of the company that you really own, so you shouldn't be too loose with it.
Especially deals like media for equity are often a bad choice for your startup (in my opinion). 😇
What to Look for in an Accelerator or Incubator?
Before you dive into an accelerator or incubator, do your homework. Check out their track record. A solid program will proudly display its portfolio and stats. Look for a strong track record of startups that have successfully scaled or exited the program.
For example:
Y Combinator has funded 5,000 startups with a combined valuation of $600 billion. That’s the kind of track record you want to see.
Idealab, the longest-running incubator, has helped launch over 150 companies, including more than 45 IPOs.
If the stats match your industry, then it’s time to take the plunge.
Final Thoughts
Both accelerators and incubators are great ways to grow your start-up, but they cater to different needs. The key lies in understanding where your business is at and choosing the programme that best aligns with your goals.
So, are you ready to accelerate your growth or develop your big idea? Either way, these programmes could be beneficial for start-ups. However, if you don't need them, I would recommend staying bootstrapped. You'll thank yourself in a few years when you own 50% of $100 million instead of only 20%.
Cheers 🥂