accelerator-vs-incubator

What Are An Accelerator And An Incubator? Accelerator vs. Incubator In A Nutshell 

Accelerators are programs that help entrepreneurs with a minimum viable product grow their business with advice, training, networking, and in some cases, financial support. Incubators, on the other hand, are similar programs designed to assist entrepreneurs in refining a business idea and establishing a company around it from scratch.

Understanding accelerators

A startup accelerator describes an organization that provides mentorship, capital, and access to a network of business partners and investors for startups with a validated minimum viable product (MVP). To that end, accelerator programs are well suited to companies with potential as a way to rapidly scale growth.

Examples of companies that run accelerator programs include Y Combinator, Techstars, and MassChallenge. The acceptance rate for such programs is low as there are thousands of startups applying for a finite amount of resources. Successful applicants will be required to hand over equity in their companies to the accelerator in exchange for services rendered.

Since the overarching goal is to scale growth rapidly, accelerators tend to be intense programs lasting anywhere between three and six months.

Understanding incubators

A startup incubator has a core focus on nurturing entrepreneurs in a collaborative and supportive environment. Incubator programs assist when required in various areas and as a consequence, do not tend to operate on a fixed schedule. The primary purpose of an incubator is to provide real-world context to the theories an entrepreneur may have learned as part of their tertiary education.

For instance, some will need assistance with their product-market fit while others need help making their business more attractive to investors. Incubators also enable startup founders to network with the founders of other startups in the same program.

Many incubator companies specialize in specific verticals. Monarq Incubator specializes in female-centric startups while KitchenCru is a food or kitchen incubator that provides commercial kitchen space and insurance, banking, and marketing assistance to budding culinary entrepreneurs.

Key differences between accelerators and incubators

Now that we have explained each type of program, let’s take a look at some of the main differences:

  • Accelerators, as the name suggests, aim to accelerate the growth of a company via rapid scaling. Conversely, incubators focus on “incubating” disruptive ideas and many consider them preparation for a subsequent accelerator program.
  • Accelerators have a specific timeframe since resources such as capital, office space, and mentorship services are finite. There is less emphasis on material resources in an incubator program, so they may last for months or even several years.
  • Mentorship in exchange for equity in the company is one of the reasons accelerator programs are so popular with entrepreneurs. However, this makes the application process much more rigorous and selective than in an incubator where there is more of a relaxed attitude to the selection process.
  • Incubators tend to be independent companies that are sponsored by universities, governments, development corporations, and non-profit organizations. In contrast, accelerators are more likely to be funded by private organizations.

Key takeaways:

  • Accelerators programs help entrepreneurs with an MVP grow their business with advice, training, networking, and in some cases, financial support. Incubators, on the other hand, are designed to assist entrepreneurs in refining a business idea and establishing a company around it from the ground up.
  • Accelerator programs tend to be intense and last anywhere between 3-6 months, while incubator programs focus on creating a more relaxed, collaborative work environment that may last for several months or years.
  • Due to demand and finite resources, the application process for an accelerator program is much more rigorous and selective than an incubator. Incubators are normally sponsored by non-profits, governments, and other development organizations.

Main Free Guides:

Connected Concepts

Venture Capital

venture-capital
A venture capitalist generally invests in companies and startups which are still in a stage where their business model needs to be proved viable, or they need resources to scale up. Thus, those companies present high risks, but the potential for exponential growth. Therefore, venture capitalists look for startups that can bring a high ROI and high valuation multiples.

Economic Moat

moat
Economic or market moats represent the long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Meme Investing

meme-investing
Meme stocks are securities that go viral online and attract the attention of the younger generation of retail investors. Meme investing, therefore, is a bottom-up, community-driven approach to investing that positions itself as the antonym to Wall Street investing. Also, meme investing often looks at attractive opportunities with lower liquidity that might be easier to overtake, thus enabling wide speculation, as “meme investors” often look for disproportionate short-term returns.

Payment for Order Flow

payment-for-order-flow
Payment for order flow consists of a “kickback” or commission that the broker routing customers to a market maker (in charge of enabling the bid and ask price) will pay a commission to the broker as a sort of market-making fee.

What is a SPAC

special-purpose-acquisition-company-spac
A special purpose acquisition company (SPAC) is a company with no commercial operations that are created to raise capital through an IPO to acquire another company. The SPAC is also called for that reason a “blank check company” as it will use the money provided by investors to enable private companies to go public via the SPAC.
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