You know a business sector is flourishing when it starts creating its own vocabulary. The startup scene began as an idea, developed into a trend and manifested into a here-to-stay entity. The entire startup ecosystem is growing, creating layers of meaning, value and use cases.
One of the most interesting aspects of this developing community is the terminology that’s been created to describe work flows and business processes. It comes as no surprise that new words take time to establish their meaning and they can often get used in the wrong context.
The terms startup accelerator and startup incubator are often found in the midst of such misunderstandings. The terms are used in conversations about funding startups and even though many believe are synonymous or very, very similar, they are actually very different and serve separate use cases.
Differences & Similarities
Understanding the differences is essential because the implications are decisive for your business. Both concepts are a form of business assistance but they come at different stages of the business lifecycle.
In a nutshell, a business accelerator is a fast-track bootcamp that offers mentorship, capital (in exchange for equity), and connections to investors and business partners. It is a boost offered to a startup at the early stages of its journey in order to realise, commercialise and get the business up and running. Accelerator programs have a specific time-frame and they are both structured and guided in that they offer specific training, education and mentorship.
Joining an accelerator program is only suitable if you’re at the beginning of a startup’s journey. A validated MVP and a strong founding team are two of the strongest requirements when submitting an application to be accepted by an accelerator program. Accelerators need to see a proof-of-concept, a lean yet functional version of your product in the form of an MVP. It doesn’t have to be the final version neither does it need to fulfill the highest standards in terms of features and functionalities.
What needs to happen though is that your idea needs to have a working prototype that proves it’s not just an idea. The accelerator members need to be able to see your vision in “flesh”.
Now let’s shift our focus to incubators.
Incubators are less structured and usually offer help in the form of physical space plus the nurturing and coaching startups over longer periods of time. They generally do not provide capital/funding but can help you on areas like human resources, building your product as well as legal and ad-hoc advice. The help provided is not enforced as there are no deadlines or monetary pressure.
An incubator creates a collaborative habitat where startups can “breathe” and start working towards materialising their business idea.
Which One is Right for You?
The matter of duration is a big one when you’re trying to assess which of the two routes you’re going to take. If your startup is at the beginning of its journey and you need to see immediate impact, an accelerator program is the way to go.
For a long-term approach and a more gradual building of your startup through the coworking and networking ecosystem, an incubator will be the right choice for you.
Whatever your choice may be, getting accepted in either one of them can be challenging. Both accelerator and incubator programs hold competitive application processes and are quite selective with their decisions. The corporations/businesses behind these programs are essentially investing in your idea, even if that investment is not always in the form of cash.
They are investing time, effort and resources because they believe that with the right guidance and support, your startup can blossom into fully-functional, profitable business. Preparation for such an application entails lengthy research and the ability to draft a proper business plan amongst other things.
The Future of the Startup Support System
Just like the startup scene used to be a novelty in its early days, so were accelerator and incubator programs. Having established their position as “permanent” entities, they’re now starting to carve a path that entails loads of interesting routes.
The first (and obvious) direction of what the future holds for the support system is specialisation. Industries will see the creation of their own dedicated programs which makes absolute sense as the whole point is to offer startups personalised, tailored advice and guidance. Attracting market experts and specialists into the mentorship program will cut out generalisations and focus on the specifics of any given industry.
The startup scene was first frowned upon by big corporations and not really taken seriously. Once startups started being disruptive, corporates and multinationals had no choice but to pay attention as they were starting to sense competition. Now, well into a more mature phase of the startup scene, the relationship between them and big corps is again going through a change. Corporates are starting to embrace the startup scene as they are beginning to understand the opportunity for innovation and smarter business.
You can already see where this is going, right? The future will most probably see corporates employing their vast funds, resources and business reach to build their own accelerator and incubator programs to support startups. That’s the perfect way to not only avoid competition but gauge the tech and ideas surrounding their industry and acquire them if they’re worth the investment.
These developments are natural progressions of the system that’s already in place. As you very well know though, things in business change and they change fast. A very plausible development for the startup support system is the creation of programs that mentor startups that are more mature and closer to their peak in their business cycle. Startups that have proven they can work at a local level and they need the push to expand operations and take their idea cross-country or even global.