Understanding accelerators, incubators, and what they do for your startup

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Understanding accelerators, incubators, and what they do for your startup

Incubators and accelerators are often generalised as similar concepts. Both have a common goal of taking young or fledgling businesses to the next level via mentoring and provision of resource. But there are key differences between the two in the way they operate and the timeframes they work to.

What does working with an incubator entail?

Incubators work with nascent startups prior to their launch. They will play a key role in moulding the business.

One of the reasons the nomenclature is so fitting is that a startup will move into an incubator’s office space like a baby bird in the nest. This is a big leap forward for new companies, who will often be coming from home or makeshift offices.

A big pro of working with an incubator is the proximity it will provide founders to others in-industry. They will be granted the opportunity to learn from and build relationships with valuable contacts, and with others experiencing the same challenges.

Some might consider the less-structured nature of incubators a slight con. You’ll be setting your own goals and schedule - you’ll have support to build your skillset, but no hand-holding or direct instruction.    

What does working with an accelerator entail?

Once a business has been operating for a certain amount of time, founders can partner with an accelerator, who will provide the expertise and mentorship required to get the business to the next level.

Although an accelerator program won’t typically provide entrepreneurs with premises, they can connect them with technical resources, valuable coaching, and the all-important funding required for scaling up.

The main pros of accelerators are that they’re able to access substantial seed money and enable rapid development within a fixed timeframe. This is a true crash course for ambitious entrepreneurs.

The biggest con, of course, is that these privileges come at the cost of equity in your company.

What are the key differences between incubators and accelerators?

Time frame

Accelerators tend to operate within a more limited time frame. They are both able and required to take the reins, as structure and schedule are exactly what’s needed by young startups without an established modus operandi.

An entrepreneur’s time with an accelerator will typically last between 3-4 months. Incubators work on a more open-ended contract. It will not be clear at the starting point exactly how much help the startup needs, and how much time it will take to reach their goal.

Working style

Working with incubators is often less rigid than accelerator programs. There won’t be any existing routines and commitments to work to - there will be much more trying and testing, and less expectation to conform.

Application

Accelerators are highly competitive and come with a rigorous application process. Each program will receive thousands of applications each quarter.

Founders will need to be at a far enough stage in their business to provide Proof of Concept and Minimum Viable Product in order to be considered.

Incubators are less rigorous, but they’re highly valuable to young businesses determined to succeed, so there’s still competition. The selection criteria is based more around those with disruptive or innovative approaches. Connections and references also play a significant part in gaining acceptance.


Which program is right for me?

It’s generally “easier” to access incubator programs as you have much less to prove.

If you’re brand new to the world of business, and don’t have a fixed vision of the minutiae of running your company, an incubator program could prove an ideal route to commercialisation for you.

To be accepted into an accelerator program, you’ll need to be knowledgeable, investable, scalable and further along in your venture. It sounds intimidating, but understanding exactly what is expected can empower and prepare you.

STAX gives companies a pathway for easy growth. Talk to our listings team to find out what the most suitable fundraising option is for your startup.

James Brannan

Director of Operations at STAX

Sam Henderson

Director of Marketing at STAX

Natalia Forato

Social Media Manager at STAX

All views, investment or financial opinions expressed are those of the author and do not necessarily reflect the official policy or position of STAX. The information contained in this post is not investment advice or a recommendation to buy or sell any specific security.
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