Entrepreneurs use funding to produce information. The more funding you have, the more experiments you can run to learn about your product-market fit, target audience, business model, and scalability.
Financing options range from venture capital and angel investors to bootstrapping and loans from family and friends. One way to secure funding while building your network and pursuing growth is by joining an incubator or accelerator. While often used interchangeably, the nuances between the two can make one a better fit for your venture.
To help you decide whether an incubator or accelerator is right for you, here’s a breakdown of each, the key differentiators, and questions to ask yourself.
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DOWNLOAD NOWWhat Is a Startup Incubator?
A startup incubator helps you develop and refine high-potential startup ideas. Incubators often operate locally and provide a host of resources—such as physical space to access as needed—over a span of one to five years.
The benefits of joining an incubator include:
- Guidance on developing a product from your idea
- Help running experiments to prove product-market fit
- On-demand access to resources
- Legal consultation
- A workspace shared with other entrepreneurs
- Networking and mentorship opportunities
- Funding in return for a stake in your company (although many don’t provide this)
Examples of incubators include:
- TechNexus, which connects entrepreneurs with mature corporations to foster innovation and mutually beneficial relationships
- Capital Factory, which acts as a self-proclaimed “center of gravity” in Texas for tech entrepreneurs aiming to raise funding
- Seedcamp, which provides funding and resources to European tech founders
- Wayra, which supports and connects tech founders to Spanish multinational telecommunications company Telefónica for investment and partnership opportunities
- Harvard Innovation Labs (i-lab), which acts as an innovation hub and provides support to Harvard students and alumni, with specific resources for those in the life sciences
What Is a Startup Accelerator?
Startup accelerators are short, intensive programs that provide education, resources, and mentorship if you’re an early- or mid-stage founder. Often cohort-based, accelerators are more structured than incubators and outline specific tracks to turn your startup into a scalable business. Some offer multiple programs targeted at different industries or venture stages.
Whereas incubators provide the environments and resources to help your ideas succeed, accelerators compress years’ worth of learning and growth into the span of a few months.
The benefits of joining an accelerator include:
- Funding in return for a stake in your company
- Immersive education on fundraising, product development, and growth marketing
- Access to an alumni network and investor connections
- Networking and bonding with your cohort
- Intensive mentorship from industry leaders
Examples of accelerators include:
- Techstars, which offers virtual, in-person, and hybrid three-month programs and invests up to $120,000 in each startup in exchange for six percent of the company
- Founder Institute, which groups entrepreneurs into “Launch Track” or “Growth Track” programs to support early- and mid-stage startups
- Y Combinator, which hosts a three-month program and provides $500,000 to each company in exchange for a seven percent share
- AngelPad, which accepts only 15 tech startups to each of its three-month programs to create extremely selective, close-knit experiences
- Startupbootcamp, which offers 21 programs focused on industries ranging from global clean energy to geography-specific finance technology (fintech)
Related: How to Create a Term Sheet for Investors
What’s the Difference Between Startup Incubators and Accelerators?
Startup incubators and accelerators have similar functions: to propel your startup into growth mode. Both can be sources of funding and provide support, resources, and networking opportunities.
Yet, they have distinct differences. Here are six to consider when deciding which is right for you.
1. Venture Stage
The most significant difference between incubators and accelerators is the venture stages they serve.
Accelerators support your business if it’s in its early stages and already has a minimum viable product (MVP). Coined by Frank Robinson and popularized by Eric Ries, an MVP is the version of your product with the minimum amount of usability to gather the greatest amount of user insight. This provides confidence in your product-market fit and actionable feedback to test and enhance your offering. To be accepted into an accelerator, you typically need a business model you’ve either tested or executed.
Incubators, by comparison, support you if you’re a founder with an innovative business idea who’s much earlier in the startup lifecycle. While your idea must be high-potential and reflect a market opportunity, an MVP and a business model aren’t necessary to apply. Instead of propelling a company you’ve already started, an incubator will provide the resources to help turn your idea into a business.
Check out our video on how to come up with innovative business ideas, and subscribe to our YouTube channel for more explainer content!
View Video2. Founding Team
Accelerators often prefer—if not require—having a strong founding team when applying. If you’re struggling to build yours, some accelerators offer free tools to do so, such as Y Combinator’s co-founder matching platform.
If you’re a solo entrepreneur aiming to find a co-founder or other key player, like a software engineer, an incubator could be the place for you. Its shared workspace, programs, and networking opportunities can be effective ways to meet other entrepreneurs in your field and geographic area interested in collaborating.
3. Funding and Equity
Whether joining an incubator or accelerator, you may have the opportunity to raise seed and growth funding.
“Both are usually quite selective in who they allow into their programs, and then typically take a percentage of ownership—often five to 10 percent—in exchange for their services and modest capital,” says Harvard Business School Senior Lecturer Jeffrey Bussgang in the online course Launching Tech Ventures.
Incubators, however, are less likely to provide capital. If funding is important, research your options to ensure you only apply to incubators that offer it.
4. Timeline
Another difference to consider is that accelerator programs have much shorter timelines.
If you’re accepted into an accelerator, you’ll likely be part of a specific cohort that goes through an intensive, bootcamp-style program over two to six months.
Incubators, on the other hand, typically last between one to five years, but often offer resources with no expiration date.
5. Location
While many incubators are geography-based to promote local businesses’ growth, accelerators may require relocating to participate in them. Some have one location, but others have offices in several major cities. You may need to apply to the specific location you’re interested in, so decide beforehand where you’d like to live during the program.
Consider whether you’d be willing and able to relocate if accepted into your ideal accelerator or if you’d get the same benefit from applying to a local incubator.
6. Application Process and Acceptance Rate
Application processes and acceptance rates vary across programs.
To apply to accelerators, you must be further along in your entrepreneurial journey and prove your product-market fit and business model—making the process more rigorous and selective.
When applying to incubators, you must articulate your idea and the size of the market opportunity, but you don’t need an MVP, go-to-market strategy, or developed business model.
In both cases, it’s crucial to communicate why your idea or product has high potential and how the incubator or accelerator would benefit from your venture’s growth.
How to Decide Between an Incubator and Accelerator
Incubators and accelerators both offer mentorship, strong entrepreneurial networks, and the skills to get your startup to its next stage.
To decide which is right for you, ask:
- What stage is my startup in?
- What are my funding needs?
- Do I have a strong founding team, or do I want to build one?
- Am I willing and able to relocate?
- Who would I like to learn from and be mentored by?
By carefully considering your goals and venture’s current state, you can choose the best option for you. Whether you pick an incubator or accelerator, take the opportunity to strengthen your business and propel its growth.
Are you ready to launch a successful startup? Explore Launching Tech Ventures—one of our online entrepreneurship and innovation courses—and download our free guide to starting your entrepreneurial journey.
