Startup Accelerator vs Incubator: Which One to Choose?

When we compare incubators and accelerator programs, it is important to recognize that although they both offer significant support to startups, such as mentorship, they differ in several key areas, including:

• Entry Stage: The phase at which startups can join the program.
• Funding Sources: The types of financial backing available.
• Duration: The length of time each program typically lasts.
• Program Costs: Any fees or expenses associated with participation.
• Location: Where the programs are based.
• Acceptance Criteria: The requirements for startups to be accepted.

Understanding these differences as an entrepreneur can help you choose the option that best fits your needs.

What is a startup accelerator?

A startup accelerator, also known as a seed accelerator, is a structured program designed to support early-stage companies. They usually focus on companies with high growth potential by providing education, mentorship, and funding. These programs typically last for a fixed duration - between three to six months, and involve cohorts of startups that participate simultaneously.

Accelerators focus on equipping startups with the necessary tools and connections to scale effectively in a competitive market. They culminate in a "Demo Day," where participating startups pitch their progress to investors, aiming to secure additional funding and partnerships.

What is a startup incubator?

A startup incubator, on the other hand, is a program or organization that supports early-stage startups by providing essential resources, mentorship, and a collaborative environment. The primary goal of an incubator is to help entrepreneurs:

• develop their business ideas
• validate their target markets
• establish a solid foundation for long-term success.

Overall, startup incubators play a crucial role in the entrepreneurial ecosystem by helping founders refine their ideas and navigate the challenges of starting a business.

Both concepts sound similar from these definitions. Let’s examine the differences and see how to pick the right one for your startup.

Key Differences between an accelerator and incubator

1. Stage of Development

Incubators target early-stage startups that might still be in the idea phase. Building a successful MVP is one of the main outcomes for an incubator, along with laying the foundations for a successful long-term business.

Accelerators, in comparison, are designed for startups with an existing MVP and validated business model. Their focus is to facilitate the company's scale phase of development.

2. Areas of Focus

Incubators focus on nurturing early-stage ideas and helping them achieve product-market fit. Additionally, they set up the startup for long-term success by building the needed know-how, processes, and structure.

Accelerators focus on rapid growth and scaling for startups that already achieved or are close to product-market fit. One of their priorities is investment readiness to further accelerate the growth of the startup after the program is completed.

3. Program Structure and Timeline

Incubators offer flexible timelines, ranging from months to years. This allows startups to develop at their own pace. This type of support is ongoing and on an “as needed” basis without a fixed curriculum.

On the other hand, accelerator programs operate on a structured, cohort-based model with a set curriculum. Being time-constrained, accelerators are often very intense and time-consuming. They usually require the participants to devote themselves completely to the program to succeed.

4. Funding and Equity

Incubators may provide funding through different financial instruments like loans or grants but often do not require equity in return as they are not looking for immediate financial returns.

Accelerators typically offer seed funding in exchange for equity in the startup. This way, these programs provide a more complete service while also expecting more in return.

5. Location

Incubators are usually local or regionally oriented, focusing on improving regional economic growth. Their reach and networking capabilities are often within the regional context, making them ideal for entrepreneurs who prefer to stay local and benefit from the familiar environment.

Accelerators, especially globally recognized brands like Y Combinator, have a centralized program structure and expect participants to reallocate for the duration of their program. Other accelerators, like TechStars, have networks all around the globe, offering more flexibility for founders regarding where to scale their businesses.

6. Cost

Most accelerators require startups to give up a percentage of equity, typically in the range of 5% to 15%, which will get you an investment between $20k to $50k. Some accelerators have also a fee which can be in the range from a few thousand to tens of thousands of dollars, although the most well-known programs are free to join.

Incubators usually charge a monthly fee for your membership which can range from $100 to $2000 or more depending on the resources and services that are included. While rarer than accelerators, incubators can also require small equity as a condition for participating.

In addition to these costs, you need to factor in possible reallocation costs and other additional costs.

7. Team Composition

Some accelerators have soft or hard requirements for the startup teams that participate. Most of them prefer a founding team with two or more cofounders and prioritize previous experience and a solid professional background.

Incubators might be OK with solo founders who have yet to build a successful startup team.

8. Application Process

Both types of programs have a similar application process consisting of the following steps:

1. Assess your readiness and fit for applying for a certain program.

2. Submit your application.

3. Review process based on evaluation criteria

4. Interviews and/or Pitching

5. Approval to join the program and onboarding

However, there are a few differences:

• Competitiveness: Accelerators are usually more difficult to get into due to their fixed cohort-based structure. The rolling admissions offer more opportunities to join an incubator program.
• Pitching Requirements: Due to the different stages of the startups, accelerators require formal pitching and good skills in presenting your idea and the validation for it. The pitching may be done in a written submission for incubators since the idea stage is still early and will evolve as it gets validated.

How do accelerators and incubators support entrepreneurs?

1. Structure and Guidance

For first-time entrepreneurs, the entrepreneurial path can seem chaotic and confusing. Accelerators and incubators provide methodology and structure for progressing with an idea.

Of course, you may learn things the hard way - by making mistakes and learning from them. However, many startups don’t have the luxury of time and resources to learn lessons this way. Thus, they prefer to accelerate their path by leveraging the experience and knowledge of industry veterans.

2. Networking Opportunities and Knowledge Sharing

Accelerators and incubators serve as gate openers to the entrepreneurial world. There are different types of connections that you will need to be successful:

• First customers and early adopters
• Investors and advisors
• Team members and cofounders
• Service providers and partners

Being part of an ecosystem that has all these types of connections in one place will speed up your progress while providing highly engaged and trusted collaborators.

Another important factor is the knowledge sharing between peers. This is especially the case when joining an accelerator program. Being part of a group of like-minded people going through the same process and struggles offers many opportunities to share lessons and experiences.

3. Access to Services and Resources

Many accelerators and incubators will provide their participants complimentary or discounted access to services that are important for setting up a successful business like:

• Cloud services
• CRM, billing, marketing, and other types of similar software
• Service providers like legal services, accounting services, etc.

The additional benefit of this is only financial, as these partners have experience with service companies like yours and are well aware of your business's specific needs.

Incubator vs Accelerator: How to pick the best option for your startup?

There are a few questions that you need to answer to decide between an incubator and an accelerator.

1. What is the stage of your startup?

If you are before MVP and haven’t validated your idea and business model, you may want to apply for an incubator. If you already have early traction with the first version of the product and some early adopters have validated your business model, the next step is scaling. Therefore, joining an accelerator will be the best place for you.

2. What is your availability and the timeline in which you want to see results?

If you are not in a position to dedicate yourself completely to your startup for several months, accelerators might be too demanding. On the other hand, they will drastically increase the rate of progress that you are making over the same amount of time compared to incubators or progressing on your own.

If you need a more relaxed pace and/or cannot reallocate, incubators might be a great opportunity.

3. How do you plan to fund your company?

First, startup funding rounds can be confusing, so we put together an article to help you navigate that.

If you are looking for seed investment, applying for an accelerator will be your next step. If you are not looking for investment or don’t want to give away equity, an incubator can help you secure other types of investment, like loans or grants.

By answering these questions, you might already know what you need, but some other things to consider are the type of support you expect (more structure and fixed curriculum vs. more relaxed and “as needed” help).

Still not sure what is the right choice for you?

If you need guidance to progress on your idea but neither the accelerator nor the incubator is the right one for you - you can consider Icanpreneur. We are the first Accelerator-as-a-Service that helps entrepreneurs get from idea to product-market fit. Among the many benefits of our platform, you will:

• Follow a structured approach and proven methodologies
• Progress at your own time and pace
• Be part of an amazing community for entrepreneurs and product builders
• Access all of this in exchange for a small monthly fee

FAQs