Startup incubators and startup accelerators both provide support and benefits to startups. However, they are not considered to be the same. If you’re a first-time founder, choosing the program that is right for you may be confusing. Both exist for the purpose of helping founders launch and grow their startups, but each offers a different framework to support launch and growth.
Let’s break down the respective goals of a startup incubator and a startup accelerator and see what each offers startups, so you can determine which is the best for you.
Startup Incubator
A startup incubator supports startups at the early stages of company development and launch. Many incubators are either government-funded or are supported by universities. A typical startup incubator caters to entrepreneurs who already have the idea but have not yet begun to turn it into reality.
To support growth, startup incubators provide founders the necessary tools to launch and grow their companies, including mentors, co-working spaces, marketing assistance, and more.
Timeframe. A startup incubator does not have a set timeframe for startups. They focus on making budding companies stable rather than pushing it to grow as fast as possible. Their mentorship lasts anywhere from a few months to five years.
Capital. It’s not typical for a startup incubator to provide seed capital to startups. And because they don’t offer capital, they take no equity from companies.
Application Process. Many types of business concepts are good candidates for startup incubators. While there are some specialized startup incubators, most take any application as long as it fits their criteria. Once accepted, budding entrepreneurs may be required to move to the incubators’ geographic area.
Startup Incubator Examples
Startup incubators have been around since 1959, and many are still standing today. The following are some of the best at what they do today:
- CSI Kick Start. CSI provides mentorship and connects FinTech startups with the right people. They have connections with investors, successful entrepreneurs, and mentors.
- TechNexus. TechNexus was born from the partnership of local entrepreneurs and the Illinois Technology Association (ITA). Members can use their spaces for free.
- One Million by One Million. This global incubator aims to help 1 million entrepreneurs to reach $1 million in annual revenue. 1M/1M works virtually by offering online programs and lectures. They also offer consultations and introductions to partners and investors.
Startup Accelerator
By definition, a startup accelerator is a fixed-term, cohort-based program offering a structured approach to help founders take their startup ideas from concept to launch by offering educational components, mentorship and connections. The program typically culminates in a pitch event or demo day where graduating startups are presented to the public and potential investors. Some startup accelerators offer equity investments in their startup graduates as well. Startup accelerators are generally idea-stage or early-stage.
Timeframe. The goal of a startup accelerators is to advance the growth of a company as quick as possible. As such, accelerators only work with startups for a set period of time, usually three to four months.
Capital. Many startup accelerators offer startups a small amount of seed capital upon graduation. In exchange, they require a cut of the company, usually from 3 to 8 percent.
Application. Getting accepted into a top startup accelerator is a competitive journey. The best accelerators choose only the top startups that are scalable and are proven to have the ability to grow fast in a few months. Some accelerators, such as Founder Institute, place more emphasis on the entrepreneurial attributes of founders when choosing which startups to accept into their program.
Startup Accelerator Examples
Startup accelerators only started popping up in 2005. Today, these institutions have already guided thousands of companies to success. Some of the best are:
- Y Combinator. Y Combinator provides seed funding and support to get startups through the first phase. Acceptance at Y Combinator is highly competitive with only a select few being chosen to move to Silicon Valley for three months. Graduates receive $150,000 in equity investment.
- Cleantech Open. This non-profit organization funds and supports top cleantech startups. They now have supported the launch of over 1,200 clean technology businesses since 2005. Cleantech Open operates in various regions of the United States. In each region, startups participate in the program and then compete in regional finals. Winners of the competitions receive a cash prize and in-kind resources. Regional winners go on to compete in the Global Forum, where they compete for a larger cash prize.
- Founder Institute. The Founder Institute startup accelerator provides mentorship and structure for aspiring entrepreneurs. Founder Institute is the world’s premier idea-stage startup accelerator, with chapters in more than 170 cities around the globe. Before being accepted into the program, founders must take a proprietary psychological exam that measures entrepreneurial traits across multiple dimensions. The Founder Institute approach is highly-structured and built on a very challenging, real-world curriculum supported by an impressive global network of mentors and resources. Many Founder Institute graduate startups have achieved great success.
Which Program Offers the Best Benefits for Your Startup?
Choosing which program is right for you means you really need to understand your needs and where you are in your founder journey. As Co-Director of the San Francisco Founder Institute, I’ll admit that I’m somewhat biased towards accelerators and in particular, the FI program. However, before determining whether a startup incubator or a startup accelerator is right for your startup, it is incumbent upon you to do the research and then make your decision.
Interested in learning more about startup incubators and startup accelerators? Contact me today and let’s talk!
