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.
Launching a startup is tough, especially if you are a first-time founder. The statistics show that many startups that launch will fail within five years. Those statistics make launching a startup on your own even scarier. That’s where startup incubators and startup accelerators can help. Both offer founders a structure that provide support, technical assistance, professional and peer guidance, and in some cases, access to funding.
Let’s break down what their respective goals are and what they can offer startups.
What is a Startup Incubator?
Startup Incubators support startups at the early stages of building their company. They cater to entrepreneurs who already have the idea but have not yet begun to turn it into reality. They are usually nonprofit organizations that include partnerships between the public and private sector.
In most cases, founders accepted into startup incubator programs relocate to a specific geographic area to work with other companies in the incubator. A typical incubator has shared space in a coworking environment, a month-to-month lease program, and some connection to the local community.
Timeframe. Incubators do not have a set timeframe for startups. They focus on making budding companies stable rather than making it grow as fast as possible. Their mentorship lasts anywhere from a few months to five years.
Capital. It’s not typical for incubators to provide seed capital to startups. In turn, they take no equity from companies.
Application Process. Many businesses are good candidates for incubators. They take any application as long as it fits their criteria. Once accepted, budding entrepreneurs may be required to move to the incubators’ geographic area.
Examples of Startup Incubators
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.
What is a Startup Accelerator?
Startup accelerators can focus on either idea-stage or early-stage startups. Accelerators build upon the foundation to get startups ready for investors. Once accepted into a program, entrepreneurs get access to a wide network of mentors, investors, professionals, and more.
Timeframe. The goal of accelerator programs is to advance the growth of a company as quick as possible. As such, they only work with startups for a set period of time, usually three to four months.
Capital. Some startup accelerators offer startups a small amount of seed capital. In exchange, they receive a small portion of equity.
Application. Applying for accelerator programs is a competitive journey. They only select the top startups that are scalable and are proven to have the ability to grow fast in a few months.
Examples of Startup Accelerators
Startup accelerators only started popping up in 2005. Today, these institutions have already guided thousands of companies to success. Some of the best include:
Founder Institute. The Founder Institute is an idea-stage startup accelerator program that provides mentorship and structure to aspiring founders around the globe. FI is a top idea-stage startup accelerator, offering a highly structured program and access to some of the world’s brightest minds in the world of entrepreneurship. The FI program is tough to get into and even tougher to complete, but the organization boasts impressive success and has launched startups that have achieved billions in valuation.
Y Combinator. Y Combinator provides seed funding and support to get startups through the first phase of launch and growth. Twice a year the Y Combinator startup accelerator invests a small amount of money ($120k) in a large number of startups. The startups move to Silicon Valley for 3 months, during which time, the Y Combinator team works intensively with them to get the company into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present their companies to a carefully selected, invite-only audience.
Cleantech Open. This non-profit organization funds and supports the top cleantech startups in various regions throughout the United States. Since its launch in 2005, more than 1,200 cleantech startups have launched through Cleantech Open.
Which One Offers the Best Benefits for Your Startup?
Choosing which program is right for you means having an in-depth understanding of what your current needs are and the level of support you require to launch your startup. Remember that startup incubators require you to physically locate your startup in their location and do not have a specified timeframe. The level of support you receive is usually (but not always) somewhat informal. In contrast, startup accelerators allow you to locate your business wherever you like and almost always have a structured program that lasts for a specific timeframe.
Want to learn more about startup accelerators and startup incubators? Contact me today and let’s talk!