It’s a question we come across on a weekly basis here at IncuBus London, since we’re an early stage incubator getting startups ready for an accelerator. There are lots of different interpretations and both terms are often interchanged in the same sentence. There are many different models for each so I won’t go into those in detail, but below I have given an overview of each and what different stages of startups should be looking at and why.
The Startup Incubator
Much like a new born baby may be placed in an incubator to provide a controlled and protective environment for their care and growth, an incubator helps early stage startups in a similar manner.
An incubator helps early stage startups develop their idea, figuring out their market, build the team and getting early customers and feedback. Essentially an incubator helps early stage startups build a solid foundation for which they can build and grow upon.
There are a huge amount of incubators and just as many business models including investment in exchange for equity or charging a fee and zero equity. Also, with the focus on such early stage startups, incubators tend to have much more varied timelines. Some run for 3 months, some can even be 2 years or more.
Again incubators vary from taking applications, opening up to anyone who fits a specific criteria, a fee based service model or even a mixture of those.
If you’re still at an idea stage or have an MVP but are pre launch pre revenue, then an incubator is for you.
The Startup Accelerator
Accelerators tend to be less varied in terms of the model. The majority prefer investment for equity with the goal of ‘accelerating’ growth through mentor driven support.
Startups at this stage have had some traction and built a team, ready to use the investment and mentorship from an accelerator to build on the early traction they already have.
These programmes are usually short and intense. As well as building on initial traction, an accelerator helps startups get ready for a larger investment upon leaving the accelerator. Once they have figured out the most effective growth plan the investment can help them continue growing faster.
A lot of investors are introduced to the startups during the course of a programme and attend an accelerator demo day, where startups pitch for investment.
Accelerators take on applications and pick based on which teams they believe have the ability to implement and execute an idea.
They are reliant on ‘big wins’ in the future from the equity they have taken, so only take on the best. This also leads to a higher level of competition.
Y Combinator and Techstars are two of the most popular accelerators but there are thousands across the world, across many industry verticals.Do the research and check which one, if any, is right for your startup.
Incubator = idea development, Accelerator = startup growth
Many startups often look at raising money too early on and look to apply to an accelerator with a basic idea and no team. Very few accelerators take on single founders, especially if they don’t have a team around them. Investors too will usually need proof of traction.
Look to develop your business in an incubator where you can get the help and support to put your business on the right track and then you can look to join the right accelerator for you.
Would love to hear your thoughts…
Originally published on the IncuBus London Medium page.