In today’s age, every enterprise or startup that wishes to be incorporated has access to several funding options, ranging from crowdfunding to loans to accelerators and incubators, with the latter two being the traditionally popular ones. It is crucial that each business makes the right choice, so that they can obtain capital at the most appropriate terms to grow their business. This article will focus on the difference between accelerators and incubators, and develop on the most appropriate option in different circumstances. In the words of CapitalPilot, ‘Accelerators are application-based, fixed-term, cohort-driven programmes that include mentorship, educational components and in many cases seed funding. On the other hand, incubators are organisations that help startups and entrepreneurs develop their businesses by providing a range of services and office space and access to venture capital and angel investors’.
Accelerators are for startups that already have a Minimum Viable Product (MVP) validated in some way or the other, with low acceptance rates. These programs look out for high growth potential companies that are likely to become successful in just a few months, which is why they require more than just a concept. They usually take a cut of equity in exchange for providing a place on their program. These startup accelerators take 3-6 months in general to get an early stage startup ready for the market, and most of them give graduates between $20,000- $80,000. In short, if your business has a validated MVP and a founding team but less than required capital to scale and obtain traction, it could be a good fit for an accelerator program.
On the other hand, entrepreneurs with unvalidated ideas are a better fit for incubators rather than accelerators, because these work from scratch and help form a business model and teams over longer periods of time. In simple terms, incubators focus on early stage founders who are often focused on a sector, who are still recruiting their founding team. They range from 6 months to 5 years in duration with lease terms, and do not take up equity, however, they leverage their network to help startups obtain funding. They provide ad-hoc help with legal and business services, and also help turn concepts into something that is product market fit, along with taking a more laid-back approach and providing office space and consultations with experts. Incubators intrinsically do not provide an intense program, rather, they provide an environment of collaboration and support when required. Overall, the choice between an accelerator and an incubator depends on what you are looking for, and the stage of your startup/ company. Which option would you choose for your enterprise?