Incubator or Accelerator? 6 Key Differences to Help You Choose the Perfect Path

This is a time when startups are popping up in droves. Many people have projects that they want to develop to turn them into a company, but it is usual that for this they need the help of an incubator or accelerator.

And what are these about? Well, in a few words, they can be defined as two phases that a business idea has to go through. For this reason, rather than saying that one is better than the other, it is necessary to understand the moments in which each one comes into action.

For this, below we will explain what they are, what is their importance, and how they differ.

What is a business accelerator?

To start differentiating between an incubator and an accelerator, it should be noted that the latter are organizations that specialize in helping companies scale their business model. Its main objective is that the project that is already under development obtains real benefits.

To do that, business accelerators employ techniques that streamline the actions needed to turn an idea into revenue. Within these companies, one of the relevant figures is that of mentors. These are the main support for startups and help expand their network of contacts and even investors.

What does a business accelerator do?

A business or company accelerator develops intensive programs of two to three months. These spaces are attended by new companies (with a permanent team, a minimum viable product, and specific customer profiles) to accelerate the growth of their projects.

It is usual for these companies to carry out a selective application process with the applicants. Following this, accepted companies receive education, mentoring, networking, and possible funding.

Startups generally enter accelerators looking to get away from investor funds. While some programs guarantee some funding in exchange for equity participation, others give away amounts of funds for nothing.

As a preparation, new companies do not need to have large funds beforehand. Despite this, it is assumed that they require some money, through financing or start-up, for the development of a product, team, and clients in order to qualify and apply.

In conclusion, business accelerators benefit all parties involved: investors, companies, customers, and the economy. Beyond this, they are not the only business development program for new companies.

Even accelerators and incubators are often confused, without understanding their differences and true utility. Next, we will explain what an incubator is.

What is a business incubator?

Before explaining whether you should choose between an incubator or an accelerator, we are going to explain what the former consists of. We can say that this is a company that is in charge of looking for future startups that have the potential to hit the market.

The main idea of these is that their experts and advisors work together with the CEOs of the ventures. One of the greatest examples of these is Rappi. This Colombian multinational is currently considered the Latin American company with the largest number of startups founded by former employees.

It should be noted that there are incubators according to their specialization, so in this industry, we find the following types:

1.            Traditional

These types of incubators are those that carry out their work in traditional media or markets. These are usually directed to service businesses or shops.

2.            Intermediate technology

In this group are the incubator companies that give their support to technological organizations. Here, the space is open for companies in this area and there are no major limitations.

3.            High technology

Like the previous incubators, these types of incubators focus on technology companies. The difference is that they give priority to information technology and others related to innovation.

What is an incubator for?

A business incubator provides support in areas such as management, training, offices, capital, advice, and expansion of the network of contacts. These are usually sponsored by different types of private organizations, government agencies, and universities.

The incubation process consists of four phases, which are:

1.            Selection

To begin with, a business postulates its entrepreneurship project before a business incubator. Your idea or innovation enters a selection process and in this, the advisors analyze the profile of the entrepreneur, his team, and the potential of the idea.

After analyzing these factors for each project, they choose a certain number of companies. The above figure depends on the structural and economic capacity of the incubator. After this, they notify each team so that they know the results and the start dates.

2.            Pre-incubation

In this stage, the necessary requirements are reviewed to start a project. In the same way, the business plan is defined and a work plan is generated that will support the project throughout the incubation period.

Here it is necessary that the documentation and the steps to follow are fulfilled according to the parameters. The incubator is in charge of advising on technical matters and providing tools so that the projects continue on their feet.

3.            Incubation

The incubator provides support to businesses during the development of their products or services. In this step, commercial activities are started until the project is ready for launch.

Specialized advice, support networks, and financing plans are offered during this stage.

4.            Follow up

After the project finishes its process, the incubator does a periodic follow-up to monitor the progress of the startup in the market. From there, it is possible that the post-incubation service is given to improve products or provide new financing or training support.

Business incubators have some key functions such as providing physical offices, offering specialized equipment, and expert help. In addition, they also offer discounts on software, have shared business services, and integrate a community.

6 differences between accelerators and incubators

After knowing what these tools are and how they are developed, we will now be able to identify their differences. Next, we will show you some key aspects with which you can make the best choice between an incubator or an accelerator:

1.            Time

An incubator can be called a tool for long-term business growth, with a temporary commitment to the achievement of objectives. Meanwhile, accelerators are short-term help, only partnering with companies for a limited and immediate purpose.

The former can help lay the foundations of a project for sustained growth, and the latter helps companies make significant progress in the short term.

2.            Costs

It is common for accelerators to ask for a percentage of the company’s capital in exchange for financing. Companies allow investors to own a portion of their investment, which can yield large future returns, in exchange for mentoring and funding.

Incubators do not charge for their services, as they only support growth to secure funding for their network. Instead, what they do is charge for the office space provided and the advice of expert professionals.

3.            Resources

An incubator or accelerator offers similar resources to startups, such as advice, financing, and support networks. An accelerator may have access to larger capital funds because the investment is short-term and with significant returns.

On the other hand, incubators are more focused on helping a new company. What they do is contribute to the preparation of a business plan and also present that plan to their network of investors.

4.            Structure

The two options structure their program differently according to the calendar. Both have an application process that helps compare companies to each other and to the market to determine the best investment.

Accelerators put accepted companies into an immediate cycle of mentoring and working capital to fuel their growth. For their part, what the incubators do is spend more time helping the company to achieve its establishment.

5.            Location

Many of the incubators have specific locations where they host several startups at the same time. These are usually called co-working and represent a space in which people from different companies work. If a startup wants the support of an incubator, it would need to operate in this space for better communication and greater collaboration.

Contrary to accelerators, which may have physical locations, but in most cases allow companies to operate in their own facilities. A large part of the companies that request help tend to be more consolidated, so they choose to stay in their initial place and not move to a new one.

6.            Origin

Perhaps the least substantial for what concerns us, but without a doubt, another clear difference between accelerators and incubators, is the case of origin. The first ones have only officially existed since 2005, thanks to Y Combinator of Cambridge Mass, the first recognized accelerator.

Incubators, on the other hand, date back to the 1960s. It should be noted that both arose in the United States, but with a different origin in time.

As you can see, despite the fact that at some point they may offer something similar, these tools have great differences that will make your choice easier.

Incubator or accelerator? What you should choose?

The answer can be summarized as that depending on the phase your company is in, it will be more convenient to choose between an incubator and an accelerator. If you have an innovative idea, but you don’t know how to start developing it, the best option will be an incubator. On the other hand, if it already has a shape and you want to boost the business in a short time, an accelerator will be the most suitable alternative.

Accelerators could provide you with networking and short-term assistance in launching business ideas. The incubators, for their part, can give you in-depth advice and the treatment of ideas.

Another important aspect to consider is the possibility of locating or relocating your company. Incubators often require the projects they support to work in their buildings, while accelerators can be more flexible.

You should also determine what resources your company needs in order to choose the most effective program. Determine if your project needs an immediate financial advance or long-term financing, a professional in the sector for advice, or another type of resource.

Accelerators and incubators focus their goals on creating networking opportunities for the companies they help. Most of these have a network of professionals in the sector, which can be found on their website.

Therefore, it is crucial to investigate this network to find out who its members are and how they can help your company. An adequate choice can guarantee that you generate lasting links or connections for the growth of your idea.

Final words

As you may have found out, the choice between an incubator and an accelerator is not because one is better than the other. What you must understand is the phase your project is in, what it really needs, and the characteristics of incubators and accelerators.

More than competitors, accelerators and incubators are complementary tools. The former help to go to market and the latter support the rapid growth of these projects. So, with both options at hand, which do you think your company needs right now: incubator or accelerator? Before deciding must consider your startup's specific requirements and aspirations to determine which path will propel you toward success.

FAQs

Q1: Can a startup participate in both an incubator and an accelerator?

A1: Yes, it is possible for a startup to participate in both an incubator and an accelerator. However, it is essential to carefully consider the timing and objectives of each program to avoid overlapping or conflicting commitments.

Q2: How do I find the right incubator or accelerator for my startup?

A2: Start by researching and identifying programs that align with your industry, stage, and goals. Evaluate their track record, network, mentorship offerings, and success stories. Attend networking events, seek recommendations, and connect with alumni to gather insights before making a decision.

Q3: Do all incubators and accelerators provide funding?

A3: No, not all incubators and accelerators provide funding opportunities. While some may offer funding as part of their program, others may focus more on mentorship, resources, and networking. It is essential to thoroughly research and understand the offerings of each program you are considering to determine if funding is a priority for your startup.