The startup world is fast paced and always changing. Newcomers to the arena are often lost in the day to day jargon surrounding startups. But a common question among entrepreneurs trying to turn ideas into money is what is the difference between incubators and accelerators?
The good news is that both incubators and accelerators support startups in their early stages to get past the startup phase. Both frameworks provide capital, operating resources, help with management and valuable networks to help businesses grow. Startups who participate in incubators and accelerators are generally shown to have a higher rate of success raising follow on capital.
But which program is best to help you strategically grow your business to be the million-dollar idea you know it to be?
Generally, incubators provide a space for startups to translate ideas into businesses. Incubators provide startups with a broad range of mentorship and guidance in areas like business, finance, presentation skills, fund raising and managing intellectual property. The typical incubator aims to provide low or no cost office space for multiple startups looking to grow their ideas with the supervision of technical advisors. One of the benefits of incubators is they typically do not require an equity stake in your business in return for their services. Incubators are usually sponsored by universities, non-profits and government entities looking to grow your idea for an unspecified amount of time. Some incubators are even sponsored by venture capital (VC) firms, angel investors or other major corporations.
With that being said, incubators are not the panacea for every growing business. Some incubators are understaffed and lack the entrepreneurial drive or pressure to deliver successful startups because of their lack of an equity interest. Some research even suggests that the majority of startups don’t become successful or are slow to realize the benefits of an incubator until the 5 years into the program.
But not all incubators are bad, many have the adequate resources to achieve your startup goals. Here is a list of some of the great incubators we found around Los Angeles: Viteribi Startup Garage, LA CleanTech Incubator, Hub101
Unlike incubators, accelerators are geared more toward taking an existing business and scaling it to accelerate growth.
Mike Bowry, general manager of Brandery said, the goal of an accelerator program is “to help a startup do roughly two years of business building in just a few months.”
Accelerators are intense 3-6-month commitments which require startups to give up equity in exchange for in-depth training and access to a valuable network of investors, financial advisors, successful startup executives and industry experts. The accelerator framework can help your business secure funding to grow, provide living expenses for entrepreneurs and even find long term business partners who can help you down the road. Accelerator programs generally have a high rate of success with their startups because they have a stake in your success if you succeed they succeed.
But the benefits of an accelerator come at a cost. Putting equity aside, accelerator programs are extremely competitive to participate in. Accelerators receive thousands of applicants every year and must carefully hand-pick the most scalable startups. The framework necessarily drives accelerators to select startups that will take the least amount of time and produce the highest return on investment.
Overall, accelerators are a great resource for achieving rapid growth and building networks despite intense commitment to the program. Here is a list of some of the great incubators we found around Los Angeles: Launchpad LA, McKernan, Disney Accelerator, Amplify LA.
Ultimately, incubators and accelerators are different programs each with their own unique benefits. Some incubators look more like accelerators and some accelerators can look more like incubators. To determine which pathway might be best for your business it is important to look into specific programs, who sponsors them and how might their benefits affect your business.