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In today's tech world, the terms incubator and accelerator are often used interchangeably. In reality, they're actually very different beasts. They both help businesses get off the ground and offer office space and advice, but there are a number of distinct characteristics of each program. Here are a few of the major differences:
Time frame
This is the most obvious distinction between the two programs. Accelerators typically run for three to four months at the end of which time the members "graduate." As the name suggests, the goal is to accelerate the growth of the company in value and size in a short period of time, often in order to raise a first round of funding after graduation.
Companies in incubators have a longer gestation period, anything from 18 months to an undefined period of time. Typically startups can stay in the space for as long as they need to, until the company has outgrown the incubator. They focus less on quick growth but rather provide an environment for the company to grow and help it along.
Funding
Accelerators usually provide a small, specific amount of funding, typically around $20,000 for a single digit equity stake in the member company. Advisers involved in an accelerator program will often invest larger amounts in a successful company once it graduates.
There are two different models of incubators. Many incubators are funded by grants from universities, which allows them to provide their services without taking any equity in the company at all. However, others will partner with venture capital firms to provide significant funding to incubator members at which point a larger equity stake, 20 percent or more, is given up by the startup. These venture backed incubators group funded companies together in the hope that they will help each other and be more likely to produce a return on investment.
Entry requirements
Accelerators usually have a defined application process. Incubators, particularly ones that don’t take any equity, can be more difficult to gain access to. Many incubators only accept member companies they have heard of through their network.
This doesn’t necessarily make being accepted into an accelerator any easier. Big name programs like Techstars and Y Combinator receive thousands of applications for each term yet only a handful are accepted.
Mentorship
Accelerators usually have a more structured and defined mentorship program. Advice could be coming from more than 100 entrepreneurs associated with the accelerator, some of which get involved to help the startup community that fostered their business, but also to keep an eye out for a smart investment.
In incubators mentoring is generally provided by the investors and by the shared experiences with other member companies within the program.
Which to choose
Both incubators and accelerators provide three major benefits: mentorship, office space and access to funding (whether during or after the program). They also provide access to other entrepreneurs and a network that could be a lifeline to any startup. You need to decide whether your company will benefit from the short kickstart an accelerator gives or the more unstructured progress of an incubator. Be aware that these programs can be time consuming and can impose their own structure on your business. You may have to go to meetings with mentors when really you should be working on your product and the mentors might not be available when you really need them most. That being said, they do offer tremendous benefits and many successful startups have come through such programs.
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