Startup life can be lonely. Even with a growing team, dozens of clients and friends supporting you, it’s easy to feel alone if you don’t know how to grow your business.
Fortunately, organizations and investors around the world have developed intensive business programs to combat this loneliness and provide mentoring, training and support. Most startups dream of being accepted into a world-class mentoring program and a chance to attract big-name investors, but don’t know the difference between the two main funding options that provide such opportunities: accelerators and incubators.
ACCELERATOR VS. INCUBATOR: WHAT’S THE DIFFERENCE?
Startup incubators help entrepreneurs improve their business ideas and build their company from the ground up.
Startup Accelerators are intensive two to three month programs that engage startups (with a permanent team, minimum viable product, and a defined customer profile) to accelerate the growth of their business. Accelerators usually include a selective application process. Once accepted, startups receive education, mentorship, networking, and potential funding.
IS YOUR BUSINESS READY FOR AN ACCELERATOR?
Is an accelerator right for you? If you are thinking about applying for a startup accelerator, ask yourself the following questions to see if your business is ready.
- Are you growing fast? If your company is attracting customers (and employees!) at an incredible rate, you’re probably ready to launch an accelerator to take your business to the next level.
- Are you ready for expert mentoring? Can you articulate your concerns? If you have clear, unanswered questions and curiosities that only experts can answer, it’s time for an accelerator.
- Do you have a minimum viable product (MVP)? Accelerators are only for companies that have identified and sold an MVP.
- Do you have clients and an established client profile? Accelerators benefit companies that know who they are selling to and are willing to do extensive research to deepen the profiles of those customers.
- Would you be willing to move? Many accelerators require physical relocation in order to take full advantage of their resources and offerings—perhaps a small sacrifice for greater rewards for growing your business.
- Can you afford it? While accelerators provide some funding, they do not necessarily pay for your participation in the program. Make sure your team and business can afford to set aside a few intense months to focus on growth.
Accelerator programs cyclically accept startups in batches, which means that 45 to 90 slots are allocated each year. In most accelerators, the application process takes place in stages:
- Application. An application will ask for specifics on a startup’s idea, market, traction, team, and other aspects vital to success.
- Assessment. Promising teams from the pre-screening phase move on to be assessed for investability, revenue potential, and overall strength of the product/service offering.
- Interview. At this stage the accelerator is very interested, but wants to know about the team, product and evidence of traction. The interview process typically takes 20-30 minutes.
- Evaluation. Interviewees provide documents to prove their statements about revenue, legal standing, or any claims made about the company.
- Acceptance. Upon completion of the final evaluations, the investment committee will meet to finalize where the funding will go during the 12-16 week program. Roughly 30-60% of the teams that made it to Assessment phase will receive funding.
STARTUP ACCELERATOR PROGRAMS
Hundreds of accelerators are available worldwide, it’s impossible to list them all here. Instead, we’ve rounded up some of the most popular, as well as a few niche accelerators you might be interested in.
POPULAR STARTUP ACCELERATORS
Y Combinator, Mountain View, CA
Y Combinator is one of the most popular and most competitive startup accelerators. The program has generated nearly 2,000 investments and 200 exits (which are sales to larger companies, meaning a return on investment for investors). Y Combinator has worked with Airbnb, Dropbox, Stripe, Reddit, Twitch, Coinbase and Weebly.
Techstars, Boulder, CO
Techstars, another highly competitive accelerator, has produced over 1,500 companies and 132 exits. Companies like Bench.co, ClassPass, and Pill Pack have worked with Techstars. It’s also the name behind Startup Week and Startup Weekend.
MassChallenge, Boston, MA
MassChallenge has worked with over 1,300 companies, produced nearly 40 exits, and indirectly created over 80,000 jobs. The program also has offices in Israel, the UK, Mexico and Switzerland.
INTERNATIONAL STARTUP ACCELERATORS
Startupbootcamp, London, UK
programs in Mexico City (FinTech), Milan (FashionTech), Cape Town (AfriTech), Rome (FoodTech) and other countries. The program has made over 420 investments and produced 21 exits. Notable alumni include Bellabeat, Joyride and Zenith. In total, the program has attracted more than 1.1 million euros.
Start-up Chile, Santiago, Chile
Start-up Chile, unlike other accelerators, was launched by the Chilean government to develop entrepreneurship and encourage investment in the economy. The program has made over 830 investments and 16 exits. The startup in Chile also offers a “pre-acceleration program” called “Factory S” for female founders only.
MINORITY STARTUP ACCELERATORS
MergeLane, Boulder, CO
MergeLane only invests in startups that have at least one female CEO. It offers various funding and acceleration programs and has invested in over 40 companies to date.
DigitalUndivided, Atlanta, GA
DigitalUndivided works exclusively with Black and Latina women. The program has funded 52 companies, worked with over 2,000 founders, and raised over $25M in funding.
BENEFITS OF AN ACCELERATOR
The benefits that come with putting a group of talented startups, investors, and business decision-makers in one campus are clear:
- One-of-a-kind networking opportunities. Get access to opportunities with well-established companies and influencers.
- Personalized guidance from serial founders and investors. Accelerators work with angels, VCs, and seasoned founders — they may even end up investing in accelerated startups at the program’s end.
- Collaboration and partnerships with innovative startups. Most startups are facing similar customer acquisition or team management issues — accelerators give you a chance to learn how to overcome early challenges together.
And then there’s the capital. Most accelerators give graduates $20,000-$80,000:
Incubators are more open than accelerators and are not usually designed to accelerate growth quickly. Instead, incubators nurture and mentor startups over a longer period of time—more than a year.
While accelerators want to pay close attention to each startup, incubators provide one-time assistance with legal and business services, and help turn a concept into a product that fits the market.
Incubators typically provide office space and expert advice, but take a more casual approach. There is no intensive program here – only an atmosphere of cooperation and support when needed.
IS AN INCUBATOR RIGHT FOR MY STARTUP?
If your company is not ready to join an accelerator program, an incubator might be the answer. Incubators help startups solve technical and design issues when building the product, learn how to run lean, and build a successful team.
Incubators also help startups who don’t have experience operating a venture-backed startup or are up against legal and operational issues related to company structure, etc.
Incubators usually don’t require equity or put as much pressure on success as accelerators, but also don’t offer capital. It’s all a trade-off.
To summarize: if your company is very early stage and needs help getting past the idea stage, an incubator is the better fit versus an accelerator.
The application process for incubators is not as competitive as accelerators. They often focus on advancing local startups and improving the area’s business ecosystem. This often means including businesses that aren’t showing signs of rapid growth or scalability.
Incubators don’t traditionally offer capital to startups, instead offering office space, mentorship and partner opportunities. Because no capital is given, incubators don’t ask for a cut of equity.
POPULAR STARTUP INCUBATORS
500 Startups, Mountain View, CA
500 Startups has made just over 1,600 investments (in companies in over 60 countries) and generated 162 exits. Notable alumni include companies such as Udemy and Credit Karma, as well as others that have been sold to Google and Rakuten.
Amplify.LA, Los Angeles, CA
Amplify is an early stage venture capital firm in Venice, CA dedicated to making early investments in LA’s most promising startups, and is a leading institution in the Los Angeles venture capital scene.
ACCELERATOR OR INCUBATOR: HOW DO YOU CHOOSE?
The choice depends on two main things: (1) what you are looking for and (2) what stage your company is in.
If you are a proven startup in need of cash injections to drive growth, an accelerator is the best option.
Companies in earlier stages, or those who have started a company for the first time alone, are better off working under the guidance of an incubator.
DURATION OF A STARTUP INCUBATOR AND ACCELERATOR