Accelerator vs. Incubator: What’s the Difference?
If you’re interested in getting your start-up into an accelerator or incubator there’s no shortage of options. But these terms sometimes get thrown around interchangeably. Do you know the difference between the two?
I asked Paul Bricault, cofounder of Amplify, a Los Angeles-based accelerator, to define them.
“An accelerator takes single-digit chunks of equity in externally developed ideas in return for small amounts of capital and mentorship. They’re generally truncated into a three to four month program at the end of which the start-ups ‘graduate,’” he says.
TechStars would be an example of an accelerator, although good luck getting in—even though thousands of companies apply every year, it only selects 10 for each of its programs.
An incubator, on the other hand, brings in an external management team to manage an idea that was developed internally. “Those ideas can gestate for much longer periods of time and the incubator takes a much larger amount of equity [compared to accelerators],” he says.
One highly successful incubator is Pasadena, California-based Idealab, which was started by Bill Gross in 1996. Bricault says Idealab itself usually comes up with all the good ideas for new businesses then recruits outside people to bring them to fruition. Incubators like Idealab take a bigger cut of the company than an accelerator does—anywhere from 20 percent or more Bricault says.
Want to get your idea incubated? Idealab doesn’t accept business plan submissions but only considers ideas it hears about from people with whom it already has a business relationship, although Bricault says that’s not the case with all incubators.
Fortunately, now there are so many to choose from. Capital efficiencies in the market have brought down the cost of creating a start-up, Bricault says, thus fueling a boom in new accelerators and incubators. “What would have taken $5 million to get off the ground with a product developed and customers and traction several years ago now can take a few hundred thousand dollars,” he says.
If you want to see your company get into an accelerator, here are a few interesting ones tailored for unique niches:
Women Innovate Mobile is a new accelerator in New York for mobile technology start-ups that have a female founder or co-founder. Companies accepted into its three-month program receive $18,000 in funding, free office space, product development and design support, mobile-marketing promotions, and mentoring. In exchange, WIM takes a 6 percent equity stake in the companies it helps get off the ground.
San Francisco is the latest city to partner with Code for America to launch an accelerator for Web developers who create apps that that can make the city government run better. In the last two years Code for America has helped hundreds of developers in dozens of cities and received $1.5 million in funding from Google. CfA in San Francisco will start taking applications in the spring.
The NewMe accelerator is a 12-week program for businesses led by underrepresented minorities, specifically African Americans, Latinos, and women. This one is intense—if your start-up is selected you’ll hole up with seven others in a house in Mountain View, Calif.