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The Difference Between a Business Accelerator and a Business Incubator?

Business incubators mentor companies through childhood while business accelerators guide them through adolescence into adulthood.

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There seems to be a considerable amount of confusion about the differences between business accelerator and business incubators. Many people use the terms interchangeably, but there are a number of elements that distinguish one from the other. At the same time, there is indeed overlap across incubator and accelerator services, which explains much of the confusion. The aim of this article is to help distinguish the difference between the two.

It is sometimes easier to grasp the differences between two adjacent paradigms by first knowing about the elements they share. For example, incubators and accelerators both prepare companies for growth. I.e. both incubators and accelerators help firms grow by providing guidance and mentorship, but in slightly different ways and, and more importantly at different stages in the life of the business. In order to get this straight, let’s draw an analogy and say that the life of a business is like the life of a human being. There are roughly three major stages of life: childhood, adolescence and adulthood.

Like a father to a child, an incubator provides shelter where the child can feel safe and learn how to walk and talk by offering office space, business skills training, and access to financing and professional networks. The incubator nurtures the business throughout the startup phase (childhood) and provides all the necessary tools and advice for the business to stand on its own feet.

However, while learning to stand on its own is a great entrepreneurial achievement, the walk through adolescence is often wobbly and filled with challenges, and the need for guidance is far from over. As any parent knows, guiding a teenager through adolescence is perhaps the most trying period in that person’s life, as the adolescent gains a sense of self and identity. One major challenge facing most companies who operate on the verge between childhood and adolescence is that sooner or later, they get stuck in the trenches of day-to-day operations, and more often than not fail to incorporate long-term strategic planning in the development of the business. The company may lose track of its unique value proposition - its identity - during this phase.

It is at this critical point in the business life cycle that most incubator programs end, as the firm is technically ready to spread its wings. Nonetheless, the journey towards sustained growth is far from over. Often it becomes necessary to receive advice and guidance from a business accelerator. By means of acceleration services, often in the form of “acceleration programs”, business accelerators help companies get through adolescence and prepare them to enter adulthood, providing them with strong arms and legs, sound values and a clear mindset (strategy) for the future. In other words, while incubators help companies stand and walk, accelerators teach companies to run.

Incubator programs last for varying durations and include several forms of mentorship and support, and nurture the business for the time it takes for it to get on its feet, sometimes for many years. On the other hand, a business acceleration program usually lasts between 3-6 months. The emphasis of the business accelerator is on rapid growth, and to sort out all organizational, operational, and strategic difficulties that might be facing the business. It can be understood as a holistic business advisory service, often bearing strong resemblance to traditional management consulting practices, but adjusted to fit small and medium sized organizations.

It is important to note that, compared to people, companies don’t grow by the tides of time per se, but by means of expanding their markets. An established company can still be stuck in the trenches of operations, or face other obstacles in accelerating their business. Hence, be it a young or established company, business accelerators can step in and straighten out the journey towards adulthood.

Both incubators and accelerators are important resources to ensure the growth of firms, be it from early startup or in becoming established organizations. And as we all know, the growth of firms is the lifeblood of any economy.

Last updated: Jul 31, 2012

FERNANDO SEPULVEDA | Managing Director, Impulsa Business Accelerator

Prior to leading Impulsa Business Accelerator, Fernando, a Harvard graduate, was an Associate Principal at McKinsey & Company Inc., serving clients in North and Latin America and Africa, mainly in the Industrial, Consumer Goods, Telecomm, and Financial Services sectors. He previously served as an advisor to the Ministry of Health and the Ministry of Education in Mexico. Fernando is a member of the Inc. Business Owners Council.




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