As growth programs designed to launch and fuel startups have become more popular, the terms "incubator" and "accelerator" are often used interchangeably. And that's understandable--these two types of programs have borrowed many characteristics from each other in recent years.
The key thing to know is that incubators generally help seed-stage founders launch their companies, while accelerators speed the development of later-stage enterprises. Beyond that though, the options for specialization are nearly unlimited. Here are some points to consider when deciding on the right program for your startup.
As of 2018, there were nearly 1,300 accelerators and incubators in the world, according to a report by Ian Hathaway, a senior fellow the Brookings Institution. While there is a strong concentration of accelerators and incubators in New York City and Silicon Valley, other programs have set up shop in smaller cities like Austin, Boulder, Cincinnati, and even Boise.
Both accelerators and incubators typically offer participants a place to work. The extra amenities--like 3-D printers, maker studios, and laboratories--vary by program, but both incubators and accelerators typically grant participants access to some combination of these tools.
Don't forget to read the fine print though: "There may be an amazing lab facility, but if it turns out you only get access two hours a week...it may not be the right fit," says Dr. Susan Amat, the vice president for education at the Global Entrepreneurship Network. GEN, which is based in Arlington, Virginia, operates programs and projects aimed at helping people start or scale a business in 170 countries. ??
And finally, both incubators and accelerators generally offer space for networking events--though these meetings have been forced online for the foreseeable future due to the coronavirus. For example, St. Paul-based Lunar Startups--an incubator focused on startups founded by people of color, women, veterans, LGBTQ+ people, and indigenous peoples--is using videoconferencing to keep in touch with its cohort.
Accelerators typically set agendas for their participants. Meanwhile, incubators often act like co-working spaces where founders can come and go as they wish, says Thomas Korte, the co-founder and general partner of AngelPad. ??
"Incubator startups are very early-stage and sometimes just an idea the founder wants to nurture," says Steve Hoffman, CEO of incubator and accelerator program Founders Space. "Accelerators are for companies that are much further along...they've established an idea and the product is in beta testing."
Many incubators and accelerators these days are focused on a specific industry or niche market. A specialized program might be able to better connect entrepreneurs to potential customers and mentors in that industry, says Hathaway.
What's more, many accelerators and incubators partner with corporate entities or large businesses for these specialized programs. For example, Chobani hosts a New York-based food and beverage incubator and Boomtown's Boulder-based patient safety health tech accelerator is sponsored by medical liability insurance provider COPIC.
San Francisco-based accelerator 500 Startups promises attendees access to its network of more than 3,000 founders and 200 mentors. This kind of networking power--which includes former graduates, mentors, investors, and marketing specialists--is a typical offering of both incubators and accelerators.
The caveat is that networks aren't one-size-fits-all. Founders should ensure that they're connecting with relevant experts in the field they are attempting to enter, says Dr. Amat. "Understand what you need and do the work beforehand."
Exposure to Investors
Many incubators and accelerators conclude their programs with a demo day or pitch presentation where participants are given the opportunity to perfect their pitches and land investments.
Techstars--which operates 29 accelerators in the U.S.-- typically hosts demo days for its participants. Meanwhile, when Target ran its first Generation Z-focused business incubator last summer in Minneapolis, it built a three-day conference around the demo day.
Many of these events have moved online, and have seen an uptick in investor attendance without the constraints of venue capacity laws. Take for example the 2,500 investors who registered for 500 Startups' virtual demo day on March 26--1,850 more than were in attendance last year.
Funding and equity
Many accelerators take equity in a company in exchange for funding. Incubators generally don't do that. Techstars offers up to $120,000 for six percent equity in a company. But founders can return the money and get their equity back if they're disappointed with the experience, says David Brown, the founder and CEO of Techstars. But he says only about one percent of Techstar participants have done this.
What Works for You?
Think of choosing an incubator or accelerator like choosing a college to attend: most offer programs catered to specific industries, and some are harder to get into than others. Founders who are looking for a place to start or scale their businesses have a strong array of options available to them today. The difficult part is choosing exactly what you want.