by Alejandro Cremades, author of “The Art of Startup Fundraising“
Entrepreneurs with an interesting business concept or Intellectual Property (IP) don’t always have the skills and relevant know-how to transform industry-disruptive ideas into commercially viable products. Aside from business know-how, they also need more funding than personal savings and contributions from close friends and family. Relying on a renowned startup accelerator program or incubator is an excellent way to kickstart a new company.
Both these organizations provide monetary support with additional tangible and intangible resources that startups need. Read ahead for detailed information about how incubators and accelerators work, so you can make an informed decision about the ideal program you would want to enter.
How Incubators and Accelerators are Similar
Both incubators and accelerators provide invaluable support in getting startups off the ground. Here’s how:
- You’ll get invited to on-site premises where the necessary infrastructure, inventory, and staff assistance will be available.
- You can expect financial aid. Startup accelerators and incubators are known to invest funds from $10,000 to $150,000 in each project.
- You’ll get mentoring, seminars, lectures, and hands-on workshops to assist you in developing a working prototype.
- Expect a learning-intensive environment where you’ll learn the basics of setting up a business, including legal advice on how to structure the company and hire and manage a founding team.
- You’ll get guidance on managing your startup’s accounting and financial aspects.
- Train in business etiquette and learn about the regulations pertaining to your industry.
- Practice creating compelling pitch decks and presenting them before potential investors.
- Benefit from the expertise of professional advisors and industry experts who oversee the product development process offering feedback where needed.
- Connect with networks comprising interested venture capitalists, angels, and private investors looking to back a potentially profitable enterprise.
- You’ll get the opportunity to connect with complementary ideas that could lead to robust partnerships down the road.
The benefits could prove invaluable if you can get into an incubator or startup accelerator program. By the time ‘demo day’ arrives, you’ll be ready with a working product and the skills to convince investors that your idea has what it takes to get them rich returns. At the same time, you’ll want to research how the programs are different so that you can choose the appropriate option for your line of work.
How Incubators and Accelerators are Dissimilar
Although both organizations are committed to providing a launch pad for startups, there are several dissimilar factors you need to be aware of:
- More than 90% of incubators are non-profit organizations run by government, academic, and local entities fostering business development in their commercial spaces. As for accelerators, although most are public-owned and non-profit, others are run by private entities looking to profit from the startup’s success.
- Accelerator programs are intensive and typically last for three to six months. Incubators allow founders an average of two years to develop their concepts and make them market-ready.
- Incubators work with the objective of eventually connecting founders with their network of partners and investors to spur growth. But, with accelerators, you might have to sign over a fixed amount of equity at a future date.
- Incubators support pre-seed founders and are typically industry-specific, with the organizers providing generic collaboration and assistance. On the other hand, accelerators are just that, committed to fast growth, offering one-on-one training, mentoring, and cohort-based programs.
- Incubators and accelerators receive and evaluate applications before selecting candidates. Although both are competitive, an accelerator program has more stringent criteria, with just around 1% to 3% of entrepreneurs getting accepted.
Now that you have an overview of how incubators and accelerators work, understand the pros and cons before making the appropriate choice.
Alejandro Cremades is a serial entrepreneur and the author of “The Art of Startup Fundraising“. With a foreword by ‘Shark Tank’ star, Barbara Corcoran and published by John Wiley & Sons, the book was named one of the best for entrepreneurs. The book offers a step-by-step guide to today’s way of raising money for entrepreneurs. Most recently, Alejandro built and exited CoFoundersLab, one of the largest communities of founders online. Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding, where he was involved in one of the most prominent investment arbitration cases in history ($113 billion at stake). Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia Business School, and NYU Stern School of Business.