As every founder knows, building a successful startup from the ground up is no joke, especially if it’s the first time. This is why they often turn to startup incubators and accelerators, as they have played significant roles in the rise of many global companies like Stripe, Airbnb, Udemy, and Reddit. These programs also offer added credibility to startups in the eyes of investors and customers.
The history behind incubators and accelerators can be traced to startup hubs in Silicon Valley supporting tech companies. Since then, they have become widespread across the globe expanding beyond tech startups and accommodating a variety of verticals.
While incubators and accelerators both help startups grow and tend to be used interchangeably by some first-time founders, they are not the same and offer different learning experiences for startups at different stages in their business.
If you’re considering applying for a startup incubator or accelerator and aren’t sure which is right for your company, this article will provide a general overview of these programs and help you make the right choice.
What is a Startup Incubator?
Startup incubators, sometimes called business incubators, are programs that support newly launched startups to accelerate profitability and success. They help develop businesses from scratch, usually businesses that still need to build a Minimum Viable Product (MVP) or business model. Incubators do not work to boost rapid growth; instead, they provide support that lasts over an extended period.
There are two kinds of incubators; those that find impactful early-stage founders to work on an existing idea and those that develop an idea within an organization. Nevertheless, both types offer helpful resources like free physical office spaces, mentorship, networking with potential investors, access to collaborative and helpful communities, etc. They are usually less intense than accelerators and offer support when needed.
Generally, when a startup is accepted into an incubator, there are no fixed terms or dates. The duration of this program is usually dependent on efficiency and may run anywhere from 6 months to 5 years. During the program, founders build their idea, establish product-market fit, network with other founders, and become investment-ready.
Startup incubators may be independent or supported by NGOs, venture capital firms, government organizations, and for-profit companies. The application process for incubators usually involves meeting specific criteria as defined by your chosen incubator and submitting a viable business plan.
Benefits of an Incubator
· Available at the idea or concept stage.
· Access to office spaces or co-working spaces.
· Availability of conference rooms for meetings.
· Provision of physical business address, which gives credibility as compared to a residential address or P.O. Box.
· Networking and collaboration among other participating startups.
· Access to advice and consultation from industry experts and mentors.
· Access to support from the program over an extensive period.
What is a Startup Accelerator?
Accelerators are programs that fast-track the growth of existing companies that have a business model, a minimum viable product (MVP), may have a prototype, and may have already received pre-seed funding.
They provide access to helpful resources like free co-working spaces, mentorship, potential investors, legal services, and a network of industry experts. As the name suggests, the goal of an accelerator is to speed up business growth and achieve two years’ worth of building in a few months. Following a holistic approach, startup accelerators are usually fixed-term and cohort-based, lasting no longer than one year. During this time, they offer guidance and support to ensure the business is scalable and investment ready.
Accelerator programs, such as Accelerate at The Bulb, tend to feature intense learning environments to help companies scale rapidly while remaining sustainable in a short timeframe. Generally, these accelerators collaborate with venture capitalists, angel investors, industry veterans, and seasoned founders to help participating startups learn from the best and form valuable partnerships with other entrepreneurs.
Accelerators begin with an application process, which can be very selective, with top programs like Y Combinator only accepting about 2% of applications. The program ends with a demo day where potential investors and the media are invited to hear founders pitch their companies. Chosen startups are usually given a seed investment and access to a mentorship network and other resources in exchange for equity.
Benefits of an Accelerator
· Access to a focused program designed for specific sectors or industries.
· Access to early seed investments, with most accelerators offering between $20,000-$80,000.
· Valuable networking opportunities with established businesses, industry veterans, and influencers.
· Personalized guidance and support from successful founders, investors, and operators.
· Collaboration and partnership opportunities with other founders at the same business journey and larger organizations.
Incubator vs. Startup Accelerator; What’s the Difference?
As mentioned at the beginning of the article, incubators and accelerators share some similarities. However, there are key differences between both programs, and they also determine which programs are right for you.
1. Business Stage
This is one of the most glaring differences between these startup programs. While incubators focus on growing an idea or a concept, startup accelerators only accept companies with an established product-market fit. In other words, incubator guides from scratch, while accelerators expedite the growth of existing companies that already have a minimum viable product (MVP).
2. Length of Program
As mentioned above, startup incubators are quite extensive, do not have a fixed timeline, and can go on for up to 5 years to build a successful company. However, accelerators are a short-term commitment that could last anywhere between 3–6 months, with a few lasting a year.
3. Funding
Unlike accelerators, who provide small seed investments, incubators do not invest in startups. Instead, they prepare you to be investment-ready and may ask for equity in exchange for their resources.
Choosing Between an Incubator and an Accelerator
Now that you clearly understand what an incubator or accelerator is, you might already know which of these startup programs is right for your business. If not, the best way to identify your choice is by defining the stage your startup is in.
For example, an incubator might be ideal if you don’t have an MVP or haven’t landed your first ten customers. Similarly, an accelerator is your best bet if you already have a business model or product and would like to fast-track growth.
Hence, choosing between these programs should depend on your business needs and the support you require. When you’ve made your choice, you’d need to research which incubator or accelerator program you’d be applying for. Conduct extensive research while considering how reputable the accelerator or incubator program is, their track record and if they have established excellent partnerships that can benefit your startup.
Conclusion
As startups across the globe continue to implement lean strategies, participating in startup programs like incubators and accelerators has become the norm for many founders. These programs can help ease the burden of building a successful business and aid founders in making fewer mistakes along the way.
At The Bulb Africa, our Accelerator program is geared towards early-stage African founders to help them build sustainable businesses by offering resources that expedite business growth. Our new cohort starts in January 2023, and applications are open for a limited time. Apply today to learn from the best founders, entrepreneurs, and experts in the African tech ecosystem.
