In this article, we going to talk about startup accelerators and startup incubators. But Before that let’s have some words on entrepreneur and entrepreneurship.
“An entrepreneur is someone who has a vision for something and wants to create.”
The factors that account most for a company’s success and failure:
- Ideas
- Team
- Business model
- Funding
- Timing
Entrepreneurship is one of the biggest buzzwords of today. Starting your own company can be a daunting but rewarding process. While a great business plan is crucial for founders, financing is one of the most important elements a company needs to succeed. One of the main challenges as a business owner when marching on a startup is coming up with a working capital you need to purchase inventory or other revenue-generating initiatives.
Every business has different needs, and no financial solution is one size fits all. Your personal financial solution and vision for your business will shape the financial future of your business. It’s no secret that it is harder to get money in the current financial climate. But just because it’s a bit of a fight, doesn’t mean your great idea isn’t worth fighting for.
Both Startup Accelerators and Incubators help early-stage startups to grow and scale their business. It is no surprise then that these terms are often mixed up and misused, despite being very different entities.
For early-stage startups, startup accelerators and incubators offer great ways to grow their businesses. They assist entrepreneurs in their journey to becoming successful companies down the road. Albeit in different manners. We can inspect by separating the goals of the two programs.
What is a Startup Accelerator?
Startup Accelerators also known as Seed Accelerators, tend to focus on providing startups with mentorship, advice, and resources to help startups succeed, including a Demo Day where you can pitch to startup investors. Accelerators tend to not offer dedicated office space to startups (and may encourage startups to find their own dedicated spaces), buy may back with a physical location for shared resources and accelerator events like Guest speaker talks and advising office hours. They can get involved at all stages of a startup’s development from the idea stage to the revenue-generating, late stage.
They help startup ideas in funding and the existing startup businesses in the acceleration of growth. They act as catalysts to speed up the entire growth process. Accelerator programs are a melting pot of group activities like an initial investment, connections, sales, mentorship and even educational facilities.
Accelerator programs operate within a set timeframe in which an individual company may spend anywhere from between a couple of weeks to a couple of months with a group of mentors. One important incentive that the entrepreneurs and the founding team members look for in an accelerator is the Money. Accelerators offer seed money in exchange for a part of equity or share in the company.
The goal of the Accelerator encapsulates networking, mentorship and resource allocation to skyrocket the success of proven business ideas. One of the popular startup accelerators in India is Catalyzer, based out of hyderabad. It’s a 101-day startup mentorship program in which it chooses 12 startups twice every year and helps them navigate through the crucial first stages.
Related – Motivational Quotes for Entrepreneurs to Ignite their Inspiration
What is a Startup Incubator?
An incubator brings in startups when they only have an idea or they even come up with the idea themselves and then just bring in founders to make that idea a reality. So an incubator starts with just an idea and usually invests capital right from the beginning and gradually owns a very large percentage of that startup. They can own up to 70% or more depending on their very own structure.
Being pertinent, a business incubator helps new startups to flourish by providing services like management, training or office space. The National Business Incubation Association (NBIA) defines business incubators as a catalyst to offer either regional or national economic development.
The NBIA segregates their member incubators by the following 5 incubator types:
- Academic Institutions
- Nonprofit development corporations
- Profit property development ventures
- Venture Capital Firms
- Combinations of the above
Business incubators differ from research and technology fragments in their commitment to start up early-stage companies. The Research and Technology part on the other hand tends to be large scale projects that hold everything from corporate, government, university labs to very small companies.
Business incubators offer startups shared operation space. In doing so, entrepreneurs enjoy a collaborative work environment with invaluable mentoring and networking opportunities, funding support, and shared equipment. In short, they offer fledgling young companies a warm, safe place to grow and prosper.
For instance, let’s spotlight India’s largest incubator for startups – tHub ! After the launch of the Startup India initiative, tHub is trying to create a dexterous community of entrepreneurs to propel more startup success stories. It stands at the intersection of startups, academia, research and development. Its mission is to promote Technology related startups. tHub is itself a startup that has grown leaps and bounds.
Related – A Glossary of 51 Startup Terms Every Entrepreneur Must Know
Accelerators in contrast to Incubators
Here are the main issues that feed the Incubator v/s Accelerator debate
Based on Project Maturity
- Incubators are meant to nurture startups through the beginning phases of their project. They provide mentorship that allows these start-ups to perform customer discovery, to prototype and develop their product, and to plan out their business.
- Accelerators, on the other hand, focus their guidance on scale-ups, which are ventures that have already developed a prototype, done project development, planned out their business, and completed customer discovery.
Based on the Duration of services
- Incubators work based on the entrepreneurs’ needs and have no time limit to the duration of the incubation services provided. Entrepreneurs can be incubated for as long as they think is necessary.
- Accelerators, on the other hand, are bound by time. This means that accelerators tend to take entrepreneurs in cohorts and provide intensive training for a limited period of time (3–6 months typically).
Based on Business Model
- Incubators do not traditionally provide capital to startups and are often funded by universities or economic development organizations. They also don’t usually take an equity stake in the companies they support.
- Accelerators, on the other hand, take equity in the companies that they accelerate. They are also instruments for entrepreneurs to find investments for their start-ups.
In closing, if an Accelerator is a greenhouse for young plants to get the optimal conditions to grow, an Incubator matches quality seeds with the best soil for sprouting and growth. Both incubators and accelerators offer a great opportunity to help young companies and ideas for startups get headed in the right direction, but it’s up to you where you need to start. Through careful self-reflection and introspection, entrepreneurs will be able to determine which is the right fit for their business at that moment.
Also Read – What is a Startup? The Ultimate Startup Guide – Definition, Types & Important Terms
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