If you’re a startup founder looking to take your company to the next level, you may be considering applying to an accelerator or incubator program. Both offer support and resources to help startups grow, but they have some key differences. In this article, we’ll break down what accelerators and incubators are, the benefits of each, and what factors to consider when choosing between them.
What Is a Startup Accelerator?
A startup accelerator is a fixed-term program — usually lasting three to six months — that provides participating startups with mentorship, education, networking opportunities, and often seed funding. Startups typically give up a small amount of equity to participate. The goal of a startup accelerator program is to rapidly advance early stage startups in a short period of time to get them ready for further investment or launch.
Benefits of Startup Accelerators
Startup accelerators offer a range of benefits to help startups grow quickly, including:
- Access to experienced mentors who provide guidance and support
- Educational programming on key startup topics like pitching, fundraising, and scaling
- Opportunities to network with other startups, investors, and industry experts
- Seed funding to help cover costs and kick-start growth during the program
- A time limitation, which creates urgency and forces rapid progress
- Credibility based on association with a well-known accelerator brand
What Is a Startup Incubator?
A startup incubator provides longer-term support, workspace, and resources to early stage startups — usually taking little to no equity in exchange. Incubators are often associated with universities, economic development organizations, or venture capital firms. The timeline is more flexible and graduation is based on achieving certain milestones rather than a fixed duration. The focus is on nurturing the startup during its early stages.
Benefits of Startup Incubators
Startup incubators offer a myriad of benefits to help early stage startups grow, including:
- Affordable or free coworking space and business services
- Longer-term support that allows startups time to organically develop and find a product-market fit
- Less pressure to scale quickly in a more nurturing environment
- Greater ownership retention because incubators usually don’t take significant equity
- Connections to universities and research institutions for sector-specific startups
- The potential for small amounts of funding through grants or loans
What to Consider When Comparing Incubators vs. Accelerators
Now that we’ve covered what accelerators and incubators are and the benefits they offer, you might wonder which one is right for your startup. The answer depends on a variety of factors, including your funding needs, your startup’s stage of development, the cost of participation, the details of the program, and if your startup meets the acceptance criteria. Let’s take a closer look at each of these factors to help you make an informed decision.
Funding Opportunity
One of the main differences between accelerators and incubators is the funding they provide. Accelerators typically offer seed funding to participating startups — usually in the range of $20,000 to $150,000 — in exchange for a 5% to 10% equity share. This funding is meant to help startups cover expenses and scale quickly during the program. Incubators, on the other hand, rarely provide direct funding. Some may offer small grants or loans, but most do not take equity or make significant investments in the startups they support.
Startup Stage of Development
Accelerators and incubators target startups at different stages of development. Accelerators look for startups that have already made some progress — usually having a minimum viable product (MVP) and some initial traction in the form of users, customers, or revenue. They want startups that are ready to hit the ground running and scale quickly.
In contrast, incubators often accept startups that are much earlier in the development process. These startups may still be refining their idea, conducting market research, or building their first prototype. Incubators provide a supportive environment for these early stage startups to develop and grow at their own pace.
Cost of Participation
Another factor to consider is the cost of participating in the program. The cost of participation in an accelerator can vary with many programs being offered for free or paid for through funding provided by the accelerator. Additionally, many accelerators cover their costs through the equity they take and the investments they make in the startups.
Because they don’t usually make investments, Incubators often charge startups a small fee to cover the cost of the space and resources they provide. However, these fees are usually quite low compared to typical office rent and business service costs. Some incubators — particularly those associated with universities or economic development organizations — may even offer space and resources for free.
Program Details (Location, Duration, Etc.)
Accelerators and incubators also differ in the structure and intensity of their programs. Accelerators are usually very structured with a set schedule of workshops, mentoring sessions, and networking events. They typically require founders to work full-time on their startup for the duration of the program, which is usually three to six months. Many accelerators also require startups to relocate to the city where the program is based for its duration.
Incubators, in comparison, typically have a more flexible and longer-term approach. They provide ongoing support and resources, but don’t usually have a set end date. Startups can often stay in an incubator for a year or more. The programming is less intensive with fewer mandatory events, allowing founders to work on their business at their own pace. Incubators also don’t usually require relocation.
If Your Startup Meets Acceptance Criteria
Getting into an accelerator is highly competitive. Top programs like Y Combinator and Techstars accept only 1% to 3% of the startups that apply. They look for standout teams with innovative ideas and the potential for high growth. Incubators usually have more relaxed acceptance criteria. They often focus on supporting startups in a particular sector or geographic region and may have mandates to support underrepresented founders.
While getting into a renowned accelerator can be a significant validation for a startup, incubators can be a great option for startups that don’t meet the strict criteria of accelerators or prefer a more supportive, less pressured environment.
Frequently Asked Questions
What is the difference between an accelerator and an incubator?
The main differences between accelerators and incubators are their duration, structure, and the stage of startups they support. Accelerators are short, intensive programs that usually last three to six months and provide seed funding, mentorship, and networking opportunities to help early stage startups grow quickly. Incubators offer longer-term support, often one to two years, and provide workspace, resources, and mentoring to very early stage startups — typically without taking equity.
What is a seed accelerator?
A seed accelerator is a type of startup accelerator that focuses on very early stage companies, providing a small amount of seed money and mentorship in exchange for equity. Seed accelerators are designed to help startups get off the ground quickly and prepare for larger investments in the future.
Is Y Combinator an incubator or accelerator?
Y Combinator is a seed accelerator. It provides a three–month program where selected startups receive $500,000 in funding, advice, and connections in exchange for a 7% equity share. After the program, startups have the opportunity to pitch to a large audience of investors on Demo Day.
What is the difference between incubators, accelerators, and venture studios?
Incubators nurture early stage startups by providing workspace, mentoring, and resources. Accelerators help more mature startups grow quickly through a structured, time-limited program that includes seed funding and intensive mentoring. Venture studios, also known as startup studios, create their own ideas and build startups from scratch, providing more hands-on support and resources than incubators or accelerators.
What are the disadvantages of incubators and accelerators?
The main disadvantages of incubators are that they don’t usually provide funding and may not have a proven track record of success. For accelerators, the disadvantages include giving up equity, the intense time commitment required, and the pressure to grow and scale quickly, which may not suit all startups. Both incubators and accelerators also can be distracting, taking time away from actually building the business.