Startup Incubator Overview
What Is a Startup Incubator?
As the name suggests, startup incubators are collaborative programs constructed to incubate and nurture innovation. Incubator programs are designed to support startups in developing their ideas and the earliest stages of their businesses — providing education, mentoring, help with design and tech issues, physical workspace, and sometimes even seed money and working capital.
Here are some of the services that incubators provide to startups in their programs:
- Physical Office Space
- Technological Resources
- Basic Business Skills Development
- Comprehensive Business Training
- Mentors and Advisors
- One-on-One Coaching
- Network Opportunities
- Collaborative Opportunities
- Assistance Building a Team
- Access to Grants, Loans, & Funding
- Technology Commercialization
Incubators vary widely in their offerings and program models. Many incubators accept applications into their programs, while others only take referrals from their trusted partners. Incubators also may be cohort-based — running for a specified time — or incubators may have rolling admissions. Incubator programs also vary greatly in their length: some programs are a few weeks long, while other incubators nurture startups for several years.
While the quality of incubators varies greatly, and participating in an incubator certainly does not guarantee a startup’s success, entrepreneurs often benefit from the long-term mentoring and support as they work to develop their ideas and launch their startups.
Startup Incubator vs. Accelerator
Similar to incubators, accelerators help support cohorts of entrepreneurs. However, accelerators differ from incubators.
What Is a Startup Accelerator?
Startup accelerators are programs that provide education, coaching, and funding to early-stage, growth-oriented businesses. Startup accelerators are designed to accelerate the life cycle and growth of early-stage startups that need mentorship, support, and investment development in order to succeed.
Accelerators typically accept applications for fixed-term, cohort-based programs. Once a startup is accepted, startup accelerator programs last anywhere from three to six months and involve a fast-paced, rigorous, and immersive education and coaching experience on all things growth. Although each program is different, accelerators typically accept two to three cohorts a year.
Check out our list of the best startup accelerators.
What Are the Differences Between a Startup incubator and an Accelerator?
Startup incubators and startup accelerators are often confused with one another. While the mission of both startup incubators and startup accelerators is to help startups succeed, some key differences distinctly define each one.
Simply put, startup incubators concentrate on the earliest startup stages when the startup may be little more than an idea. Incubators focus on survival and growth.
On the other hand, startup accelerators are designed to propel the growth of early-stage startups that already have a minimum viable product and are or are near operating. Accelerators, then, focus on growth and expansion.
Here are some of the key differences between startup incubators and startup accelerators:
- The Stage of Your Startup
- Length of the Program
- Training, Mentoring, and Resources
- Business Model and Profit Motivation
The Stage of Your Startup
One of the major differences between startup incubators and startup accelerators is the stage of startups to which they specialize in and support.
Startup incubators are constructed to help entrepreneurs in the earliest days of their startups. Incubators help startups develop their ideas into business models, create business plans, and move entrepreneurs toward launching a business.
Startup accelerator programs are designed for startups with visions that are fully realized and need assistance with scaling and growth. Accelerators prefer to work with startups who already have a minimum viable product (MVP) and are (or are near) operating capacity. Accelerators then help them scale and grow. Therefore, accelerators are most advantageous for startups in the early and middle stages of their life cycle.
Length of the Program
Another notable difference between startup incubators and accelerators is the length of each program.
In general, incubator programs mentor and train startups over longer periods of time, typically ranging from one to five years. In fact, the average time a startup spends in a startup incubator is about two years.
Accelerators, on the other hand, are fast-paced, intense programs designed to rapidly boost growth and development and usually range from three to six months long.
Training, Mentoring, and Resources
Startup accelerators and incubators each utilize different approaches to training, mentoring, and access to resources. Most startup accelerators incorporate a rigorous training program with seminars, workshops, and courses, combined with hands-on coaching and mentoring to teach entrepreneurs the skills to develop and grow their startups.
As opposed to a rigorous training program, startup incubators utilize a longer program that is less hands-on and allows entrepreneurs time to explore and develop their startup ideas. Although incubators often offer training through events, mentorship, networking, and other ad hoc support, they are more tactical and less hands-on.
Business Model and Profit Motivation
Another key difference between startup accelerators and startup incubators is their business model and profit motivation. Startup accelerators are profit-focused, and most accelerators operate as for-profit businesses. They invest in and provide resources to companies in exchange for equity in the startups that they support. Accelerator programs focus on increasing the startup’s value to yield a profitable return on their exit.
Most startup incubators, on the other hand, are nonprofit organizations. These incubators are typically sponsored by universities, government agencies, and local economic development organizations. Many receive most of their funding from government programs, corporate and investor sponsorship, participation fees, and office rent. While they do provide a network for startup companies to solicit funding from outside sources like angel investors and venture capitalists, nonprofit incubators do not typically provide seed funding or require equity in your startup. Instead, their motivations are the creation of a startup ecosystem, the nurturing of innovation, and general economic development.
Note: In addition to nonprofit startup incubators, for-profit incubators with equity-based business models have also become popular. Many of these for-profit incubators offer seed money and working capital, in addition to their other services, in exchange for equity in the venture.
Startup Incubator Pros
Now that you know a little bit more about what a startup incubator is, it is time to weigh the pros and cons of applying to and participating in an incubator. Here are some of the biggest advantages of startup incubators:
Community, Connections, and Networks
One huge benefit of participating in a startup incubator or a startup accelerator is the huge network of people that you will meet. Incubators are collaborative programs where you have opportunities to connect with other startups in the incubator, startups in the community, mentors, advisors, alumni, and potential investors.
Coaching, Mentoring, and Skill Development
Another benefit of choosing a startup incubator is the education, training, and mentorship provided by the incubator. As compared to accelerators, incubators take a more focused approach to mentorship. Incubators work to connect you to a network of successful entrepreneurs in your field so that you can find the mentoring and advice you need for your startup.
Access to Capital and Investors
Yet another benefit of participating in a startup incubator is access to capital. Although most incubators do not actually provide capital to startups accepted into their programs, they often know about and can offer advice on securing grants, loans, and other sources of funding. A well-connected incubator will also have access to angel investors and venture capitalists within their networks and may be able to make introductions when the time comes to seek investments.
An additional benefit of participating in a startup incubator is added credibility. A startup’s relationship with a startup incubator signals legitimacy and lends credibility to your startup. This acts as a form of social validation, sending the signal that others see the value in you and your startup as well.
Startup Incubator Cons
Despite all of the upside, there are also several drawbacks to applying to and participating in a startup incubator. Here are the biggest disadvantages:
Finding the Right Incubator
Finding, applying to, and getting accepted to the right startup incubator is no simple task. Incubators vary greatly in terms of their business models, the help and support they provide, their connection with investors, and their track records of success. With thousands of incubators in the US alone, it can take a significant amount of time and effort to research incubators and find those that are the right fit for your startup. What’s more, researching programs requires time and effort that you could spend working on your startup.
The Startup Incubator Application Process
Another downside of startup incubators is the application process. Depending on the startup incubator, the application process can be a rigorous process and extremely competitive. Top incubators receive hundreds of applications and only have the resources to support a fraction of those entrepreneurs and startups.
Time and Dedication
Although seeking out a startup incubator program might seem like the best idea for your business, many incubator programs require a large commitment of time. With an average incubation of two years, you need to be dedicated to starting a startup and committed to dedicating the next several years to building your business.
Startup Incubator Examples
With over 1,000 startup incubator programs in the US and many more globally, startup incubators also vary nearly as much as startups. Many startup incubators are funded by universities, nonprofits, and other government programs and are open to a variety of startup ventures. Others are funded by venture capitalists and corporations and may be very narrow in focus or industry.
Here are a few of the most popular startup incubators, each having helped nurture hundreds of startups:
- ATDC: The Advanced Technology Development Center (ATDC) is a startup incubator run by Georgia Tech. Founded in 1980, ATDC is one of the oldest incubators in the United States, building a global reputation for fostering technological entrepreneurship. ATDC was even named to Forbes list of “Incubators Changing the World” in 2010 and 2013. ATDC has incubated more than 190 companies, with 90% of its companies still operating and successful after five years.
- CodeBase: CodeBase is the United Kingdom's largest startup incubator, with its core programs located in Edinburgh, Aberdeen, and Stirling. CodeBase brings together ambitious entrepreneurs, world-class technology talent, and top investors in a creative, collaborative atmosphere intended to nurture ideas and help entrepreneurs develop and launch technology-based startups. Currently supporting 400+ startups, CodeBase has helped tenants raise more than $600 million in funding.
- The Tech Garden: The Tech Garden is New York’s premier business incubator. Founded with a mission to convene and support Central New York's startup community, The Tech Garden has become a hotspot for tech entrepreneurs. In 2020 alone, companies incubated at The Tech Garden raised $100 million in follow-on funding and generated $54 million in profit.
Is an Incubator Right for Your Startup?
If you are working on a startup idea with high-growth potential and are still in the idea or early stages of launching your startup, a startup incubator may be right for you. Furthermore, if you have an idea but can’t quite figure out what to do next, then a startup incubator might be great for you. Incubators can provide a tremendous amount of help, including office space, technical support, assistance with legal and operational issues, and a network of resources needed to launch a business successfully.
If you do decide that a startup incubator is right for you, it’s best to take the time to do your research. You should weigh the costs of participating in the program against how many resources the incubator can provide, the quality of their resources and network, and the incubator’s record of success.