Failory - Startup Accelerators vs. Incubators

Hey — It's Nico.

In July, I'm publishing some articles related to Startup Ideas. This week, an article on Accelerators vs. Incubators.

🙌 Welcome to the 436 founders who joined this week.

This issue is brought to you by Around:

A few months ago, I downloaded Around, looking for ways to improve my Zoom's calls with other startup founders.

I've since stuck to Around for two reasons: 1) it frees up my screen, which allows me to easily read and take notes as I have the call; 2) my background image and noise are always messy and Around helps me avoid founders from noticing this.

If you're a first-time founder, chances are you'll feel lost at some point in your startup journey.

Most founders struggle with the earliest stages, not knowing how to execute their ideas. Other founders are able to get some traction for their startups but then struggle to keep growing it.

In either case, joining a startup accelerator or incubator program could be a good solution.

What is a Startup Accelerator? They are short, intensive funding and mentorship programs designed to help startups jumpstart their growth. They typically are very competitive and accept a fixed number of applicants at regular intervals (usually every 3-6 months).

During the time you spend as part of an accelerator, you’ll have access to a variety of resources: a chunk of initial venture capital, mentoring and advisory services, networking opportunities, chances to raise further seed funding, and collaborative office space.

What is a Startup Incubator? They are similar to accelerators, except that they tend to be longer term, less intensive, and more informal.

They also provide resources: office space, equipment, access to mentors, a collaborative community, and valuable business services, such as financial management, human resources, and legal assistance.

What are their differences?

1. Stage of Venture: Startup accelerators almost always only admit startups that already have a minimum viable product, while incubators generally don’t care about whether or not your company even has a prototype yet.
2. Seed Funding: Startup accelerators are quite funding focused, while incubators do not generally invest capital into the startups they accept, although they may ask for a small equity stake in return for their services (some also charge a small monthly fee to cover office and equipment expenses).
3. Program Timeline: Startup incubators almost always run longer than startup accelerators. The typical length of an incubator is at least 12 months, with some lasting for several years or indefinitely. Most startup accelerator programs are either 3 or 6 months long.
4. Relocation: If you join a startup accelerator, you typically have to relocate and spend much of your time physically in the program’s offices. Incubators are much more casual, and you would normally apply to one in your local area.
5. Type of Office Space: Startup accelerators usually provide a private office space to host the founders and companies they accept. Incubators, instead, provide some type of personal office space within a shared facility.
6. Competitiveness: Since startup accelerators directly fund the startups they accept, they are usually highly competitive. Startup incubators do not have such a competitive application process. Since they don’t directly fund startups, they have less to lose if your startup doesn’t become profitable.
7. Type of Mentorship Offered: Startup accelerators usually provide founders with dedicated mentors and one-on-one guidance. Incubators are often more informal with the mentorship they provide (they hold open office hours or host special events).

To determine whether you should join a startup accelerator or an incubator, ask yourself:

• What stage is your company at? I.e., Do you only have an idea, or do you already have an MVP?
• What are your primary goals for joining an incubator or accelerator?
• What does your business’s timeline look like?

Remember that startup accelerators and incubators are not mutually exclusive, and many organizations offer variations of both types of programs.

If you want to learn further about the differences between these two great sources of funding, mentorship, and networking opportunities, check our article.

​Here's our article on Startup Accelerators vs. Incubators.

If you found today's article useful, you may enjoy these two articles we published some months ago:

• ​A Guide to Startup Accelerators​
• ​Startup Incubators: What Are They & How They Work​

As every week, here are 3 recommended resources:

• ​Revenue-Based Finance: Revenue-based financing gives companies capital in exchange for a percentage of their future revenue. This article dives into how it works.
• ​The Double-Edged Sword of a Lifetime Deal: A lifetime deal is when, for a limited time, you offer your product for an absurdly low, non-recurring price. This article analyzes its pros and cons.
• ​Publishing Your Work Increases Your Luck: This article proposes the following formula: Luck = [Doing Things] * [Telling People].

I hope you enjoyed this week's newsletter!

Cheers,

Nico