To start new companies or startups is very difficult. The founders that are looking for the right start seek the help of business accelerator or business incubators. The terms business incubator and business accelerator explain the same concept. However, there are a few differences that separate the two terms.
Business accelerator and incubator both gives the entrepreneur good opportunities. These help the founders to grow their business and improve the chances to attract good venture capital firms to invest in the startup at some point. But, the business accelerator and incubator are two different programs with a different framework.
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Business accelerators are the organizations the offer companies a wide range of support services and opportunities to acquire funds to the new companies (startups). They enroll the companies in months-long programs under which they offer the mentorship, office space and supply chain resources. Further, business accelerators program offers the companies access to capital and investment in return of equity in the company. The development of the project is time-sensitive and very intensive. The time frame of an accelerator program is of three or four months.
The main reason for the popularity of the business accelerator program is that the design of these programs provides the best of both worlds for startups as well as investors.
The accelerators strictly scrutinize the participating businesses; therefore, the investors do not need to waste their time in tracking and evaluating the new startups. Instead, they can invest in the accelerators that take the equity in startups themselves. The accelerators structures in such a way that the early-stage investors get the right to invest further if they want to. It is not an obligation for the investor.
On the other hand, the accelerators are like gold mines of resources for owners of a startup. Keeping in mind, that these organizations are run by the experts that help businesses to overcome the basic hurdles, there is no better way to guarantee the success of the enterprise than by sharing the workspace with these experts. The owners get a chance to blend with their peers and generate healthy competition that helps to boost development. But, there is a drawback of joining an accelerator program, the owner of the startups have to hand over the part of the equity in their companies to the accelerator organizations.
Difference between Business Accelerator and Incubator
At an initial glimpse, the accelerators and incubators sound very similar, but there are a couple of differences.
An incubator is an organization that helps the startups by providing shared operation space. These also support the young enterprises by providing the networking opportunities, mentoring services and access to shared equipment. This concept has been around for many years, but it gains popularity in the 1980s. Many colleges and universities started launching school affiliated incubators in order to boost entrepreneurship and employment.
These business incubators are run as nonprofit organizations. The incubators generally don’t take the equity in the company in return to the funds and resources in the way that accelerators take. As a result, the startup receives less access to the resources (funds and capital) by taking help of incubators than they could expect to receive by taking the help of accelerators.
Incubators are better than accelerators to encourage slow growth because there is no time frame in their programs. Where accelerators have a boot camp style short term programs which last only a few months, the incubators spend for years working with a startup to establish the growth of the company.
When all’s said and done, no two companies are the same. As a result, they will need different types of support in order to grow. There is no wrong or right decision when it comes to choosing an accelerator or an incubator. It depends upon the needs and requirement of the company. The startups should do thorough research and then choose according to the need of their company.123