Acceleration and incubation tend to get lumped together. They are all programs that support early-stage businesses, right? Not so fast. These programs may have a lot in common, but they each serve unique needs and have very different functions.
Accelerators, in particular, are becoming more and more prevalent around the world. So, if you’re starting your own business or advising those who do, it’s important to understand the differences between incubation and acceleration, as these key concepts will help you decide which program is best for your company at this stage of growth.
Read on to learn more about the differences between incubation and acceleration and which one is right for you!
What is a business incubator?
A business incubator is a program that supports early-stage startup companies to expedite profitability and success by creating a business plan, developing a product or service, and finding product-market fit.
Incubators provide startups with valuable resources such as free office space, equipment, mentorship, a collaborative community, and networking opportunities with potential funding sources, like angel investors and venture capitalists with the goal of helping start-ups to grow quickly to the point where they can stand on their own.
Business incubators focus on brand-new businesses that still need to develop a product idea and business model.
What is start-up acceleration?
A startup accelerator program expedites the growth of existing companies that have developed business models and validated products in the marketplace. Startup accelerators provide companies with valuable resources such as mentorship, free co-working spaces, legal services to help secure intellectual property, a collaborative work ecosystem, and access to industry influencers and potential investors.
Startup accelerators take on businesses that already have a solid foundation to build upon, so accelerators focus their guidance and resources to help ventures scale up as quickly as possible not just to the point where they can stand on their own, but to a point where they can stand out from the crowd.
The goal is to help ventures reach “scale” – the point at which they have the capacity to expand their business across multiple markets and geographies. In addition, accelerators commonly give their ventures a seed investment and take equity stakes in the companies.
Business Incubator vs. Startup Accelerator: What’s the Difference?
While there are similarities between Business incubators and startup accelerators to the extent that people may use their terms interchangeably, there are key differences between these business development models:
1. Business stage
This is the biggest difference because Incubators focus on early-phase startups that are in the product development phase with no developed business model but Accelerators focus on speeding up the growth of existing companies that already have a minimum viable product (MVP).
2. Seed funding
Incubators do not typically invest capital into ventures, and usually they do not ask for equity in companies. But in Accelerators, it is a standard practice to provide ventures with a seed investment in exchange for an equity stake in the company.
3. Program duration
Incubation is a long-term program that may take from 1 to 3 years because The goal is to incubate a business idea for as long as needed to build a successful company. On the other hand, an acceleration program is a short-term program that runs more like a startup boot camp and tends to have a set time frame of only three to nine months.
It is important to realize that there are many different types of funding models for start-ups, and while some might be more familiar than others, it is crucial that you take the time to understand them all. By looking at all of your options you can make an educated decision about which model is right for you and your business.
Check out the instaDeel e-book for a business guide and Acceleration/Incubation list from here