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Startup? Can You Figure Out If You Need An ‘Accelerator’ Or An ‘Incubator’?

Startup? Can You Figure Out If You Need An ‘Accelerator’ Or An ‘Incubator’?

Considering that the entrepreneur wave is at an all-time high the world over, the ecosystem too has been responding positively to keep up the tempo and give the rising trend a further boost. The fact remains that a majority of startups that are launched fail to survive past the crucial first year and the ‘great idea’ often dies with it. To better their chances of succeeding in the long run, they need handholding at various levels. They require mentorship and understanding of the business which can help them scale up. And to get the necessary support, they now have angel networks, mentors/advisors and accelerators/incubators to count on.

Accelerators and incubators offer mentorship, capital, seed funding, tech, infrastructural support and everything else they need to build a strong and lasting foundation.  Though both accelerators and incubators serve as enablers for the startup ecosystem, it is important to understand how they differ from each other, so you know which way to go when you reach out for the necessary support.

A business incubator mentors and fosters a company completely in its initial stage by offering office space, business skill training, professional expertise and financial help; essentially offering the necessary advice and infrastructure for the business to stand on its own.

On the other hand, an accelerator plays a pivotal role post incubation and pre-VC funding to enable the startups to build scalability and healthy business metrics. Just like guiding a teenager is the most trying period for any parent, similarly, this stage is very crucial as most new ventures get stuck in the trenches of day-to-day operations and the need for guidance is far from over. In the midst of all the hustle-bustle, drawing up long term strategic plans (that are extremely critical to give a clear direction to the business), takes a backseat. Here’s where an accelerator comes into the picture. Its pursuit is to grow the size and value of a company as fast as possible, and prepare it for the initial round of funding.

Apart from this, the amount of time a company spends in an incubation program can vary widely, depending on a number of factors, but the period is generally longer as compared to an accelerator program, which typically ranges from a few months to a maximum of 1 year. So, while incubators essentially jump start your business and then kick you out of the nest; accelerator programs are more intensive and aim for the startup to raise venture capital fund at the end of the program and therefore, entrepreneurs who adopt this program for their company should understand that it will demand aggressiveness not only from them but also from their teams.

Moreover, some of the accelerators offer seed funding to the startups that come to them for the ‘run for investment program’ and also take a stake in the company. An incubator normally doesn’t offer any funding or take any stake in the company, but offers more of mentorship and shared resources (common office space and other basic infrastructure for startups etc.), without which taking the ‘entrepreneurship plunge’ can seem intimidating. Since most of the accelerators have a stake in the company, they do all-that-it- takes to ensure that the startups they are mentoring are successful, and just like the name suggests, they are able to accelerate the pace of growth and readiness for Series A funding for their startups.  In fact, a good accelerator would handhold a startup from start to exit.

Yet another differentiator is the fact that incubators have much smaller mentor networks as compared to an accelerator network where mentorship could be coming from more than 100 entrepreneurs who are affiliated with the accelerator. Most of them are successful CEOs or investors who are looking to fund the ‘next big idea/company’ or simply to help the local start-up community. They offer expertise in all areas related to a business – marketing, public relations, legal, strategy-making, engineering, accounting, operations and what not – everything that one needs to take the business to the next level.

The advice that one gets from the accelerator community is not philosophical but straight and clear ‘actionable talks’, because everyone there is interested to see the startup succeeding fast, very fast. This community works extensively on building a solid revenue stream for the company because that’s how they can prepare the startup to raise funds. Today investors in India are not just looking for a million-dollar idea or a power point presentation. Rather, they are interested in investing in companies that have already productized their ideas and have a revenue stream, i.e., they are looking for ‘real’ traction.

Reality checks are important for any company to know whether their business model is going in the right direction or not and an accelerator program is built to keep a continuous check on the company’s health.

Considering the immense support and value that both incubators and accelerators add to a startup at different stages in the early phase, there’s no denying that they make the journey far less bumpy for a startup. As an entrepreneur, if you are driven to ‘get it right’ the first time and better your chances of succeeding in the long run, all it takes is to reach out to a credible incubator or accelerator…Who knows, you might just be the next ‘Billion-dollar baby’ in the making! 

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.