Incubators vs Accelerators

Somehow there is this theory that Accelerators are the new version of the Old-age Incubators. IMO, that is not true. It is also my belief that in a mature and functional ecosystem, we need both the players. I’ll tell you why that is so in a second.

If we take the long hand view of what an ecosystem requires, it is not just the short wins, but also the long wins. If you look at the US right now, they are where Japan used to be in terms of Consumer products and electronics. I guess its fairly acceptable to say that today’s Apple has taken the position what the Sony of Yesterday used to stand on. Atleast, I was a big fan and buyer of Sony products a few years ago, and now Apple seems to own “most” of my wallet. Why is this necessary? It is necessary to think about an ecosystem from that perspective, because time and time again, ecosystems specialize into something so niche and then become obsolete.  Om Malik of GigaOm wrote a recent post of How Japan blew its Hardware Edge. I wouldn’t be surprised to hear and read of a very similar viewpoint of the US in the future – everything is too darn nichely focused on Software and that too on everything social.  Chris Dixon made a post a few weeks back on how you might have a better chance of success if you were a company building virtual robots on Facebook than real robots. Take my word the US is about to blow its software Edge, soon.

How does this all matter, when we are talking about Incubators and Accelerators? It does, because its about the short wins and the long wins.

Incubators are a core part of what is needed to align with long term research. There are sectors such as Energy – for example – which take years of engineering to find that one key element which can give you a single digit enhancement on solar energy production – and in that space, its really a big deal and an opportunity you can make a fortune on. Sadly so, the research effort that goes behind it HAS to be backed by Academia and applied sciences. There is simply no way to build that over a weekend prototyping event.

Accelerators on the other hand, follow a simpler rule of coming up with elegant solutions to everyday problems. Because the solutions are – for lack of a better word – Shallow, its far easier (in comparison) to prototype, do market access, validate and grow quickly. Because its a problem everybody relates with, its also easier to get funded – than the startup which is trying to introduce a brand new way of gene sequencing or that startup around the corner which has built the software to scan infrastructure for hairline fractures (and are absolutely crucial when it comes to monitoring the health of Nuclear Plants, Aircrafts and Space Shuttles – let alone bridges) but the business models around it arent that easy to understand. Accelerators, also only make sense for certain – or in particular one niche segment – which is Software and Software-based.  Marc Andreeson wrote a post on Why Software is Eating the world which will give an indication as to why this is happening. Almost all technology platforms seem to be transitioning to software on the delivery and end-user level on standardized hardware platforms (or atleast on the core level), which makes it easier for technology startups to be accelerated in a slightly different manner.

Truth though is that We need them both. We need the Accelerators to help build and accelerator startups towards the “smaller” and short wins, and we need the Incubators to build platforms and core technologies that can keep us grounded on the tectonic plates that we as an industry and ecosystem stand upon. If you are an investor, I’d advise to hedge the bets with some proportion on both – any sane investor would be doing that.

Bottomline:

• Incubators and Accelerators are not terminologies to be used Inter-changeably. They both mean very different things.
• We need both the Incubator Ecosystem and the Accelerator Ecosystem for the Larger landscape to remain a healthy one
• The process and learnings from the faster iterations of Accelerators would fuel the larger incubator ecosystem as well in the longer run.
• Accelerators as a Model, work only for “Fringe” opportunities for Software and Software-based Startups (IMO – Would love to hear cases, if they exist)

If you are a startup looking to decide where your footing should start from, Here is a small chart that can help: