Business mentorship programs
Accelerators and incubators are both selective business mentorship programs that provide potential funding and additional support, but they differ significantly in goals and methodology. Which type of program you decide to apply for, if any, will depend on your specific plans and business outlook.
What is a business accelerator?
Business accelerators are programs that provide startup businesses with capital funding, expert mentorship and access to additional resources such as supply chain and manufacturing connections. Accelerators focus on rapid business growth and typically last three to six months. The programs offer their services in return for an equity stake in your business, generally between 4% and 10%, depending on the program. If accepted into a business accelerator program, you can expect to be grouped with a cohort of fellow business leaders in a fast-paced, high-pressure environment encouraging friendly competition.
What is a business incubator?
Incubators are also programs designed to support businesses with mentorship and a variety of additional resources. They provide access to a shared physical space and invaluable networking opportunities with peers and experts across the full range of business disciplines. They generally do not have a set duration; rather, they intend to support businesses with slower, consistent growth over the long term. Participants enter and exit continuously as opposed to staged cohorts. Nonprofit organizations often run business incubators and do not require an equity stake. As a result, while direct funding for your business could be possible depending on the specific program, it is significantly less than what an accelerator would provide, if available at all.
Which program is right for your business?
Both business accelerators and incubators are valuable programs, and neither is categorically better than the other. But if you choose to apply for one of these programs, it is critical to understand which one will be most beneficial to your specific business and situation. Both program types are selective and will only accept business applicants who are the right fit.
While you can expect to receive expert mentorship and support, networking opportunities and peer connections in both environments, consider the particular elements below in determining which type of program best suits your business:
1. Current state of your business and growth potential
Accelerators are often looking for startups ready to launch (or already have) with a fully realized concept. If you’ve already formed a comprehensive and detailed business model, and your startup is positioned for immediate rapid growth, a business accelerator has the potential to provide you with significant benefits.
Incubators are better suited to businesses in the earlier stages of development. If you have a good concept but have not quite nailed down your business model and are looking for more early-stage guidance along a less explosive growth trajectory, a business incubator may better tailor your startup to ensure its health and success.
2. Maturity of your product
Business accelerator programs generally only accept startups with an established minimum viable product (MVP). The growth-oriented nature of these programs necessitates that you already have a product developed that is ready for market. If you have an MVP ready to go, an accelerator can provide you with a more immediate and aggressive entry into the market than an incubator.
On the other hand, business incubators are a better fit if you have a solid idea but are still in the conceptual stages of product development. Incubators can provide guidance and facilitate the technical design process as you transition from concept to your first marketable MVP.
3. Team composition and experience
When evaluating if your startup is well-positioned for the growth goals of a business accelerator, consider the makeup of your team as well. It requires an experienced and capable founding team to navigate a business accelerator’s demanding environment effectively and guide your business along a steep growth trajectory. An accelerator may be the ideal program for your business if this isn’t your first startup or you’ve assembled a highly capable founding team.
If you are bringing your business to life on your own or with a relatively small team, an incubator’s slower pace and learning-oriented environment will be a better fit to ensure long-term success and avoid rapid burnout.
4. Current and future capital requirements
Rapid growth being the enduring theme, accelerators provide startups with immediate capital funding to get off the ground. While accelerator programs themselves are relatively short, consider the long-term implications of the accelerator arrangement. In return for its capital investment and services, you will be handing over an equity stake in your business to the accelerator organization. If not carefully managed, this can lead to future equity dilution as you secure additional funding rounds. Based on your goals, this may or may not be compatible with your long-term outlook, and you should carefully assess this before taking the business accelerator route.
In contrast, business incubators will provide little, if any, direct funding. When it comes to capital investment, the benefit of an incubator comes from its network of partners and associates. While you shouldn’t expect any direct money from an incubator, you can use the incubator’s mentoring opportunities and extended network connections to secure your own funding. In an incubator’s slower-paced environment, you’ll have more time to work through this process alongside experts.
Even with the exceptional benefits provided, not every business is in a place to be improved by one of these programs, and neither type of program is a requirement for a startup to be successful. However, if after reading this summary you find your business fits much of the discussed criteria, it is well worth considering leveraging an accelerator or incubator program to support a solid start and a bright future for your business.
