Business Education

Difference between Accelerators and Incubators

Main Difference

The main difference between these two type of professional training accelerators and incubators is that accelerators are about the growth of an existing company while incubators stand for building out a business model and company.

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Comparison Chart

Basis of Distinction Accelerators Incubators
Definition Accelerator is a place for existing business that helps them achieving growth in their businesses. Incubator is a place for new small businesses and startups that offer support staff and equipment for further development
Objective Support startups with an array of business support resources and services, orchestrated by incubators Support startups with a structured program along fixed curricula
Time Period Intense three to four-month program Less time pressure and less intensive
Business Model Large mentor-driven business network Smaller mentor network
Entrance All can apply Restricted and depends on the incubator
Selection Extremely selective Usually less selective
Equity Ratio Take 6 to 8% equity stake No equity stake was taken
Resources Ample Some
Areas The Web, mobile, IT Biotech, Medtech and products
Selection Process Competitive – essential to business model Competitive – based on available space and resources
Demo Day Yes No
Services Fast-test and validation of ideas, with mentoring support from experienced entrepreneurs and seed-funding Management support, IP rights assistance, networking and access to external financing

Accelerators

Accelerators that are also known as startup accelerators are cohort-based programs for fixed terms that include mentorship and educational components and culminate in public pitch event. Unlike incubators that are usually government funded, accelerators can be either public funded or private and focus on a wide range of industries. In most of the countries, there are widely open to anyone, but it is highly competitive. Most of the accelerator shares some characteristics of incubators by offering professional advice and guidance to startups. According to Bloomberg, “accelerators institutes designed to turn business ideas into reality or giving a ready to use shape to the existing products and making hem ready for the market. Sponsors provide initial funding and expertise to small groups that can demonstrate a great product idea. In return, the sponsors take a small equity stake in the new business, which might be around 6 percent.” The emphasis of accelerators is more to the rapid growth of business and a successful product launch. At the end of the period, the businesses have the opportunity to make a pitch to venture capitalists to obtain further financing.

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Incubators

Incubator is a form of business place that assists the new and startup companies and individuals in developing their products and ideas by providing them services like management, training, resources and office space. For the information of the readers, incubators are entirely different from the technology parks in a sense these are designed for the startup and to some extend early stage companies. Incubators provide the new businesses and startups with office space, shared facilities, and resources like internet connections, telecommunications systems, etc. In addition to startups, existing entrepreneurs can also access and guidance from these kinds of places. Most of the incubators are run by NGOs such as economic development agencies and government groups. Nowadays, universities and educational institutes are also offering incubations centers where both startups and professionals can make an entry into the research activities on campus or can take existing research and turn it into a commercial business. The services offered by the incubators include management support, IP rights assistance, networking and access to external financing. Incubators are suitable for startups because they don’t ask for an equity stake.

Key Differences

  • Accelerators deal in the large mentor-driven business network while incubators deal in small mentor-driven research work.
  • Accelerators are more common in the USA while incubators are more common in Europe.
  • Accelerators emerged in 2005 while incubators emerged in the 1960s.
  • Accelerators offer small seed funding while incubators usually have no funding scene.
  • Accelerators apply to lean startup methodology while incubators apply to management methodology.
  • Industry drives accelerators led while academic is driven by academic led.
  • Accelerators focus more on applied sciences and technology-based programs while incubators focus more core science and other technology-based
  • The sectors of accelerators are fundamentally software and software based areas while the sectors of incubators are technology platforms, clean energy, healthcare, biotechnology, automotive, material sciences, and agriculture.
  • Incubators focus more on technology as compared to the accelerators.
  • Accelerators require weekly reality checks while incubators require not so much reality checks.
  • Accelerator offers small seed funding while incubator requires usually no seed funding.
  • Incubators guide assist startups in growing and succeeding in an unstructured program, with no specific goal or timeframe. Accelerators provide hep to already stabled company to get ready and achieve its particular goal, typically to raise financing.
  • Incubators prepare you for initial stages while accelerators prepare you for a major
  • Accelerators typically have a more rigid process as compared to the incubators.
  • Incubators are the best option for idea development while accelerators are the best choice for startup growth.

Video Explanation

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