Launching a startup is no easy task. From coming up with an idea that can actually gain traction to creating a solid positioning statement, there are plenty of caveats that can cause even the most well-intentioned startups to fail — or at least stumble along the way. This is why getting assistance earlier on to help focus targets and strategies is critical.
Enter the incubator concept. While the term is often used interchangeably with accelerators, it is not exactly the same thing. Although the end goal is to help fledgling startups gain their footing, launch and successfully enter the market, the way incubators go about it is different.
Read on to find out more about the general purpose of business incubators and what is needed before applying to one.
What Is A Business Incubator?
Ignore the marketing speak and jargon because the concept is very straightforward. Breaking down what a startup business incubator is requires nothing more than considering what the actual piece of equipment known as an incubator does. In farming or agriculture, an incubator helps to cultivate animals and crops. It creates the perfect environment for eggs to mature and hatch, or for plants to thrive and yield a bountiful crop.
Replace plants and animals with a startup, and now one can understand what a business incubator does. Incubators accept a cohort of startup applicants every season. This could be annual, biannual or even monthly. Once accepted, participants are paired with mentors that provide hands-on support to help flesh out business concepts, marketing strategies, test for proof of concept and even connect entrepreneurs with relevant businesses to establish partnerships or a client base. These mentors are not just kind volunteers. They are usually people with experience in the same industry as the startup, and could even be an angel investor with serious business acumen.
While not always offered, some incubators also provide access to funding in exchange for an equity stake in the business. This can sometimes be in the form of direct payouts from the incubator or it can be by creating opportunities known as pitch events. Pitch events are when participating startups make presentations highlighting their business, key features that differentiate the venture from competitors, and especially how the business will not just earn revenue — but intends to turn a profit.
How Is A Business Incubator Different From An Accelerator?
Technically speaking, an accelerator is very similar to an incubator. Joining an accelerator will also put an entrepreneur in a cohort with access to mentorship and networking. However, with an accelerator, funding is guaranteed. These communities lead with funding as the biggest hook since the accelerator requires taking an equity stake in the startup in exchange for financial support from every startup accepted into the cohort.
Additionally, as the name implies, accelerators are intended to be short term. While it is possible to find accelerators that nurture cohorts for a year or more, those are not the norm. Instead, it is more likely to see accelerators graduating cohorts every quarter. Similarly, while accelerator participants do have access to mentorship and networking opportunities, the expectation is that entrepreneurs are more seasoned and can work independently, rather than needing the routine hands-on support of a mentor.
By contrast, a business incubator will host a cohort anywhere from one to five years. And as mentioned previously, the expectation is that entrepreneurs join incubators to leverage that hands-on support.
Which Is Better, Incubators Or Accelerators?
There are pros and cons for both incubators and accelerators. However, choosing between an incubator and accelerator is going to primarily depend on where a startup sits within the business lifecycle as well as the entrepreneur’s capabilities.
When An Accelerator Is Better
Businesses that have already launched and confirmed proof of concept are often best positioned to participate in an accelerator. These businesses may already know what needs to be done to scale or have growth-nurturing partnerships in place, but simply need financial support. This makes the guaranteed accelerator funding attractive. Similarly, depending on the accelerator, the simple name recognition can also be enough to attract additional funding or media coverage long after graduating from the accelerator.
When An Incubator Is Better
Very early-stage startups that still have not achieved proof of concept are best served with an incubator. This is because incubators offer longer timeframes and offer hands-on support for every step of the startup maturation process. Likewise, businesses that want to boost strategic partnerships, or leverage a network of savvy investors that are experienced in their respective industries also benefit from participating in an incubator. While funding is not guaranteed with an incubator, having an industry-relevant advisor (who is often also an angel investor) can help to fortify financial growth.
Incubators To Know
Businesses considering applying to incubators should consider the following popular incubators. Each has its own set of unique qualifiers as well as application process. Take a moment to see which may be the best fit and make sure to check specific deadlines for each.