If you have a young start-up business you’re most likely looking for ways to grow your business. You may be looking for help refining your company idea and the creation of your company’s structure. Alternatively, you may already have that in place and be in need of a boost to move your more established start-up forward toward gaining investors. Accelerators and incubators are often considered for this purpose, however, they can be quite different. The question is, which one is best for you based on the stage of your company’s growth and development? Plus, what, exactly, are the main differences?
Start-up accelerator versus incubator
Accelerators and incubators are terms that are frequently interchanged, but they are not the same. Accelerators are designed to increase the rate of growth of an existing company to the point where approximately two years of business building is often accomplished within a few months’ time. Incubators, on the other hand, typically aid in the development of new ideas and the creation of brand new companies. The other main difference between these two is that start-up accelerator programs are usually of a fixed length and much more structured than incubators that don’t have the same time-limit or set programming.
The Start-up Accelerator Process
As mentioned above, accelerators are more structured. They have a common process that includes:
Application and Acceptance – Accelerators can be very difficult to get into. Their process starts with an application where typically 1-3% of start-ups are accepted. This initial step allows you to interact with the operator and learn more about their specific program. Acceptance does not mean that you must join the program or sign any paperwork.
Funding – Often an attractive feature of accelerators, seed money ranging from $10,000 to more than $120,000 is typically offered in exchange for equity in the company. Although this may appear to be a small portion of your company to give up, remember its potential impact on future fundraising efforts.
Focus – The start-up accelerator program process forces business owners to apply focused effort and make progress over a 3 to 6 month period.
Learn – Accelerators incorporate a wide range of educational activities including seminars, workshops and mentorship opportunities. They cover topics related to launching a venture, legal topics and practice pitching to investors.
Network – Many networking opportunities are included in the accelerator experience including those with peers, industry support providers and potential investors.
Demo Day (a.k.a. graduation) – At the end of the start-up accelerator experience a graduation-like event is held. It’s a “Demo Day,” short for Demonstration Day. This is where all participants present their pitch to a group of active investors that sometimes is in the hundreds.
Advantages of Start-up Accelerators
Why should you consider one of the many start-up accelerator programs available when your business is ready for advice, direction and funding?
Comprehensive support – Working within an accelerator makes operating your start-up less lonely and difficult. You receive support from mentors and sponsors as well as other founders going through the accelerator program with you. This support includes direction, experience and knowledge as well as emotional support.
A wide variety of activities – Although accelerator programs span a relatively short period of time, they are loaded with beneficial activities for you and your start-up. Activities vary from one program to the next and include feedback sessions, meetings with mentors, networking, social activities and “demo day” presentations.
Access to investors – As a participant of a start-up accelerator program you’re connected directly to interested investors who are looking for their next hot opportunity. Times to meet, mingle and present to investors are included, opening the door for additional funding offers. This is especially true when it’s evident that the program has helped further the development of your start-up to the point where it shows the potential for reasonable returns.
Faster knowledge building – Start-up accelerator programs are packed with concentrated information from mentors’ and accelerator managers’ experiences as well as skills that allow your start-up to advance more quickly. This shared wisdom gives you a short-cut to launching your business in a more deliberate manner while increasing your chances of success.
Publicity and potential leads – Target audience members are often included at demo days helping you gain the interest of more early adopters. These leads give your organization a head start on brand development and recognition.
Skills development – Not only does the program focus on teaching important skills, you also have the opportunity to share your skills with the other founder participants. The business skills taught often include communications, sales and marketing, finance and some technical skills.
Risk identification and management – All accelerator participants are concerned about the risk of failure relating to the market, product offering and concept. The program helps you identify and proactively work to manage your risks effectively.
A clearer view of the future – First-time founders can find it difficult to look beyond the first six months or year even though a longer view is critical to their success. Accelerators help you see what’s ahead more clearly and guide you in the right direction. Mentors can present you with questions to get you thinking about the big picture and what it should look like in addition to tools and strategies to get you there.
One size does not fit all – Not all accelerators are the same. There are ones geared for various growth stages, locations, industries, desired outcomes, levels of oversight and involvement to help accomplish your particular goals. The purpose is to provide an environment where participants can thrive.
Support and motivation – The collaborative environment is designed to keep you moving forward. Interaction with fellow founders is inspiring and hearing them discuss shared self-doubts and challenges helps them feel less unsurmountable. No longer going it alone makes it easier to work through these hurdles.
Continued support beyond the program – Once the accelerator program ends, long-time relationships continue within the alumni network. They are always available to provide feedback, recommend talent and help identify potential investors for your start-up or other projects in the future.
If you’re at the right stage in your business, a start-up accelerator program may be just what you need next to grow. It can certainly help as you value your start-up and write your business plan. If you’re just getting started, perhaps you should consider an incubator that’s more geared to your present needs.
Developing a product and launching a start-up involves many risks. Reduce these risks by applying Lean methodology to your start-up: it involves working smarter, not harder, as you determine if your product or service is viable to support a sustainable business.