ExecutiveChronicles.com | Accelerator vs. Incubators: The Pros and Cons to Launch Your Startup | Launching a startup is no easy task. It often requires external support, whether that’s with a mentor, legal support or funding. This is why accelerator or incubator programs are so crucial to so many businesses in the early stages of development. There are so many instances of companies that completed an accelerator or incubator program and went on to become a household name and a huge success. Some examples include Instacart, Airbnb, Dropbox, DoorDash, and more.
Decisions that will impact your startup for life should be deeply considered. Whether you’re considering becoming a s-corp, LLC, or something else or looking for funding to develop a new product, think about who you want to partner with and how it will benefit your business in the long run.
If your startup needs the support to launch and get off the ground, an accelerator might be your answer. Make sure you research the reputation and specifics of any incubator or accelerator program you enroll in. Consider the difference between an accelerator and incubator depending on where your startup is in the growth stage. Then, look at the pros and cons to these programs before starting the conversation.
Difference Between a Startup Accelerator and Incubator
The key difference between an accelerator and incubator is in the types of startups they provide resources for. For example, this could mean your startup size or where it is in the growth stage.
Incubators are usually best for entrepreneurs who have an idea that needs to be tested, validated and developed. They help with development, recruiting, formation, biz development and more.
A startup who is further along in the growth stage typically joins an accelerator. This means they may have a business plan, team, product in the market, or some signs of revenue. The program can help them scale or grow using this foundation they already have and build on top of it with funding or resources.
Startup Accelerator Program Pros
Thousands and thousands of startups have reached success by joining an accelerator program. Let’s take a look at the benefits to joining one. Both internal and external benefits can help startups reach audiences they wouldn’t have otherwise.
Funding: This is the most important factor to joining an accelerator program, since many startups in the early stages don’t have enough money to reach success. Funding can range from anywhere from $10,000 to half a million dollars, and comes in the form of seed funding to angel investors or venture capitalists.
Complimentary Office Space: When you sign up with an accelerator program, you may get free co-working space with limited conference room options. This is crucial to reduce monthly expenses and provides a shared space for collaboration or meetings with your team.
Networks of Mentors: As an entrepreneur, you’ll face many roadblocks or hurdles that can be difficult to overcome without some knowledge, support or advice. Accelerators programs may offer networks of mentors to connect with other entrepreneurs.
Legal Support and Other Resources: Resources range from intellectual property to legal advice. There can also be discounted programs or products.
Startup Accelerator Program Cons
Despite the many pros to joining an accelerator program, there are drawbacks to consider. Really weigh your options before making a lifetime decision. Let’s look at the importance of what these programs could cost your startup.
Losing Equity in Your Startup: When new investors, partners or advisors join the business decision making table, you lose some form of equity in your startup. Consider if it’s worth it for the growth and well being of your business. How will they benefit or contribute to the startup’s lifetime growth? Consider the equity of your team, ability to raise funding later, or your return on investment when the accelerator program is over.
Insufficient Time or Money: Most accelerators offer a short timeline that can range from three to six months. When the program is over, there’s potential to leave no progress. This depends on your sales cycle, business model and more. Keep in mind this can impact how you raise funds in the future if you failed to prove valuation or success.
Whatever stage your startup is in currently, it’s helpful to do your research and weigh the pros and cons of different programs. For a resource to find a program, check out a table Embroker compiled over 160 accelerator and incubator programs. Sort by location, mentors, office space, legal support, or demo day to find the right program for your situation and needs.
Please include attribution to Embroker.com with this graphic.