Difference between Accelerators and Incubators

Difference between accelerators and incubators

Early-stage startups struggle the most, due to lack of funds, lack of network, and much more. To solve these problems here are come startup incubators and accelerators who provide a valuable network and more support to them. There is much more to know about startup accelerators and incubators, let’s see what is the difference between both of them. 

They are time-bound programs. For example, a startup accelerator can be 4 weeks, 12 weeks, or 3 weeks program.They are for a longer period, say 1 year, 2 years, etc.
They give a clear outcome. For example, a startup accelerator says that in the ecosystem, which I will give you, I will provide you funding, growth, customers, or any other specific outcome.They do not provide a clear outcome. They will say that they will give you a large ecosystem and you need to identify how you will derive benefits from this ecosystem.
They take a minority stake of 1-3% in your company. They become the shareholder of your company.They do not take a stake in your company most of the time. They will charge a fee from you for providing you an ecosystem. 
List of some startup accelerators in which you can apply:
500startups, Tea Labs, Indian Angel Network, Y-Combinator
List of some startup incubators in which you can apply: Amity Innovation Incubators, IIM Ahemdabad Incubators, IIM Bangalore Incubators, Startup India
  • Should you go to accelerators or incubators?

Startup accelerators do not take companies that are in their idea stage. Only those companies which have proved them in the market can be enrolled in it. So, you should have some traction or minima. label product, if you want to go to accelerators. You should go to them to grow your company further.

Startup incubators also support the idea stage of a company. If your idea is interesting and pathbreaking, then they will take you and give you access to their network.

  • How to apply for an accelerator or incubator?

Whether accelerator or incubator, the basic information they need from you is your business plan. So, you should have a complete business plan ready before reaching them.

It is crucial to make a business plan as a business plan helps an accelerator or incubator to understand:

• Which type of entrepreneur are you?

• At what stage of business are you?

• What is your perspective?

• Who is your target market?

• How much hold you have on your business?

Which problem are you solving and how are you solving it?

Along with the business plan, you should also have a revenue model, i.e. how you will earn money.

  • Can your business plan get stolen by providing it to an accelerator or incubator?

No, your business plan will not be stolen.

Even if your business plan can be easily replicated by anyone, then let them do it if they can do it in a better way.

However, if your idea is strong and you have an insight that nobody can replicate, then nobody can use your plan.

Also, the accelerators, incubators, and the investors associated with them have clarity that they need to invest in entrepreneurs and not implement or execute the business plan.

They want to invest money in a lot of companies to increase the value of their money.

  • Advantages of Accelerators or Incubators
  • Increase in Valuation

When OYO rooms and Razorpay came out from accelerator programs, their press coverage and valuation have increased exponentially. Thus, the best advantage you get from going to an accelerator or incubator is that exponential increase in valuation of your company.

  • Huge Network

The network is the most important thing for any business. Accelerators and incubators have a huge network. They will meet you with a lot of investors, partners, dealers, your first 100 customers, etc.

For example:

As Razorpay is a payment gateway company so, they need lots of permissions from RBI. To get these permissions, a huge and valuable network is required. As the owners of Razorpay are two college students and RBI would not give such permission to students. Such a network already exists with the accelerators and incubators.

  • Saves time

Accelerators and Incubators give you knowledge about several things, process information, and failures of other businessmen. This will help you to know what you should not do. All the entrepreneurs know what they should do but they don’t know what they should not do, which is very important to know.

  • Provide Funding

Most of the accelerators and incubators will give you a cheque of funding in the beginning because they know that if you have reached them, then your business will grow big and its value will also be big. This will help the accelerators and incubators earn more money from you

  • How can a big businessman apply to an accelerator or incubator?

If you want to create innovation in your business, then you can create a new business unit or a small Pvt. Ltd. company or a small LLP and tell that this is a startup coming out from my big business and it can separately apply for an accelerator or incubator. These small units are also called spin-offs. Some corporate accelerators invest in such spin-offs.

  • Demo Day

When you complete your accelerator or incubator program, i.e. you graduate from the product. It is called a demo day. On this day, a big event is organized. Several investors, potential customers, and potential employees attend that event. You just need to give a 5-10 minutes speech at this event. In the speech, you have to tell about your startup, the problem you are solving, and your complete business plan.

On demo day, if you have given a powerful speech and your business plan is correct and effective, then till the end of the demo day, 4-5 investors will come to you to invest in your company.