• Product
  • Solutions
  • Pricing
  • Resources
Get a demo
Key Differences Between Accelerators and Incubators: Which One Is Better?
Tips

Key Differences Between Accelerators and Incubators: Which One Is Better?

Jenna Bunnell
Jenna Bunnell
Share
Share
Share

IACs, also known as incubator, accelerator, and coworking spaces, are workspaces designed to cater to start-ups, SMEs, and small businesses. These practical, innovative, and professional workspaces offer facilities, financial support, and in some cases, even mentorship.

Typically, coworking spaces are geared towards start-ups or companies needing office space and network support. As the office spaces become more popular, coworking space owners have the opportunity to earn extra income, reach new clients, and grow their businesses.

If you are looking to grow your coworking space, or even launch a new one, keep reading for some insightful tips!

 
Understanding Incubators and Accelerators 

To understand the critical differences between the two, we must first understand their purpose, process, and outcome. This comprehensive guide aims to explain all the differences and provide a more realistic approach to getting funded through accelerators vs. incubators.

The key differences between a start-up accelerator vs. incubator

Image Source

What Is a Start-up Accelerator?

Accelerators and innovation hubs are organizations or networks that offer start-up training, networking, business mentoring, networking, business partnerships, and financial/strategic resources.

Start-up accelerators provide real-life business and funding support from seasoned mentors, subject matter experts, technology services, free or discounted space, partner marketing plans, and other vital resources for start-ups.

What Is the Aim of a Start-up Accelerator? 

The focus of the accelerator program is to create an environment that allows for acceleration, mentorship, networking, and access to crucial resources. It also provides support and resources to the entrepreneurs in the process.

Start-up Accelerators are an interdisciplinary collaborative effort of entrepreneurs, companies, and mentors who all work together to form a network and collectively, and professionally, support the growth of a start-up.

How Long Does a Start-up Accelerator Program Last?

Most of these programs are free and run over two to three months by some of the most renowned enterprises in the world. Because industry experts run these programs with extensive experience building and scaling start-ups, candidates can learn from CEOs or CTOs.

A successful accelerator will use this short space of time to target a particular industry (software, tech, biotech, etc.) and connect entrepreneurs with resources, industry experts, mentors, and potential investors.

Accelerators offer different forms of business support, with mentoring being the most common form at 85%.

Who Are Accelerators Looking for?

Open to everyone, most accelerator programs–especially the newer ones–are non-credentialed, meaning that they don’t require an entrepreneur to obtain a university degree or anything of that nature. This decision aims to give entrepreneurs a chance to learn while creating. Not create, then learn.

Do Start-up Accelerators Offer Investment Capital?

Start-up accelerators aim to help start-ups get up and running as quickly as possible. The most fundamental support is assistance with operational costs, such as purchasing office space, furniture, and equipment or setting you up with a physical business phone or a virtual number.

What Is a Start-up Incubator? 

Entrepreneurs set up start-up incubators to bring together companies that need funding and aim to facilitate and accelerate growth. For instance, a physical incubator might offer office space and equipment, health insurance, retirement plans, job-search assistance, and a legal team.

What Is the Aim of a Start-up Incubator? 

Essentially, a start-up incubator brings together start-ups and works to educate and help develop an entrepreneur’s brand. They also offer services like online matchmaking, strategic advice, and investments.

The objectives of a start-up incubator are to:

  1. Provide funding, capital, or supplementary technology and resources for small businesses.
  2. Provide a safe and suitable environment to learn and develop skills for the entrepreneur.
  3. Provide support in various ways, including mentorship, education, and opportunities for growth and expansion.

How Long Does a Start-up Incubator Program Last?

Because of the structure of start-up incubator programs, they can typically last anywhere between 3 to 10 years. In some cases, it’s not uncommon for start-up incubators to be associated with an investment bank. So, you can expect an additional equity investment to be tied to your company.

Who Are Incubators Looking for?

As opposed to just targeting start-ups in a single sector, incubators are in an excellent position to offer resources and mentors to a broader range of entrepreneurs. As mentioned previously, for the best chances of raising money, start early and–before applying to an incubator–make sure you have a clear funding strategy.

Do Start-up Incubators Offer Investment Capital?

Many start-up incubators will provide an applicant with an opportunity to acquire start-up capital. For instance, they might offer capital as part of an equity share deal or give the financing to build a business. However, while equity investment deals are typically good for securing funding, it is not the best solution for funding the company for an extended period.

Deliver a stellar member experience at your coworking space with andcards - banner

What Is the Difference Between Accelerators and Incubators?

One thing that both incubators and accelerators have in common is their funding. Both programs often provide founders with an equity stake in their company. While a start-up offers the money up-front, an incubator focuses on receiving a percentage of the start-up's income over time.

With a start-up, new businesses don’t have the capital to sufficiently pay for start-up or running expenses. By giving up-and-coming companies money, the start-up incubator allows the company to grow and provides the entrepreneur with the momentum needed to succeed.

In return, the incubator gets some financial benefit out of the deal. However, an incubator may choose to give a start-up a portion of the money for free.

Alternative Funding - What Are Seed Funds?

A seed fund helps an entrepreneur gain their first customers rather than managing customer satisfaction, acquisition, and retention. Seed funds are usually geared toward significant capital commitments. So, you have a better chance of receiving more than just a token amount.

Start-up accelerators and incubators allow entrepreneurs to network and grow their professional connections

Image Source

What Are the Benefits of Start-up Accelerators?

Start-up accelerators can benefit entrepreneurs and their companies by offering them access to investors and helping with market validation but they can also significantly benefit coworking space owners too.

Assisting New Companies In Launching

Coworking space owners have the privilege and responsibility of guiding and mentoring new businesses. Having a supportive network to turn to when in need of advice and resources, for example, is vital in any growing business—coworking space owners play an essential role in this regard.

Advice, Training, and Collaboration

An essential part of an incubator or accelerator's job is to provide expert advice and support to their customers. These centers are helpful for business owners and for providing mentorship to new start-ups and small businesses.

When new co-working spaces join the market, it can be beneficial for existing space operators to work together to attract new clients. Having this network can potentially lead to new opportunities—like shared office spaces opening in competition with coworking space operators.

Managing Market Competition

Co-working space owners are often subject to competition from other operators, such as independently owned spaces. However, through collaboration with other spaces, coworking space owners can work to improve their services and operate in similar spaces.

Lucrative Collaborative Opportunities

Owners of coworking spaces are not required to put in the hard work themselves. Often, an incubator or accelerator will allow the business to operate out of their space rent-free while simultaneously charging their client base–resulting in extra income for the business owners.

Opportunities For Financial Support

For new start-ups or companies on the verge of achieving their target markets, this is an invaluable service to them. Offering to help new customers with financing is a simple way for coworking space owners to secure recurring revenue from their existing client base.

Meeting New Clients

Coworking space owners can easily attract potential clients by posting their space on a variety of different coworking websites and online directories and through newsletters and marketing materials.

Business Updates and Strategies

Coworking space owners need to be constantly open to ideas and strategies for growing their businesses. At the end of the day, the most significant benefit is the ability to continue developing their space business through the collaborative efforts of other spaces worldwide.

For example, Dialpad’s business messaging model is tailored to providing effective communication solutions to international businesses and demonstrates the demand for the product through research, statistical analysis, and determination.

What Are the Drawbacks of Accelerators and Incubators For Coworking Space Owners?

Owners of coworking spaces need to recognize the benefits of having an accelerator and incubator in their community but understand the potential downsides as well. Coworking space owners should consider the following disadvantages of offering space for start-ups and new businesses through accelerator and incubator programs.

Scheduled Visits

Unlike regular coworking space operators who typically work in their space, incubator and accelerator members usually need to regularly visit the center or contact their facilitator for updates on their company's progress and meet-ups.

Finding the right person

Finding the right facilitator is a big issue for coworking space owners. Typically, if you need the support of an incubator or accelerator facilitator, you will need to find one who is the right match for your business.

If you work with an employee or a subcontractor to help you operate your space, you can find various people to help. However, you will need to focus your energy on working with the right facilitator and, ideally, find a person who can work with your specific needs.

Time

Due to the decentralized nature of the coworking community, multiple spaces can often compete for the same business in the same city. This results in a competitive environment that can make it difficult for new companies to find a productive environment.

Quality

As a coworking space owner, you are expected to be a highly-qualified, passionate, experienced professional who can provide the facilities and amenities to help companies thrive. Your role is to assist your occupants with any professional needs, from small gestures like providing business instant messaging solutions to more lucrative ones like providing networking opportunities and seminars.

As more and more coworking spaces open in competition with each other, standards for the spaces' equipment and space can begin to diminish. This can be a concern for business owners and could potentially lead to poor relationships with business owners and other tenants in the space.

Highly Competitive

As professionals become more comfortable with moving to a coworking space, existing spaces may not be able to maintain the same level of business, which could ultimately force them to close down. This problem can also be exacerbated by the rapid growth of coworking space operators trying to compete with the more prominent brands in the market.

However, as long as a coworking space is well established and continues to provide quality service, space, and advice, its location and management expertise will be more valuable.

Incubation and Acceleration occur in the early stages of a business, beginning with an idea and turning into a profit

Image Source

Accelerator vs. Incubator, Which Is Right for You?

When deciding between an accelerator and an incubator, it is vital to consider the differences in light of your coworking space’s long-term goal.

Are you able to provide the facilities and amenities required for incubators or will the rigid structure of accelerators be too much for your company to handle? Is your aim to offer customers quality culture and will you have the resources to maintain it?

Remember, an incubator provides training and mentorship to give entrepreneurs a better understanding of the different aspects of running a business, whereas the primary aim of an accelerator is to take a start-up to the next level.

With an incubator, the business is often given some funding at inception but is supported financially over time; an accelerator, on the other hand, typically receives funding and an equity stake in return for a set period.

So what’s your end goal, and which program is right for your coworking space—is it both, none, or one?


The article was written by Jenna Bunnell is the Senior Manager for Content Marketing at Dialpad, an AI-incorporated cloud-hosted unified communications system that provides valuable call details for business owners and sales representatives. She is driven and passionate about communicating a brand’s design sensibility and visualizing how content can be presented in creative and comprehensive ways. Check out her LinkedIn profile. Jenna has also written content for Airdroid and Promo.

Keep Reading

“We Plan to Double in Size Over the Next Three Years” — John Preece, Hub Australia
Tips
“We Plan to Double in Size Over the Next Three Years” — John Preece, Hub Australia
yesterday
How to Manage Multiple Teams Under One Coworking Space?
Productivity
How to Manage Multiple Teams Under One Coworking Space?
3 days ago
How to Achieve an Eco-friendly Coworking Space: Is Paperless the Key?
Tips
How to Achieve an Eco-friendly Coworking Space: Is Paperless the Key?
5 days ago

Get inspiring coworking stories in your mailbox

Delivered twice a month, unsubscribe any time.

Sign Up for Our Newsletter

First Name *
Email *
By submitting this newsletter request, I consent to andcards sending me marketing communication via email. I may opt out at any time. View andcardsPrivacy Policy.

Save time and deliver exceptional customer service.

Try andcards coworking space platform for free.
Book your demo
© 2022 andcards
StatusPrivacy PolicyCookies PolicyTerms of Use