The Difference Between Incubators and Accelerators

The Difference Between Incubators and Accelerators

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Carlsbad's Bio, Tech and Beyond, an incubator and shared work hub.

Starting a business is hard. Very hard.

Deciding to utilize an accelerator or incubator program can be a make-or-break moment in that process. At least 16 local incubators and accelerators took part in an event hosted by San Diego Venture Group last month. AngelList, Silicon Valley’s website for startups and investors, lists over 60 incubators and accelerators. The choices can be overwhelming.

Blair-GiesenIncubators provide guidance and advice to help startups grow and succeed in an unstructured program, with no specific goal or timeframe.

Accelerators provides structured curriculum in a short period to help rapidly grow the size and value of a company to get ready for a specific goal, typically to raise financing.

Both can help young companies figure out how to get through some of the early difficulties of starting a business. Both help create successful companies on a scale that has never been done before.

But one important question can help guide entrepreneurs who aren’t sure which path is right: What is the goal of the program? Once you’ve established that, compare it to your own company’s goals and see whether they align.

Either type of program can include some big benefits to a startup, including:

• Free office space

• Formal curriculum

• Mentor program

• Financing

• Links to strategic partners

• Marketing assistance

• Advisory boards

• Management team identification

• Access to angel investors and venture capital

• Help with presentation skills

• Networking events

Key Differences

The key difference between and incubator and an accelerator is what happens at the end of the process and what you and your company walk away with.

Typically incubators have a process of getting into the program, but that process is often unclear. Incubators help you build a company. Incubators take little or no equity in your company. Incubators are great if your goal is the get some help and retain control of your business or get prepared to go into a more competitive accelerator program. Incubators provide these services to a group of companies with no specific goals for every startup.

Accelerators prepare you for a major milestone – usually the ability to fundraise and attract a large investment round. Accelerators take anywhere from 3 percent to 8 percent or more of your company equity. The goal is to scale you fast and rapidly increase the value of your company. Scale is a characteristic of a business that describes its capability to grow as clients and customers grow while increasing its level of performance or efficiency.

There are many arguments for and against giving up equity but most of them can be boiled down to one question, Neil Senturia said at a San Diego Venture Group event for incubators and accelerators last month: “Do you want to be king or rich?” – basically, do you care more about control, or about growing the business quickly to increase its value? This is a question that all entrepreneurs need to ask themselves early in the process.

Accelerators typically have a more rigid process that governs how a company gets accepted into the program. Once accepted, a company goes through a very specific program to gain market traction and start an investor funding campaign.

Here are two examples of local accelerators:

Founder Institute: An after-hours, before-you-quit-your-day-job program that provides a structured curriculum. It’s a step-by-step process with experts to get you started. Founder Institute offers no investment in the startups that go through the program.

(Full disclosure: I went through this program, and thought it was amazing.)

Plug and Play San Diego: One of the most successful accelerator programs in the Bay Area now has a branch in San Diego. It offers local entrepreneurs an opportunity to pitch their startups, get an investment on the spot and enter the program. After the startup is in the accelerator program, startup founders are introduced to a wide range of strategic partners in a hands-on, structured program.

And here are two local incubators:

EvoNexus: This one’s centered on web or mobile technology. EvoNexus provides free office space and other benefits in an unstructured, a la carte way – startups can use various services if they want to. All EvoNexus incubator services are free to startups in the program.

CyberHive’s iHive: iHive is all about The Internet of Things (the connected technologies around home, wearables and auto in a structure connected to the internet). iHive provides a combination of co-working space and incubation services.  Visit iHive’s startup, music and art event SAM Fest to learn more.

Better Together

Yes, it’s important to seek out an incubator or accelerator that syncs up with your company’s goals. But there’s a wrench: Many startups go through more than one of these programs.

Why would they do this? Because most programs are not designed to create absolute success. Startups need to take advantage of every opportunity they can.

Startups must also remember that many of these programs have sponsors and are structured in a way that might not be entirely focused on the success of the startups in the program. As the founder it’s up to you to make the right decisions to guide your company. No one knows your business like you.

A more complete list of various programs can be found here.

I want to hear your stories of success and growth, frustration and failure with incubators and accelerators.

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Blair Giesen

Blair Giesen

Blair Giesen is a VOSD contributor, serial entrepreneur and Zambig.com founder. Join the conversation by following him on Twitter or emailing him at blair@zambig.com.

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9 comments
Pat McKemy
Pat McKemy subscriber

Both incubators and accelerators in San Diego have their importance and the role of neither can be denied. Thanks for sharing all the details about the incubators and accelerators in San Diego. Thanks for the share, it was a good read.

Gaby Dow
Gaby Dow subscribermember

Plug and Play invested $250,000 in ten local startups just via the pitch competitions last year and made additional investments in some of these startups once they completed StartupCamp (office space and program / mentorship was provided for free for three months for the ten startups in Sunnyvale, so that's an additional form of investment). So far the sum of these ten startups have raised about $2 million since returning to San Diego, they're kicking ass, and we're getting ready to pick the next group of startups on May 6.

I don't think we can have too many programs here in San Diego. Great article spelling out the nuances of incubation vs acceleration. In the end we just need more huge exits and a process of reinvestment and continued commitment to grow and retain San Diego talent. You are right about volunteers working like crazy in all corners of this region ;)

Blair Giesen
Blair Giesen author

Good points Kelly. I agree. The movers and shakers are here in San Diego and they want to punch through the walls. They are just waiting for the right group of people. They are waiting for us.

Kelly Abbott
Kelly Abbott moderator memberadministrator

We have neither incubators nor accelerators here. We have volunteers who are working their asses off. We have sweetheart real-estate. We have innovators and angels. We have pride. But there are no institutions with skin in the game. No risk, no reward, no punch-through-walls movers and shakers. That is all. 

Blair Giesen
Blair Giesen author

@Gaby Dow  Great points. Plug and Play has set a tone that they are a LEADER in the San Diego startup community. Everyone involved in tech startups need to ask themselves are they just helping out or are they doing things to be a LEADER.

rolandal
rolandal subscriber

@Kelly Abbott  Skin in the game is what is truly necessary to make a substantial difference. Until we attract one(s) that is able to put in $ investment, the current ones will have to stay afloat by pitching their sponsors products (which as @Blair Giesen said isn't necessarily in the best interest of the startup - and in my opinion can actually be very detrimental). 

yashara
yashara subscriber

@rolandal @Kelly Abbott @Blair Giesen  I have to agree with Kelly, and Roland alike. There needs to be more investment from institutions. Just last week when I attended Tech Crunch LA instead of Spring Fling, I was amazed that only two hours north of us companies were getting funded at Bay Area valuations.