Knowing the difference between accelerators and incubators could make all the difference in your quest for funding.
When it comes to building your business, there’s one giant, looming cloud that will always hang above your head: the money cloud. Where is the money going to come from? Who is going to invest in your vision? There are countless options that entrepreneurs explore to get funded, from crowdfunding to venture capitalism. But In the hot pursuit of funding, don’t overlook these two lesser-known options.
If you’re ingrained with your city’s startup community, you’ve undoubtedly heard the buzz about business incubators. As the name suggests, these programs are geared to support the growth of early-stage entrepreneurial efforts. These organizations are designed to help speed up the success of a startup or company in its early stages. A business incubator will help your company get in the best shape possible to raise more capital and go to market. They typically invest between $5,000 and $25,000 and are often a good path to capital from angel investors, state governments and other types of investors. As incubators are typically industry-specific, such as technology or energy, their partners bring significant industry experience, resources, and contacts.
By working with an incubator, your business has the opportunity to gain access to a variety of capital choices, as well as the benefits of mentorship and networking. One possible downside is that it may deter your focus during those critical first stages. Before you engage with an incubator, be certain that you have the time and resources to make the most of the experience. And as incubators vary in their approach and process, evaluate multiple options before deciding which will work best for you.
Business accelerators are similar to incubators, but they instead typically focus on working with companies that have already gone to market and are beginning a growth phase. Some businesses will work with an incubator during the early stages, and then begin working with accelerators once the business has reached a further stage in its success. Accelerators do not build a company, as an incubator might, but instead invest in the company at a very young stage.
This is why many business accelerators are backed by venture capitalists that who want to get a foothold in what they believe to be a good emerging business. By helping accelerate the path of the business, they can accelerate their own opportunities for making the most of their investment. It should come as no surprise then that accelerator programs are much shorter than incubator programs, typically only taking around three or four months to complete.
While business incubators and accelerators aren’t direct financial investments, they have the opportunity to pay dividends in opportunity, potential investors, success, mentorship, and networking. When seeking funding for your business, be sure to consider all your options — including these often overlooked programs.