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What is Incubator for a Startup?

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10 Feb '24
9 min read


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It so happened, that I was going through news headlines and I read something like – “as more people have been creating their businesses as part of the startup craze, the number of startup incubators has also increased.”

It suddenly flashed to my mind, that ’Startup incubators’ can be one of my article topics and I am sure many new startup entrepreneurs might have heard the term ‘Incubator’ but not have enough information about it.

Later in the day, during one of the discussions during a coffee break, someone mentioned, ”USA has more than 1000 incubators actively working ……how many do we have in India?”

Well, it’s a good question. 

How many incubators do we have?

However, the question will be more relevant if we know what incubators are….for startups.

While we are talking about ‘Startup Incubators’ we will also talk about ‘Startup Accelerators.” 

Quite often Incubator and Accelerator terms are used interchangeably, but both serve different purposes.

So we must know and understand the difference between an Incubator and an Accelerator.

What is a Startup Incubator?

A startup incubator is nothing but a kind of a company that helps newly found and early-stage startup companies….to develop their business around their idea …in terms of product or service. 

To be more specific, a startup incubator offers services such as management training, basic marketing training a well-thought-out practical workspace, and everything that is required to run a company, so that they can focus on their product and business …..during the early stages.

A startup company usually consists of a really small group of people of different trades and specializations. They may or may not have sufficient know-how about other aspects of businesses like legal services and legal compliances, financial planning, intellectual property management, etc.

Early-stage startups can vary considerably in their needs. There is no set structure or time frame in which startups will need help from outside resources.

Hence, the incubator aims to nurture startups to a point at which their vision becomes clearer, their Minimum Viable Product (MVP) is beginning to take shape, and they can able to see their way toward becoming viable businesses.

There are many different kinds of startup incubators, and their methods of operation vary to a large extent.

Some Incubators operate from a centralized space, from where they extend the help… or… services to startups, while others work directly with clients either…. online or … co-exist with their clients….at the client’s place. 

Some assist startups to receive funding, while others focus strongly on mentoring. 

Some incubators are industry-specific, while others work with a more generalized clientele. 

They are not like ‘one size fits for all’.

Most incubators will tailor what they provide - closely to what their startup clients require. 

However, some common incubator services/resources include:

  • Workspace provision
  • Business advice
  • Legal advice
  • Training
  • Mentoring
  • Networking opportunities
  • Access to investors
  • Seed funding 
  • Financial management assistance, etc.

Startup incubators are usually non-profit organizations, which are usually run by both public and private entities. 

It is also found… that Incubators are often associated with universities, and some business schools,… because many startup ideas need research and development support which is easily available through “university student research programs” and “business school live projects.”

 

The question always comes up, whether startups benefit from an Incubator program.

There is no straightforward answer to this in terms of YES or NO.

However, almost every startup could benefit from a bit of extra advice! 

But, whether a small bit of advice is good enough or a startup needs a full incubator program, depends a lot on – what stage of development a startup is poised at that particular moment.

If you’ve just started execution over a business idea, it’s probably worth devoting a bit more time to getting something concrete together before you begin pitching to incubators.

However, if your idea is coming together but you’re not able to come out of the starting blocks yet, the support of an incubator could be just what you need.

To summarize what startup Incubator does:

•         supports startups in an early stage or the pre-seed phase

•         provides coaching, mentoring, and infrastructure

•         focuses more on individual needs

•         accompany founders during their business development

•         can support financially to some extent

Let us understand what a is startup Accelerator.

If we think in simple terms, Accelerators and Incubators both offer entrepreneurs, good opportunities in the early stage.

If we break down startup goals, then understanding Incubator and Accelerator is most easy.

Accelerators “accelerate” the growth of an existing company, while incubators “incubate” disruptive ideas with the hope of building a great business model or a company out of it.

So, accelerators focus on scaling a business while incubators are often more focused on innovation.

A startup accelerator is a short-term growth program that promotes a few years of growth in the span of a few months.

The purpose of a startup accelerator is exactly to accelerate your startup’s growth. 

It’s a mentor-based program that provides intensive guidance, support, and structure for a set period, typically three months.

When you apply to a startup accelerator program, you are expected to have more than just an idea about your startup ideally you should have a prototype or an actual product ready with you.

When a Startup can apply for the Accelerator program?

Accelerators are for those startups who already have an MVP that has been validated in some way.  It might mean a product with a few paying customers or a group of free users who will become paying users in due course of time.

As a Startup founder, you may ask, in what way accelerators would prove beneficial for startups?

There are several advantages to enrolling in a startup accelerator. 

They offer startups:

1. Growth potential: The ultimate goal of an accelerator program is to scale up the startup business. 

2. Provide Valuable Feedback: During the accelerator program, there will be one-on-one meetings with program advisors who have experience in growing startups, bringing in investments, and how to position the product in the market. 

3. Provide Networking opportunities: Startups get opportunities to work along with other startups in co-working spaces and workshops. As a result, startup founders get unparalleled access to successful entrepreneurs through mentorships and the accelerator's alumni.

4. Facilitate Seed investments: Through the startup accelerator program startups often receive opportunities to receive funding during the program. Accelerators help founders to pitch to prospective investors at the end of the program.

5. Gives Prestige: Being a part of an accelerator is like a badge of honor in the eyes of investors. In the eyes of the investors, it shows your team has the required skill, drive, and training.

Next, What is the difference between an Accelerator and an Incubator?

A direct comparison between an accelerator and vs incubator can be quite difficult.  Yes, there are some key differences between accelerators and incubators. However, there are also some ways each is unique that are hard to compare.

 

Some of the main differences include:

Accelerators are more finance-focused; incubators may focus more on mentorship and coaching

Accelerators are for ideas that are fully realized and ready to take to the market; incubators are more for early-stage – turning ideas into reality

Accelerators may support your startup in isolation and more individually; on the other hand, incubators will help you to connect your startup with other entrepreneurs, in a shared workspace

While we are talking about incubators, let me tell you that there are virtual incubators too. 

It means if you prefer the mentorship and support of a business incubator, but don't want to share physical premises in a specific location, you can work with a virtual incubator.

This concept is also equally popular.

As a startup founder, you must know that both, - accelerators and incubators receive large numbers of applications, so your chance of success is usually in the single-digit percentage.

Hence, focus on building out your business model and compiling good documentation so that when you apply to either the Incubator or Accelerator program, you are ready to put forward the most persuasive case as to why your venture deserves the program's guidance and support.

As an early-stage founder, it is natural to have a question in your mind – which one is best for my startup?

The question of incubator vs accelerator for a startup company depends on your circumstances. 

If you just need some financial support to help you grow more rapidly, an accelerator program could be right for you.

If you're not confident enough about the readiness of your innovation or venture, an incubator program might be what you need. 

The mentorship and other support services could bridge that gap from an initial idea to a realized marketable product.

However, as a startup founder, you must be honest if you're just not ready. 

Because both accelerators and incubators require a significant amount of focus and commitment.

My advice to you as a startup founder is you may apply to the Incubator program when you know you have an innovation that you can turn into a saleable product or service.

When you feel like you're not ready yet, taking a little extra time to work on your idea first can help you build your application and become more eligible to draw attention. 

That way, when the time comes, you will have a much better and clearer idea of whether your startup needs an accelerator or an incubator.

Both accelerators and incubators have a hugely important role to play, not only in helping new startup companies to take off but also in supporting existing established startups that are trying to enter new markets.

In an era when investors are constantly looking for the next disruptive unicorn, it's more realistic than ever before to set audacious goals for your new startup.

Just a decade before, it was quite unimaginable for a small startup brand to become a dominant force in an established sector like - vacation rentals, taxi services, or a startup venture of food delivery at your doorstep from any corner of your city.

As a startup founder, you should understand that whether your innovation is a physical product or something as simple as an app for an untapped market, it's easier than ever to be truly disruptive - with accelerators and incubators standing by your side to help you maximize your market share.

Category : Entrepreneurship


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Written by Nitin Mistry