A startup accelerator is a short-term, intensive programme designed to help early-stage startups grow. These accelerators typically last a few months and offer startups mentorship, resources, funding, and networking opportunities in exchange for a small equity stake. They often culminate in a “demo day” where founders pitch to potential investors. Well-known accelerators, such as Y Combinator and Techstars, are highly competitive and can be transformative for startups ready to scale quickly. In 2022, the 50 most active accelerators invested in almost 7,800 global startups.

A startup incubator can also help startups in their early stages. Incubators are longer and guide startups through their infancy, sometimes in exchange for a fee or small equity stake. Incubators don’t generally provide funding, but they do offer access to office space, mentorship, and professional networks. With incubators, the focus is more on developing the business model, refining the product or service, and helping startups launch from the ideation stage. These programmes are typically more flexible, with less pressure for immediate growth.

Below, we discuss the distinctions between accelerators and incubators, their potential benefits and drawbacks, and how to know which is right for your startup.

What’s in this article?

• How does a startup accelerator work?
  
• How does a startup incubator work?
  
• Differences between accelerators and incubators
  
• Benefits of joining a startup accelerator
  
• Benefits of joining a startup incubator
  
• Potential drawbacks of accelerators and incubators
  
• Is an accelerator or incubator the best choice for your startup?
  

How does a startup accelerator work?

Startup accelerators are structured programmes that run for a set amount of time and help startups scale quickly. Here’s a general look at how they operate:

• Application process: Startups enter a competitive process to apply for acceptance into accelerators. Accelerators look for teams with a solid idea and some early progress.

• Initial investment: If accepted, startups usually receive some seed money upfront. This allows them to stay afloat during the programme, and in return, the accelerator receives a small equity stake in the company.

• Mentorship and resources: Accelerators connect startups with experienced mentors and give them access to resources that help them fine-tune the product, business model, and strategy for growth.

• Workshops and training: Throughout the programme, startup teams attend workshops on topics ranging from building a strong product to attracting customers and raising funds.

• Networking: Accelerators introduce startup teams to investors, industry insiders, and potential partners.

• Demo day: At the end of the programme, the startup pitches to investors. This is the startup’s chance to show off everything they’ve built and hopefully secure more funding to take their company to the next stage.

• Post-program support: Even after the programme ends, many accelerators keep offering support through networking events, alumni groups, or continued mentorship.

How does a startup incubator work?

Startup incubators differ from startup accelerators in a few important ways. Here’s how a startup incubator typically works:

• Application or invitation: Startups might apply or be invited to participate. Incubators often work with very early-stage startups and are typically looking for people with exciting ideas who need time and support to move forward.

• Workspace and resources: Once accepted, startups get access to shared office space, basic resources, and sometimes, equipment. Some incubators also provide funding, but workspace and other support are more common.

• Mentorship and guidance: Incubators focus on nurturing startups. They provide access to mentors and industry experts who help the team develop ideas, build a business model, and work through early challenges.

• Flexible timeline: Unlike accelerators, incubators offer more flexible timelines. Some startups might stay for months or longer while they refine their concept. It’s a lower-pressure environment, which is great for companies still experimenting with their business ideas.

• Networking opportunities: Although the pace is slower, incubators still provide valuable connections. Startups can meet other founders, investors, and potential partners and build long-term relationships.

• Ongoing support: Many programmes provide continued guidance and access to their network after the incubator ends.

Differences between accelerators and incubators

Accelerators and incubators provide valuable support to build startups to their full potential. However, they tend to work with companies at different stages and provide slightly different types of guidance. Here’s a detailed look at the distinctions between accelerators and incubators.

Accelerators

• Stage of development: Accelerators focus on startups that already have a product or early momentum and need a boost to scale. They’re geared toward startups that are ready to move forward and grow quickly.

• Program length: Accelerators are short and intense; they typically run for three to six months. The focus is on fast results, whether that’s launching a product, raising funds, or growing a customer base. There’s a structured timeline, and the programme is designed to be as valuable as possible in a short period.

• Investment: Accelerators often provide seed funding in exchange for equity. They commonly take a small stake in the startup, usually around 5%–10%, in return for an initial cash investment and access to the program’s resources.

• Focus: Accelerators focus on helping startups scale, raise funds, and prepare for the next big step – whether that’s launching a product, expanding the company, or attracting major investment.

• End goal: Accelerators often culminate in a demo day, where startups pitch to investors. The goal is to make connections, secure funding, or potentially lock in partnerships. The programme focuses on achieving key milestones, with an emphasis on growth and visibility.

• Pace: Accelerators move very quickly, which can make them fast-paced and intense. Startups are pushed hard to improve, grow, and refine their product in a short time.

Incubators

• Stage of development: Incubators are more suited for early-stage startups that might still be in the idea phase. These programmes help founders who are working on their business model, product-market fit, or product. Incubators are a place to experiment and refine before fully committing to growth.

• Program length: Startups might stay in an incubator for several months or years as they work to perfect their business. Incubators give startups the time and space to develop at their own pace without the pressure to grow right away.

• Investment: Incubators usually don’t provide capital, but some do charge a fee or take an equity stake similar to accelerators for the services they provide. The focus is more on creating an environment where startups can grow, rather than investing capital directly into the business.

• Focus: Incubators concentrate on helping founders further develop their idea. The emphasis is on experimenting, developing a business model, and determining market fit.

• End goal: Incubators don’t have a set end date or major event like demo day. Instead, they offer ongoing support without the same pressure to hit a milestone by a specific deadline. The goal is to help startups build a strong foundation and prepare for long-term success.

• Pace: Incubators move slower. There’s more time to tinker, experiment, and reassess without the push to meet a tight deadline.

Benefits of joining a startup accelerator

Accelerators can help a startup reach its full potential during its early stages. Among the main benefits of joining a startup accelerator are:

• Access to funding: Most accelerators provide seed funding in exchange for equity, which can be an important funding boost for early-stage startups. Beyond that, the exposure gained through the programme can lead to future investments.

• Mentorship: Accelerators connect you with experienced mentors who have been through the startup experience. These experts can provide invaluable guidance for those starting out, such as how to develop your product and scale your business. They can also help you avoid common pitfalls.

• Networking: You gain access to a broad network of investors, fellow founders, industry experts, and corporate partners. This network can open doors to new partnerships, customers, and investors that help your startup grow faster.

• Resources and support: Accelerators offer a range of resources, including office space, legal and accounting help, and technical support. These free up your time to focus on what really matters – building your business.

• Structured learning: Through workshops and training sessions, you’ll receive hands-on instruction that’s organised around the challenges startups commonly face. This approach can help you quickly develop the skills you need to navigate scaling, customer acquisition, fundraising, and more.

• Brand credibility: Being accepted into a well-known accelerator can give your startup instant credibility. It signals to investors, partners, and customers that you’re serious and have been vetted by a successful organisation.

• Rapid growth: The intense focus and pace of an accelerator programme can push your startup to grow more quickly than it would on its own. It’s a high-pressure environment designed to help you make measurable progress in a short time.

• Demo day exposure: Demo day is a chance to showcase your progress to investors, journalists, and potential partners. This visibility can be a game-changer for startups looking to raise capital or draw the industry’s attention.

• Post-program support: Many accelerators provide ongoing support after the programme ends. This includes access to alumni networks, investor connections, and continued mentorship, helping your startup sustain momentum as it grows.

Benefits of joining a startup incubator

Incubators provide some of the same benefits as startup accelerators while also offering a unique value proposition. Here’s what you can expect to gain by participating:

• Nurturing environment: Incubators provide a supportive space for early-stage startups to grow at their own pace. If you’re still refining your idea or business model, an incubator gives you the time and resources to experiment and develop without the pressure to quickly scale.

• Access to workspace: Most incubators have shared office space, saving you the overhead of renting your own. It also puts you in close proximity to other founders and creates a collaborative environment where you can exchange ideas and learn from each other.

• Mentorship and guidance: Just like accelerators, incubators give you access to experienced mentors who can help you address the challenges of building a business. You receive specialised advice and guidance on product development, market fit, and business strategy.

• Networking opportunities: Although the pace is more relaxed than in accelerators, incubators still give you valuable connections to industry experts, investors, and fellow entrepreneurs. These relationships can help you build a strong network that can help when you’re ready to launch or raise funding.

• Long-term focus: Unlike accelerators, incubators don’t rush you toward growth. Instead, they focus on helping you build a strong foundation for long-term success. This pace can be particularly beneficial if your startup needs more time to develop its product or market.

• Access to resources: Incubators often provide access to important resources, such as equipment, software, and technical support along with legal, accounting, and marketing services. These tools can help you focus more on developing your business rather than worrying about administrative tasks.

• Lower-risk environment: Since many incubators don’t take equity or push for immediate scaling, it can be a lower-risk environment to work in. This can be ideal for startups that are still in the early, experimental stages or need time to change course without investor pressure.

• Community and collaboration: Being part of an incubator gives you a built-in community of other startups. This collaborative environment encourages sharing ideas, learning from each other’s successes and failures, and forming partnerships.

• Continuing support: Many incubators provide continued access to their network and resources after you’ve “graduated”. This means you can still benefit from mentorship, connections, and guidance long after your time in the incubator ends.

Potential drawbacks of accelerators and incubators

Although accelerators and incubators can have major benefits for startups, each also has drawbacks. Here’s what you need to know when choosing either programme.

Drawbacks of startup accelerators

• Equity dilution: Accelerators typically take an equity stake in exchange for funding and support. Although this can seem reasonable early on, giving away equity too soon could reduce your control over the company later as you seek larger rounds of investment.

• Pressure to scale: Accelerators are designed to push startups toward growth. This high-pressure environment can sometimes force startups to prioritise scaling before they’re truly ready. This can result in rushed decision-making, unrefined products, or unsustainable growth.

• Short time frame: The fast pace and limited time frame of accelerators means you have to move quickly. Some startups might struggle to make meaningful progress in a short period, especially if they need more time for product development or market research.

• Limited customisation: Accelerator programs are generally structured with a set curriculum that might not perfectly fit every startup’s needs. If your startup has unique challenges or requires a longer timeline, the one-size-fits-all nature of accelerators might not provide the specific support you need.

• Emphasis on investor pitches: After completing the accelerator, some startups might not be ready to pitch to investors. If you’re still refining your product or business model, the focus on demo day and investor pitches might not align with your immediate goals.

Drawbacks of startup incubators

• Equity dilution: Some for-profit incubators will take a small equity stake in exchange for their support. This could cause problems in the future when you start to raise capital and have already given away some control of the company.

• Slower pace: While the slower, more nurturing environment of an incubator can be great for some startups, it can also lead to a lack of urgency. Startups that need to move quickly or capitalise on a market opportunity might find the pace too slow or unstructured.

• Lack of structured deadlines: Incubators often provide long-term support without strict timelines, which comes with benefits and drawbacks. The lack of structured deadlines might mean it’s harder to stay focused and move the business forward if you thrive under pressure.

• No immediate funding: Unlike accelerators, most incubators don’t provide direct funding. If you’re relying on the programme to support your cash flow, an incubator might not be the best fit. You’ll likely need to find other funding sources to keep business moving.

• Fewer high-profile connections: Incubators tend to focus more on early-stage development, rather than preparing you to pitch to investors. As a result, they tend not to provide the same high-profile investor connections and opportunities that accelerators do.

• Limited exposure: Because incubators are more focused on development than public visibility, you might miss out on the exposure and media attention that accelerators often bring. This could slow down your ability to build brand awareness and attract early customers.

Is an accelerator or incubator the best choice for your startup?

The choice between an accelerator and an incubator depends on your startup’s current status and goals. Here’s a closer look at what to consider.

An accelerator might be the right fit if you:

• Are ready to scale: If your product or service is already developed and you’re looking to grow fast – whether that means acquiring users, increasing revenue, or expanding your team – an accelerator provides the resources, mentorship, and connections to make it happen.

• Need funding: If you need seed capital to help push your business forward, accelerators offer initial investment. That boost in funding, combined with access to investors through demo days, can be ideal if capital is a top priority.

• Thrive in fast-paced environments: Accelerators move quickly. If you’re comfortable with deadlines, do well under pressure, and are ready to hustle hard over a tight timeline, this model might work well for you.

• Are looking to build investor relationships: Accelerators’ networking and demo day opportunities are designed to get you in front of investors. If your goal is to raise funding and earn media coverage, the exposure you’ll get in an accelerator is invaluable.

• Have some traction: If you already have some users, early revenue, or a validated product, an accelerator can help you refine your operations and push for rapid growth.

An incubator might the right fit if you:

• Are still developing your idea: If you’re at the very early stages of your startup journey, an incubator gives you the time and resources to experiment and develop without the pressure to grow right away.

• Need time to build: If you need more time to tinker with your product or service before going to market, an incubator gives you a slower, more flexible time frame. There’s no rush to meet investor deadlines, so you can focus on building a strong foundation.

• Are not ready to give up equity: Some incubators don’t require equity in exchange for their support. If you’re not ready to give away a stake in your company or want to maintain more control, a nonprofit incubator is a good choice.

• Want long-term support: If you’re looking for a program with ongoing mentorship, workspaces, and resources, incubators provide that nurturing environment. The focus is on long-term success rather than immediate results.