Ask anyone what they think an incubator is and they will most likely envisage newly hatched, fluffy yellow chickens huddling under warm spot-lights in a cardboard box. Ask them what an accelerator is and they will probably think of a pedal which, when pushed flat to the floor, quickly accelerates a car.
While these two thoughts are wrong in relation to the world of startups and entrepreneurship, they do provide apt analogies for understanding how incubators differ from accelerators. I’ll expand on these analogies below, but first I want to state from the outset that there is a lot of overlap between incubators and accelerators, and there is still a good degree of confusion among industry experts regarding the differences between them.
In this article I will highlight and explain two key differences between incubators and accelerators. The first difference has to do with what stage a startup is at; i.e. incubators typically accept startups (i.e. founders) at the idea-stage, whereas accelerators only accept early-stage startups, i.e. startups who are beyond the idea stage and have some kind of prototype or product made. The second difference I’ll explain towards the end.
Incubators – what are they are what do they offer?
An idea in the mind is like a fresh egg in the hand – it’s wonderful and contains huge potential but how do you bring it to life? Simple: You join an incubator.
Not all incubators are the same, however. Most incubators typically operate as co-working spaces in which they provide access to their own network of startups, mentors, events and other valuable resources for learning how to build and grow a business from scratch.
A good example of a startup incubator is Launch22, based in London and Liverpool. With three different membership plans – their cheapest membership being £80 per month – Launch22 provides desk space, access to mentorship, hosts events and provides various resources that enable you to further pursue and develop your idea, product and/or business.
Some incubators are industry specific such as EdSpace, based in Hoxton. EdSpace supports startups working specifically within the education industry. Before joining Whyable, I was a member of EdSpace whilst working on an EdTech startup of my own. For £50 per month I gained access to flexible desk space, mentorship from designers and developers, attended events and learnt from industry experts. We (Whyable) now run presentations and workshop ourselves at EdSpace and engage with their community as much as we can, providing advice on technology and product development.
While incubators are excellent in terms of providing desk space, mentorship and a broader network to help guide and support entrepreneurs at the very early stages, what they tend not to offer is their own in-house technology support or product development. If you are a non-technical founder like I was, struggling to find help with app development, incubators can introduce you to software developers within their community who can advise you on what technology you might need, or recommend someone else to speak to about technical matters, or even put you in touch with someone who might join you as a technical co-founder. Helpful as this may be, incubators do not provide technical or software development themselves. For this you will need to approach a technology incubator like us – Whyable.
The Whyable Impact Incubator
The Whyable impact incubator program is designed for entrepreneurs who are building a technology business with the aim of creating positive social and environmental impact. Our program runs for six months, beginning with one month of design prototyping, then two months of product/MVP development, then three months of gaining traction through real-world user testing. By the end of the program startups should be ‘investment ready’ whereby they can startup pitching to investors and applying to accelerators.
Whyable differs from most incubators in that that we provide a six-month program focusing primarily on product development. Whereas most incubators operate as co-working spaces with a broad community, we work in collaboration with founders as their technology partner. And while we do not currently provide physical desk space in London, our clients can work in our Bangalore office in India if they so desire to escape the cold grey English winter and enjoy the warm sunshine and low cost of living in India. Like most incubators, we also provide extensive mentorship on all things relating to technology and product development and run numerous events and workshops around London. Our own ecosystem and personal networks are extensive and includes people from angel investors, VCs, accelerators and other industry experts.
Funding, investment and equity
An important point to note is that most incubators typically do not provide any funding for their members and/or startups within their community, nor do they take equity stakes in their members’ businesses. However, a small number of incubators such as Breed Reply, who work specifically with early-stage IoT startups, do provide pre-seed investment for a “minority [equity] stake” in the companies they accept into their program. Such incubators often require tangible evidence (e.g. a prototype of some kind) or a strong pitch (e.g. in-depth, academic research) to justify why they should take the risk and invest in such an early stage idea.
At Whyable, we also take a small equity stake (sub 5%) in the companies within our incubator program. We do this for two reasons: firstly, we offer our incubees a reduced price on their technology and product development; and secondly, we invest our own time over the course of the program to help with any technical queries as well as providing advice and support regarding business development.
The incubators who do provide investment and take an equity in return do often operate much like an accelerator – this is where the overlap and confusion between incubators and accelerators is found.
Startups who have worked their way through an incubator will reach a point in time at which they have successfully built a product or some kind of technology, incorporated their business, formed a team of founders, gained traction in the market, and will thus be in need of certain expertise and support to help further develop and grow their business. Enter the accelerator.
Accelerators are cohort-based programs that provide tailored mentorship, education and training designed for early-stage startups to help further grow their business and scale their technology. Each program usually runs between three and six months, after which the startup should be ready and looking to raise another round of funding (e.g. Series A) or possibly applying to another accelerator with a more specialised, industry-specific program.
Accelerators usually provide some level of pre-seed or seed investment for each startup within their cohort in return for an equity stake in the company. The amount of investment and equity varies but as a general figure, accelerators tend to take between 7% – 10% equity. For example, Seedcamp, one of Europe and the UK’s best-known accelerators, will lead with a first investment of £100,000 for %7.5 equity.
Whereas incubators tend to provide a broad range of resources for their members, accelerators tend to focus on one specific industry or a certain kind of technology thus providing more specialised resources for the startups within their cohorts. For example, Level 39 is a FinTech and Cyber Security accelerator program based in Canary Wharf; Bethnal Green Ventures is a social enterprise accelerator investing in companies that are radically changing the lives’ of people for the better; InMotion ventures, part of Jaguar Land Rover, invests in startups working in transport and logistics; and Collider works with startups who are innovating in the marketing, advertising and retail sectors.
This brings me to the second point of difference between incubators and accelerators, which is that the former is generally sector-agnostic whereas accelerators tend to be sector specific. An incubator with a strong network of contacts should be able to connect you with the people who run the accelerators most relevant to your business. And a good incubator might even be able to guide and prepare you for entry into a specific accelerator that you want to join.
Whatever stage you’re at, it’s well worth spending some time researching, contacting and visiting both incubators and accelerators alike, because it may be that you could skip joining an incubator and apply straight away for an accelerator. Be aware, however, that you will need more than just an idea to gain acceptance into an accelerator – you will need some proof-of-concept such a design prototype or Minimum Viable Product (MVP) for your application to succeed.