Entrepreneurs Stepping Into The Startup Space

1
Entrepreneurs stepping into the startup space are
often exposed to an entirely new business world.
They are no doubt brave hearts as peddling their
new ideas, may have a background in finance, but
often find themselves lost in conversations with
people throwing around jargons like angel
investor, co-founder, venture capital, seed
funding, and the list is pretty long. Another
misconception that happens from early
entrepreneurs is the use of incubator and
accelerator interchangeably as synonyms, which is
understandable but incorrect.
2
Both of these programs, namely incubator and
accelerator, provide guidance to startups, as
well as help advance their business model and
strategies. The main goal of them is to groom the
startup to become valuable in the eyes of
investors. However, the key differences are
present between accelerators and incubators. The
differentiation between the two becomes more
apparent while examining the selection and
investment process. Incubators support startups
stepping into the world of business in the
beginning stages of building their company. The
startups may have a business idea to bring to the
marketplace, but they lack in execution process
of their business model and direction to
transition from innovative idea to reality.
3
Accelerators help grow the existing companies
with an idea and business model in place. These
programs build upon the startups foundations to
make them presentable to investors and key
influencers. Incubators invest time and
resources to help advance local startups. They
aim to generally create jobs or find solutions to
license intellectual property. Startups are a
channel to achieve both. Incubators have less
pressure to deliver startups that can grow fast.
Nurturing and supporting local startups is part
of their charter. This is the reason even a slow
growing or less scalable business constitutes a
good incubator candidate.
4
Accelerators use a more conventional and formal
business model for entry into their program.
Those who participate must apply for a select
number of slots in the program. Accelerator
programs are very competitive as the accelerator
must select the top startups from across the
country. Those top startups are scalable,
investable and have to show an ability to grow
rapidly within months. These two programs,
namely both incubators and accelerators, create
an environment of collaboration and mentorship.
It enables the startups to share a space, as well
as have access to a host of resources and peer
feedback. Both of them also offer mentorship from
seasoned entrepreneurs and business experts.
5
Usually, incubators do not provide capital to
startups. They are often funded by universities
or economic development organizations. Incubators
also dont usually take an equity stake in the
companies they support. On the other hand,
accelerators do invest a specific amount of
capital in startups. That they do in exchange for
a predetermined percentage of equity. For this
investment, the accelerators have a bigger
responsibility in the success of the startup.
Entrepreneurs should look for the right fit while
deciding which program is right for their
startup. Most startups could benefit from being
in an incubator, but fewer are a fit for an
accelerator.