By Hubert Zajicek, CEO of Health Wildcatters
Starting a new technology business comes with a multitude of challenges, including learning the ins and outs of creating a profitable company. An entrepreneur may have an ingenious idea, but obtaining the right resources to ensure the success of their startup can be problematic. Fortunately, there are programs available for startups dedicated to boosting their chances of success.
Accelerator and incubator programs are designed to provide guidance to rapidly scalable technology startups, as well as assist with advanced business models and strategies. Although many use the terms “Accelerator” and Incubator” interchangeably, both programs differ from one another and offer their own set of benefits. To help you determine which program is best for the advancement of your startup, consider the following factors.
What’s The Objective?
Startup companies selected for an accelerator program have an established idea to bring to the marketplace. Accelerator programs aim to rapidly advance the growth of startups from the beginning to end of the program. Accelerator companies are expected to be rapidly scalable, and likely to attract angel or venture capital funding. As part of their involvement in the program, these startups will likely be connected to potential funding sources.
Alternatively, incubator programs support startups that have just begun building the company and aren’t necessarily rapidly scalable or interested in attracting outside investment. Startup organizations enrolled in an incubator program are still developing their business idea and building a solid foundation on which the company can grow. Also, an incubator may be a startup’s first step toward preparing for an accelerator.
What’s Your Timeframe?
Accelerators operate on a set timeframe, typically ranging from three to four months. Startups are aware of the length of the program and of the milestones they are expected to reach throughout the program. An accelerator’s rigid timeline induces a fast pace environment for company growth within the program.
Incubators, on the other hand, operate on a flexible timeframe focusing on guaranteeing the longevity of a startup, taking the time to fine-tune ideas and strategies of up-and-coming companies. It is not uncommon for incubators to mentor startups for more than a year.
What Resources Do You Have?
Both accelerators and incubators provide startups with an arsenal of seasoned mentors, as well as a co-working environment, where startups share office space and have a multitude of resources available to them. Differing from incubators, accelerators offer a specific amount of capital to startups at the beginning of the program. The capital is often called a seed investment and ranges from $20,000-$100,000+.
What’s At Stake?
Since accelerators offer startups a financial supplement, the program asks the organization for a predetermined percentage of equity in return. Due to this investment, the accelerators bear a greater responsibility in the success of the startup compared to incubators, which do not provide capital to startups and are often funded by university grants. Since incubators do not traditionally provide financial means, they do not usually take an equity stake in startups they support.
What’s The Application Process?
Startups must apply to accelerators in order to be selected for a program. Each program decides how many startups they are willing to accept and have national calls to apply. Top-tier programs are incredibly selective and pick from hundreds of pre-vetted applicants. As such they must choose startups that are scalable, investable and show an ability to grow rapidly within months. Additionally, accepted startups must be willing to relocate to the town where the accelerator is housed for at least the duration of the program.
Since incubators invest time and resources into advancing startups, without asking for equity in return, many incubators only accept pitches from entrepreneurs with whom they have an established relationship. In many cases startups need to be “local,” or from that specific community, launched by constituents of the particular municipality, especially if the incubator is economic development driven or has intellectual property (patents) from the incubator-sponsoring university. Therefore, networking skills will come in handy for startups trying to get into an incubator.
Most startups could benefit from being in an incubator, but fewer are fit for an accelerator. Incubators tend to accept startups which have yet to fine tune the foundation of their company and may not necessarily require investment capital. These companies may need a longer timeline to commercialization.
Although the main objective of each program is to help advance the startup and provide guidance to ensure the success of the company, it’s important entrepreneurs understand what stage of development the company is in and what they are expecting out of the relationship.
Dr. Hubert Zajicek is the CEO and co-founder of Health Wildcatters, a Dallas-based mentor-driven, health care accelerator. Health Wildcatters offers a 12-week program that is geared toward health startups. Portfolio companies receive an initial seed investment, as well as access to mentors, advisors, office space and strategic resources required to help the startups grow.