A Brief Guide
With India emerging as the third-largest startup ecosystem globally, the number of participants in the ecosystem has also increased. At an early stage of a venture, it is critical to build a strong value proposition and validate the venture’s problem-solving abilities for a customer base that wants the solution. To realize the vision, budding entrepreneurs can significantly benefit from startup accelerators and incubators.
Accelerators and incubators aim to provide general business training, preparation to raise funds, and create a network of mentors and potential customers.
What do The Experts Say?
The Accelerators and Incubators report of Penn Libraries – the University of Pennsylvania lauds these entities as critical inputs to the startup support system. Most incubators offer support on many fronts for early-stage companies without requesting equity in return. The main goal is to help startups build and refine their business model. The report also states, most accelerators provide limited funding in return for equity or convertible debt. Many companies use these funds to develop a critical piece of their technical stream, such as building a prototype or hiring additional talent.
Other roles include:
To help companies drastically increase their business scope within a short period, often about three months.
De-risking ideas and preparing them to pitch to investors—mostly venture capital (VC) firms—to secure seed and Series A funding.
Simulate an evaluation environment similar to those used by VCs.
Assist in scaling by providing high-value resources at low costs like working spaces.
Some key differences exist between the two.
Accelerators are characterized by:
Fixed duration program (usually between three and twelve months),
Typically growth-based (payment via equity rather than fees), Often provides seed funding,
Focus on services over physical space, admission in cohorts, provision of startup services (e.g. mentorship, entrepreneurial training)
These programs of highly selective of their cohorts
Incubators are characterized by:
Not focusing on pushing companies to proliferate. Instead, they often serve economic development missions, which they fulfill by fostering local opportunities and creating jobs.
Accommodating business models that are not expected to overgrow slow-development or hard-to-scale startups that can potentially benefit more from these programs than accelerators.
Providing training for entrepreneurs, access to networks, and specialist equipment.
Sharing basic operating costs, consultation, and administrative assistance, access to capital, and comradeship with fellow entrepreneurs.
All in all these support entities help create founders that are connected to the pain points of their customers and act as a knowledge platform for the ecosystem.