You might have just started working on your startup or have an idea. Your friend that you knew in school started his own startup, the newspaper that you read in the morning says – ‘Startups have achieved the highest growth in the last fiscal year.’ The buzz is vibrant, so lets dwell a little more into detail on Startups
What exactly is a Startup ?
A startup company or startup or start-up is an entrepreneurial venture or a new business in the form of a company, a partnership or temporary organization designed to search for a repeatable and scalable business model.
These companies, generally newly created, are innovation in a process of development, validation and research for target markets.
Now lets break this down-
- Any business activity which has been started on the basis of innovation – tech based or non-tech by anyone (entrepreneur/ organization)
- Looking for Validation in the Market and making the model scalable in the long term.
As such there are many organizations out there with their sole business motive being to help Startups grow and find markets.
Two such terms that come to our minds are Startup Incubators and Startup Accelerators.
Now these terms are thrown around interchangeably by a lot of people. If you’re interested in getting your start-up into an accelerator or incubator there are many options. But before you decide on any course of action it is very crucial to know the difference between the two.
Accelerators and incubators both offer entrepreneurs good opportunities to grow fast and penetrate the market. Founders get help to grow their business and often have better chances of attracting a top VC firm to invest in their startup at a later point. Still, both the programs are different frameworks for startup success.
Probing into the Details
The big difference is in how the programs are structured. Accelerator programs usually have a set timeframe in which individual companies spend anywhere from a few weeks to 3-4 months working with mentors to build out their business and avoid problems along the way. Y Combinator and Techstars are two well-known accelerators.
Accelerators start with an application process, but the top programs are typically very selective. Y Combinator accepts about 2% of the applications it receives and Techstars has to fill its 10 spots from around 1,000 applications.
Companies are given a small seed investment say about $20000, and access to a large mentor network, in exchange for a small amount of equity which is usually in single digits. The mentor network comprises of startup executives and outside investors, and they add the biggest value for prospective companies.
Startup incubators on the other hand work with companies that may be earlier in the process and they do not operate on a set schedule. An accelerator as the name suggests is the pedal to take your car (Startup) into the market at full speed, an incubator is the workshop which ensures that your car (Startup) has the best engine & parts for running in the long run.
While there are some independent incubators, they can also be sponsored or run by VC firms, government entities, and major corporations. Some incubators have an application process, but others only work with companies and ideas that they come in contact with through trusted partners. A good example of an incubator is Idealab.
Depending on the sponsoring party, an incubator can be focused on a specific market or vertical. For example, an incubator sponsored by a hospital may only be looking for health technology startups.
The chart below will help you understand what’s the best fit program for your Startup.
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