Startups do not thrive in isolation. With 305M startups created each year worldwide, up to 90% fail, and only 2.5% achieve unicorn status. Among those who have survived and become unicorns, very few have done so without outside help.
It’s a well-known fact that collaborating with incubators and accelerators can catapult your startup to your first significant milestone. The problem is that targeting the wrong program can achieve the opposite, steering you off course and wasting precious time.
Given that, as of 2024, there are over 750 startup accelerators and incubators in the US and over 1200 in Europe, you’ve got lots of options to sift through.
Having helped hundreds of startups fundraise and scale, we will break down the key difference between an incubator and an accelerator, their pros and cons, and how to choose the right program for your case.
What is a business accelerator?
A startup accelerator is a short-term mentorship program for early-stage and high-growth companies with a solid concept and MVP.
The accelerator program lasts 3-6 months, with an initial pool ranging from $20K to $150K. It culminates in a public pitch event or demo day where startups can raise $500K to $1M.
Typically operated by investors, corporations, or independent entities, the accelerator program includes industry experts’ guidance, business development workshops, marketing, fundraising, product development, and networking with partners and other startups.
Usually, the accelerator takes 3-10% equity in the startup as compensation for funding, mentorship, and introductions to VCs and other investors.
Startup accelerator pros
Financial support in exchange for company shares. This capital can turn the tide in the very early stages.
Mentorship from seasoned entrepreneurs, VCs, and industry experts.
Access to a network of industry experts, potential customers, and investors.
Resources and infrastructure with office spaces and access to technical and administrative support.
Startup accelerator cons
Founders typically give up equity in exchange for accelerators’ funding and support.
Intense pressure with tight timelines and high expectations might not suit all founders or business models.
Lack of customization with a one-size-fits-all approach may not perfectly align with your startup’s unique needs or industry.
Types of startup accelerators
Startup accelerators come in various flavors, but all aim to jumpstart young companies. These programs can focus on funding stages (pre-seed, seed, Series A), industries (fintech, healthcare), or even a founder’s background (female founders, immigrants). The most common ones are below:
Industry-specific: Focus on a particular field, like healthcare (Y Combinator Health, IndieBio, Dreamit Ventures).
Corporate: Run by large companies to invest in relevant startups (Google for Startups, Comcast NBCUniversal LIFT Labs, Disney Accelerator).
Social impact: Support ventures tackling social or environmental issues (Echoing Green, Unreasonable Impact, Skoll Foundation).
University-based: Leverage university resources for student startups (Berkeley Launchpad, Harvard Innovation Lab, University of Chicago Startup Garage).
Seed accelerators: Target very early-stage startups with just an idea (AngelPad, 500 Startups, Alchemist Accelerator).
Regional/local: Support startups within a specific area (ATX Startup Week, MassChallenge Houston, Berlin Startup School).
Virtual accelerators: Offer remote programs for founders anywhere (Founder Institute, SeedLab, Selerator).
Niche accelerators: Cater to specific demographics, like female founders (SheWorx, Halogen Ventures, Springboard).
Government-funded: Backed by public funds to promote innovation (National Science Foundation Innovation Corps, Startup in Residence, Alchemist Accelerator).
Equity-free accelerators: Provide support without taking ownership in the startup (gener8tor, FounderFuel, MassChallenge).
Top 5 best startup accelerators in 2024
Y Combinator — a well-established name that fuels young businesses with seed funding, mentorship, and valuable networking opportunities in exchange for equity.
AngelPad, the top accelerator with $2.2 billion in financing provided, focuses on intensive guidance and connections for a select few startups per batch.
500 Global specializes in micro-seed funding and international reach.
Techstars offers a well-rounded package of capital, mentorship, and a vast network for a stake in the company.
Surge by Sequoia Capital caters to specific regions and provides a blend of funding, workshops, and support to promising startups.
What is a business incubator?
A business incubator is a long-term mentorship program for new small businesses and first-time founders. The duration of the program ranges from 6 months to 2 years.
Startup incubators typically don’t have an initial fund to invest in. But when they do, the funding sources are often grants, loans, or other non-dilutive forms of financing. Notably, some incubators may offer small investments alongside their program benefits, usually something between $15K and $150K per startup.
Typically led by experienced business professionals, university researchers, or industry veterans, the incubator startup program offers access to mentorship, discounted technology, physical workspaces, networking opportunities, and access to potential investors to secure their first customers. In return, most startups must give their incubators 5-12 % of their equity.
Startup incubator pros
A community of founders can help startups gain valuable insights from seasoned peers in the industry, potential investors, business partners, and vendors.
A big reputation boost for a startup, which eases the search for future angel investors, potential clients, or business partners.
Financial support without overhead, so startups can focus on growth without having to worry about basic expenses like utilities, rent, and more.
Startup incubator cons
The application process can be stressful and competitive, as founders need to submit a detailed business plan and up-to-date data about startups’ activities and progress.
Most incubators require a set time commitment, often around one to two years. Startup freedom is limited here as startup founders must attend mandatory training and workshops, which can be time and resource-consuming.
It is a very strict environment with a set schedule. The founders must be at the workspace during specified times and must answer to the investors if they’re not. This setup can often feel overwhelming as if a business owner is no longer working for himself.
Types of startup incubators
It may seem like incubators are a one-size-fits-all program. However, not all incubators are the same. Some specialize in a specific industry, while others focus on particular areas of expertise. Ultimately, the choice depends on the startup’s needs. Are you looking to develop its MVP, or do you need help kick-starting your sales and marketing efforts? The answers will define your choice.
Regardless of the answer, here are the common types of startup incubators:
For-profit incubators make money by taking equity in the businesses they help launch. (Mucker Lab, New York City, NY)
Grants or donations typically fund non-profit incubators and don’t take equity in the businesses they help launch.
(National Business Incubation Association, World Business Incubator Association, The Founder Institute)
Industry-specific incubators are focused on a specific industry, such as healthcare, technology, or fashion. (Healthbox, Chicago, IL, Fashion Tech Lab, New York City, NY)
Geographic incubators are focused on a specific geographic area and typically offer access to local resources and networking opportunities. (Kilometers to Kilowatts (KT2K), Los Angeles Cleantech Incubator (LACI)
Incubator vs. accelerator: Which one is a fit for your startup?
To choose the right program, you must consider its entry stage, funding sources, duration, program costs, location, and acceptance criteria.
The stakes are high, so choose carefully
Define your stage, as some programs are focused on pre-seed companies, and some target more established businesses with an MVP and traction.
Define your goals and needs, whether you need a mentor, money, an office space, industry-specific knowledge, or a network.
Focus on program structure and duration since some have flexible timelines, and others have fixed-term cohorts and milestones.
Examine the incubator or accelerator’s success stories and track record to make sure they fit your expectations.
Focus on location, as it’ll matter if you want to benefit from access to industry clusters, potential clients, talent pools, or even government support
Evaluate program costs and equity terms, such as membership fees, equity requirements, or revenue-sharing structures.
Ultimately, both incubators and accelerators are great for young businesses’ success. If neither option fits, a startup coach can provide similar hands-on guidance without a formal program. You might also consider intensive programs like the Bali Launchpad for a focused startup sprint. If you need help picking the right program and pitching your case, Waveup can be your guide throughout this journey. In 2023, we’ve helped our clients raise over $505M, so if you want to join their ranks, reach out to us!