Incubators and Accelerators. Are they worth it? (Silicon Valley × LexStart)
Updated: Sep 23, 2020
Silicon Valley: S01E01 (Part 1) - Richard tries to launch his business while working out of Erlich Bachman’s “incubator”.
Welcome to the first post in this series! Let’s understand what incubators and accelerators are and whether or not they’re worth your time.
What’s an incubator? An incubator helps an entrepreneur’s idea grow into a business.
So, incubators work with entrepreneurs with a promising idea or just a talented start-up that wants to go through a process of product development and customer discovery to find the right product-market fit, which they want to transform into a business that scales up. Traditionally incubators are expected to provide physical working and product development infrastructure which is slowly changing with more start-ups working on software development. Given the space and infrastructure requirements, incubators are typically set-up in parentship in an educational institution or local or national government.
Most technical and business institutions have an in-house incubator that caters to their students. An Incubator’s staff and partnerships act as a one-stop shop for pre-revenue start-ups in the idea stage with all the resources and mentorship required for them get to commercial launch. There is no fixed tenure for a start-up’s residency in an incubator but typically start-ups stay at incubators for 3-4 years and are expected to graduate from the incubator either when they start growing their team beyond the first 10 employees or raise a round of funding. CIIE at IIM-A, T-Hub and C-CAMP are some of the top incubators in the country.
Incubators are often confused with accelerators. What’s an accelerator you ask?
Well, an accelerator expedites the traction or scale-up of a start-up. Accelerators typically come in at a time when the start-up has an inkling of product-market fit or has early customer validation and is preparing for scale. The accelerator is typically a team of experienced professionals and advisors with past entrepreneurial or investing experience. Accelerators run in a cohort format, where a new cohort of start-ups are selected through a competitive process to enter the cohort and are taken through a structured program ending with a demo-day where the start-ups are showcased to potential venture capital investors. During the program, which can be between anywhere between a week to a few months, the accelerator helps the start-up founders get the right scale-up strategy in place along with leveraging its network to validate them with customers.
Accelerator programs are typically specialized with corporate and institutional partners. The Y-Combinator is one of the most successful start-up accelerators in the world!
With a rise in entrepreneurship, there has been a drastic increase in the number of acceleration programs as well as co-working spaces that cater to start-up needs and to some extent incubators. Many incubators today also run acceleration programs; start-ups joining these programs are then considered virtually incubated and have the option to leverage the resources of the incubator. With the desire to catch talented entrepreneurs early and the shorter development times to bring software products to market, accelerators have also shifted to working with earlier stage founding teams which has led to more confusion in the market.
Independent of the nomenclature, if you are looking for assistance with getting your start-up off the ground or getting to market fast, working with an accelerator or incubator can be invaluable. Some thoughts on how to pick the right incubator or accelerator:
A. Speak with some of the alumni or current start-ups to learn more about the assistance they got from the incubator or accelerator.
B. Evaluate if the team and network that the incubator or accelerator offers is meaningful to the market or product that you are developing.
C. In the case of an accelerator evaluate the stage of the start-ups that are being accepted at the accelerator and that the program is meaningful to the stage you are at.
D. In the case of an incubator evaluate if the infrastructure and location of the incubator makes sense for you for the next year or two at the very least.