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Trying to grow your startup in New Zealand without having the right support system can be difficult. Nevertheless, programs such as accelerators and incubators exist that can help your startup grow and scale. However, to choose one, you need first to understand the key differences between them. Furthermore, you need to know which one will be right for your startup and best help you grow. This article will outline the key differences between an accelerator and an incubator so you can choose the right one for your startup. 

What is an Accelerator?

A startup accelerator is a growth program that will help your startup grow in the short span of three to six months. These programs often have a fixed duration and can help your product or service develop further. To enter into such a program, you will need to apply. An accelerator program can offer services such as:

  • mentoring and coaching;
  • a co-working space;
  • seed funding;
  • networking opportunities; and
  • a demo day at its conclusion where you can pitch your startup to potential investors.

What is an Incubator?

A startup incubator can provide you with ad-hoc help and will mentor you over a longer period. With an incubator, you can expect an environment filled with support and networking opportunities. The primary purpose is to assist you from concept ideation to market launch. You will need to apply for an incubator program, although you should prepare yourself for a competitive process. An incubator may provide you with services such as:

  • business development;
  • help with acquiring new investors;
  • networking opportunities;
  • access to capital sources;
  • mentoring; and
  • co-working spaces.

What Are the Key Differences?

Although an incubator and an accelerator may seem similar, some aspects set them apart. By understanding the difference, you can realise which one will best suit your early-stage startup. 

Main Purpose

There is a difference between the main aim of these programs.

For instance, an accelerator will aim to accelerate and scale your business. Therefore, your startup should already have a concept and a minimum viable product. Unfortunately, an accelerator will not guide you through the ideation phase of creating a product or service. 

Meanwhile, business incubators aim to stimulate innovation during the early stages of your business. They are usually considered to be a program that prepares you for accelerator functions. You do not need a minimum viable product to be accepted into an incubator program. Unlike an accelerator, an incubator can help you form a business model and a concept, meaning all you need is a good idea to attract an incubator’s help.

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Program Time Period

It is a common misconception that both programs will take relatively the same time. Accelerator programs have a fixed duration and take less time than an incubator. Each program will have a different timeline, but an accelerator will generally take around three to five months. 

In comparison, an incubator has a less rigid structure and will be tailored to your startup’s needs. Depending on your needs, they have an open duration and often last longer than six months.

You can use an incubator for as long as your startup needs to grow to a solid stage. 

What the Program Looks For

Before you try applying to either of these programs, you need to know what each program looks for. Accelerator programs have narrow criteria and look for small companies with potential for rapid growth. Before applying to an accelerator program, you need to prepare the following:

  • a solid business plan;
  • minimum viable product;
  • strong teamwork;
  • scalability; and,
  • entrepreneurial drive.

An incubator has a less narrow focus and instead looks for startups with good ideas. They want startups that will grow over a few years instead of those with rapid growth ability like an accelerator. Thus, you do not need to show that your startup has a great team and scalability potential. However, you may need an operational business plan depending on the incubator program.

In addition, you must do some reconnaissance on the incubator program as some will only be interested in startups from specific industries, or a particular group, such as women. 

Investment Capital

When using an accelerator, you will gain access to venture capital and seed funding opportunities. Typically, an accelerator will provide some seed funding in return for equity in your company. You will also participate in a demo day to pitch your business to investors to receive further investment. 

Meanwhile, an incubator usually will not offer seed funding. They may, however, link you with angel investors and venture capitalists as a potential investment source. Once you leave the incubator, you will be prepared to pitch your idea to potential investors. 

Key Takeaways

When choosing whether to engage in an accelerator or incubator program for your startup, you should first be aware of their differences. The main differences include:

  • the purpose of the program;
  • how long the program will last for;
  • what each program looks for in a startup; and
  • how they can help you get investment.

If you need help choosing between a startup accelerator or incubator, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

What is a startup accelerator?

An accelerator will help rapidly grow your business within three to five months. This program has a fixed duration, and you will need to already have a concept and minimum viable product before applying to one. 

What is a startup incubator?

An incubator will help you create a business concept for a market launch through a collaborative environment. Usually, this program takes longer than six months, and all you need is a great idea to apply to one. 

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