India’s evolution as a global innovation and investment hub has dramatically altered its entrepreneurial ecosystem, positioning it as the third-largest startup ecosystem in the world.
In the recent Tracxn report, India has 437K startups, with 29.6K funded businesses that have together raised $562B in private equity and VC funds. Of these, in total, 2.81K are Series A+ funded and 498 are Series C+ funded. India has 117 unicorns, with startups recording 4.93K acquisitions, 4.79K IPOs and 86.4K failures.
DeepTech, the prime pillar of innovation, is growing more prominent and mainstream in the tech start-up environment, accounting for approximately 14% of the total funding over the past 5 years. Meanwhile, it is also going to be one of the primary differentiators for the future technology landscape.
In the startup world, which is competitive and full of complexity, founders are always on the lookout for any type of competitive advantage. More and more, startups seek this advantage in the mentor and investor networks that are present in an incubator or accelerator
But what are accelerators and incubators, and is either right to help you grow your startup?
Definitions
It’s common to see the terms ‘incubator’ and ‘accelerator’ used seemingly interchangeably, but in fact, there are distinct differences between the two, which you need to know before you consider applying to one.
Incubators
Incubators provide a supportive environment for early-stage startups to develop their business ideas and turn them into viable ventures. These programs typically offer workspace, mentorship, networking opportunities, and access to resources such as funding, legal advice, and infrastructure
An incubator is mostly a part of an academic institution or college which gives you access to a workspace and allied infrastructural support in return for a small rental. They may hold talks by experts to validate your ideas and provide preliminary support.
Incubators are set up by academic institutions where they provide working space in some infrastructure to their students who’ve turned entrepreneurs.
Examples
- T-Hub (India): One of India’s largest innovation ecosystems for startups.
- TechNexus, which connects entrepreneurs with mature corporations to foster innovation and mutually beneficial relationships
- Seedcamp, which provides funding and resources to European tech founders
- NSRCEL (IIM Bangalore) – Provides early-stage startups with mentorship and funding opportunities.
- Atal Incubation Centres (AICs): A government-backed initiative to support startups across various industries.
Accelerator
In contrast to incubators, accelerators are big names such as YCombinator, SanchiConnect where you apply to a three to four month program where experts really help you grow your product, improve it, and get more users and revenue. In addition, they also invest up to 200 thousand dollars in your business in return for some amount of equity. Plus the credibility that your startup gets after getting accepted by any of these programs really gives you warm introductions and access to a great network of investors and it possibly becomes easier for you to raise funds,
Accelerator is a 3-4 month program that invests capital of up to USD 200k in your company in return for equity and works directly with the founders in improving their product and thinking through business decisions. They put together a network of Mentors and a network of Investors to whom you can then reach out for funding with the higher credibility you get as being attached to the Accelerator.
Examples
- Techstars, which offers virtual, in-person, and hybrid three-month programs and invests up to $120,000 in each startup in exchange for six percent of the company
- Y Combinator, which hosts a three-month program and provides $500,000 to each company in exchange for a seven percent share
- AngelPad, which accepts only 15 tech startups to each of its three-month programs to create extremely selective, close-knit experiences
- Startupbootcamp, which offers 21 programs focused on industries ranging from global clean energy to geography-specific finance technology (fintech)
- India Accelerator (India): A leading accelerator program helping Indian startups grow.
Key Differences
| Feature | Incubator | Accelerator |
| Entry Requirements | Business idea or business plan | Established business model/MVP |
| Application | Competitive restricted based on industry and vertical/sector | Extremely competitive but open to all |
| Timeline | Flexible, typically 1-3 years | Rigorous, typically 3 – 6 months |
| Purpose | Building the foundation of a new startup | Accelerating the growth of an established startup |
| Support | Office space, administrative and legal assistance, business planning, product development and prototyping, networking, and learning opportunities | Seed funding, networking, and mentorship from industry experts |
| Financial obligation | Typically, monthly fees in exchange for physical space and access to program offerings. | Equity in exchange for seed funding/investment |
| Operational funding | Economic development organizations, non-profit and educational institutions | Private funds |
How does a startup accelerator work?
Startup accelerators are structured programmes that run for a set amount of time and help startups scale quickly. Here’s a general look at how they operate:
- Application process: Startups go through a competitive process to submit applications for acceptance into accelerators. Accelerators seek teams that have a good idea and early progress.
- Initial investment: If accepted, startups usually receive some seed money upfront. This allows them to stay afloat during the programme, and in return, the accelerator receives a small equity stake in the company.
- Mentorship and resources: Accelerators connect startups with experienced mentors and give them access to resources that help them fine-tune the product, business model, and strategy for growth.
- Workshops and training: During the programme, startup teams participate in workshops that cover everything from product development to customer acquisition and fundraising.
- Networking: Accelerators bring startup teams into contact with investors, industry experts, and possible collaborators.
- Demo day:At the programme’s conclusion, the startup pitches to investors. This is the startup’s opportunity to impress everyone with all that they’ve accomplished and hopefully raise additional funding to propel their business to the next level.
- Post-program support: Even after the programme ends, many accelerators keep offering support through networking events, alumni groups, or continued mentorship.
How does a startup incubator work?
Startup incubators differ from startup accelerators in a few important ways. Here’s how a startup incubator typically works:
- Application or invitation: Startups might apply or be invited to participate. Incubators often work with very early-stage startups and are typically looking for people with exciting ideas who need time and support to move forward.
- Workspace and resources: Upon being accepted, startups gain access to shared office space, general resources, and at times, equipment. Funding is also provided in some incubators, but workspace and other assistance is more prevalent.
- Mentorship and guidance: Incubators are concerned with developing startups. They offer exposure to mentors and industry professionals who assist the team in idea development, the creation of a business model, and navigating early issues.
- Flexible timeline: Incubators have more flexible timelines compared to accelerators. Startups may remain for months or more as they work on fine-tuning their idea. It’s less pressure, which is perfect for firms that are still testing out their business concept.
- Networking opportunities:While the tempo is slower, incubators also offer beneficial connections. Startups get to connect with other founders, investors, and prospective partners and form long-term relationships.
- Ongoing support: Most programs offer ongoing advice and access to their network once the incubator has finished.
How to decide between incubators and accelerators?
Incubators and accelerators both provide mentorship, robust entrepreneurial networks, and the expertise to take your startup to its next level.
To decide which is right for you, ask:
- What stage is my startup in?
- What are my funding needs?
- Do I have a strong founding team, or do I want to build one?
- Am I willing and able to relocate?
- Who would I like to learn from and be mentored by?
By carefully considering your goals and venture’s current state, you can choose the best option for you. Whether you pick an incubator or accelerator, take the opportunity to strengthen your business and propel its growth.
Struggling to drive corporate innovation or connect with cutting-edge DeepTech startups? SanchiConnect enables enterprises to collaborate with emerging technologies, fostering industry transformation and technological advancement. Discover how SanchiConnect can accelerate your innovation journey today.
FAQs –
Is Y Combinator an incubator or accelerator?
Y Combinator is a business accelerator that offers advice and resources to early-stage startups for a limited time, typically three months. The program finishes with a Demo Day, during which startups pitch investors. Accelerators such as Y Combinator excel at fast growth and getting companies ready for the next stage of expansion.
What is a startup accelerator?
Accelerator is a three to four-month program which invests around USD 200k in your business in equity and works with the founders themselves to enhance the product and also make business choices.
What is the difference between startup studio and incubator?
One of the main differences between a startup studio and an incubator is that a startup studio proactively builds new businesses from the ground up by incubating ideas and assembling teams from scratch, while an incubator mainly assists established startups with nascent business ideas, offering resources and guidance to nurture them.
