26/02/2021
accelerator vs incubator

Accelerator vs Incubator Which One is Good for You

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In this blog, explains what are accelerators or incubators and how they help in growing your business. full information about Accelerator vs Incubator

 You might have heard that a small startup from a small city has suddenly become a big company, they get huge funding, a lot of customers, good media coverage, and international exposure.
How does all this happen?

This happens because of the ecosystem that they have leveraged. You can also use this ecosystem to make your business big.

In this blog, we discusses the two important pillars of this ecosystem, i.e.
accelerator and incubator using some examples.

For example:
1. Razorpay

• It was started in a small room in Jaipur by Harshil and Shashank.
• At the very start of the company, it got admission in an accelerator named, y combinator, which is a popular accelerator and it is in Silicon Valley, US.
• As soon as the company got admission in Y-combinator it became the second only venture of its kind.
• The company received a funding of $1,20,000 from Y-combinator.
• As soon as they came out of Y-combinator, investors started reaching the company for investing funds. Thus, the company raised huge funding.
• Today, Razorpay has a big office in Bangalore and have 1 000s of customers. They have done a miracle in the Fintech industry.

2. OYO Rooms
• OYO Rooms was started by Mr. Ritesh Agarwal after going through various hurdles.
• His life was changed when he got admission in Theil Fellowship, which was started by Peter Thiel, who is a big and popular investor and is the early investor of Facebook. He is also an accelerator.

• In Theil Fellowship, Mr. Peter Theil says that he is ready to give a fund of $1,00,000 with a condition that if you are in a college, then you need to drop out of your college. You need to leave your studies and make your dream company with me. If you get success, then along with the fund, he will also introduce you to his entire network.

In the 2-4 years, you might only complete your education and join a company or start a small business. But, if you join Theil Fellowship, then in 2 years, you will be able to build a big startup with big funding and you will get massive growth or expansion in your company.

 
This is the magic of accelerators and incubators.

#2 Differences between Accelerators and Incubators (Accelerator vs Incubator )

                                                           


Accelerator

They are time-bound programs. For example, an accelerator can be 4 weeks, 12 weeks, or 3 weeks program.  
Incubator

They are for a longer period, say 1 year, 2 years, etc.  
They give a clear outcome. For example, an accelerator says that in the ecosystem, which I will give you, I will provide you funding, growth, customers, or any other specific outcome.  They do not provide a clear-outcome. They say that they will give you a large ecosystem and you need to identify how you will derive benefit from this ecosystem.  
They take a minority stake of 1-3% in your company. They become the shareholder of your company.  They do not take a stake in your company most of the time. They will charge a fee from you for providing you an
ecosystem.  
List of some of the accelerators in which you can apply:
• 500startups
• Tea labs
• Indian engine network
• Y-Combinator  
List of some of the
incubators in which you can apply:
• Amity Innovation Incubator
• IIM Ahmedabad incubators
• IIM Bangalore incubators
• Startup India  

#3 How to decide whether you should go to accelerators or incubators ?


Accelerators do not take companies that are in their idea stage. They take only those companies who have proved themselves in the market. So, you should have some traction or minimal viable product, if you want to go to accelerators. You should go to them for growing your company further. (Accelerators vs Incubator )

Incubators can take the companies at the idea stage as well. If your idea is interesting and pathbreaking, then they will take you and give you
access to their network.

#4 How to apply for an accelerator or incubator?

Whether accelerator or incubator, the basic information they need from you is your business plan.

So, you should have a business plan ready before reaching them.

It is important to make a business plan as a business plan helps an accelerator or incubator to understand:
• Which type of entrepreneur are you?
• At what stage of business are you?
• What is your perspective?
• Who is your target market?
• How much hold you have on your business?
• Which problem are you solving and how are you solving it?
Along with the business plan, you should also have a revenue model, i.e. how you will earn money.

#5 Can your business plan get stolen by providing it to an accelerator or incubator?

No, your business pkan will not be stolen.
Even if your business plan can beeasily replicated by anyone, then let them do if they can do it in a better way.

However, if your idea is strong and you have an insight that nobody can replicate, then nobody can use your plan.

Also, the accelerators, incubators, and the investors associated with them have clarity that they need to invest in entrepreneurs and not implement or execute the business plan.

They want to invest money in a lot of companies to increase the value of their money.

#6 Advantages of Accelerators or Incubators ( Accelerator vs Incubator )

1.Increase in Valuation

 when Razorpay or OYO rooms came out from accelerator programs, their valuation and press coverage have increased and perception of the world about them has changed.
Thus, the main advantage you get by going to an accelerator or incubator is that your valuation increases.

2. Huge Network

Network is the most important thing for any business.
Accelerators and incubators have a huge network. They will meet you with a Pot of investors partners, dealers, your first 100 customers, etc.

For example:
Razorpay is a payment gateway company and thus, they need lots of permissions from RBI. To get these permissions, the network is required as the owners of Razorpay are two college students and RBI will not give such permission to students.
Such a network already exists with the accelerators and incubators.

3. Saves time

Accelerators and Incubators give you knowledge about several things, process information, and failures of other businessmen. This will help you to know what you should not do.
All the entrepreneurs know what they should do but they don’t know what they should not do, which is very important to know.

4. Provide Funding

Most of the accelerators and incubators will give you a cheque of funding in the starting because they know that if you have reached them, then your business will grow big and its value will also be big. This will help the accelerators and incubators earn more money from you.


#7 How a big businessman can apply to an accelerator or incubator?

If you want to create new innovation in your
business, then you can create a new business unit or a small Pvt. Ltd. company or a small LLP and tell that this is a startup coming out from my big business and it can separately apply for accelerator or incubator. These small units are also called spin-offs

There are some corporate accelerators who invests in such spin-offs.

#8 Demo Day

When you complete your accelerator or incubator program, i.e. you graduate from the product. It is called a demo day.

On this day, a big event is organised that comprises of several investors, potential customers, and potential employees. You need to give a 5-10 minutes speech in this event. In the speech, you tell about your startup, the problem you are solving, and your complete business plan.

On demo day, if you have given a powerful speech and your business plan is correct and effective, then till the end of the demo day, 4-5 investors will come to you to invest in your company.

You have to get ready for the demo day and the complete program of the accelerators or incubators is for the preparation of the demo day.

What is difference between an incubator and an accelerator?

An incubator helps entrepreneurs flesh out business ideas while accelerators expedite growth of existing companies with a minimum viable product .

Is Y Combinator an incubator or accelerator?

Y Combinator (YC) is an American seed money startup accelerator launched in March 2005.


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