“An accelerator takes single-digit chunks of equity in externally developed ideas in return for small amounts of capital and mentorship. They’re generally truncated into a three to four month program at the end of which the start-ups ‘graduate,’

An incubator, on the other hand, brings in an external management team to manage an idea that was developed internally. “Those ideas can gestate for much longer periods of time and the incubator takes a much larger amount of equity [compared to accelerators],” he says.

Startup accelerators and startup incubators assist entrepreneurs in the journey toward becoming successful companies, but each in their own way. However different these two processes are, many people confuse the two and use the terms interchangeably.

What is a Startup Accelerator?

The most distinct difference between accelerators and incubators is the time frame of each. An accelerator works with startups for a short and specific amount of time, usually from 90 days to four months. Accelerators also offer startups a specific amount of capital, usually somewhere around $20,000. In exchange for capital and guidance, accelerators usually require anywhere from 3 to 8 or more percent ownership of your company. As you’ll see below, these features make accelerators much more structured than incubators.

The accelerator journey is not an all-inclusive road to success. Rather, it is meant to help you get to a point at which you’re ready to raise larger amounts of capital. The goal of accelerators is to grow the size and value of a company as fast as possible in preparation for an initial round of funding. This closely aligns with the equity accelerators require in exchange for their guidance and resources. Some common and increasingly popular accelerator programs that you may have heard of include: TechStars, Y-Combinators and Dreamit.

What is a Startup Incubator?

With mentorship periods often lasting more than a year and a half, incubators focus less on quick growth and have no specific goal in mind for your company other than to become successful at the right pace. In fact, the goal of some incubators may be to prepare your company for an accelerator program. Incubators take little to no equity in your company, and can afford to because they do not provide upfront capital like accelerators. Many incubators are funded by grants through universities, allowing them to provide their services without taking a cut of your company.

Because many entrepreneurs are attracted by the opportunity to keep control of their startup and the absence of a 90-day time limit, you will most likely encounter more difficulty getting into an incubator. It may also be difficult to get accepted by an incubator if your networks aren’t connected in some way, as many only accept pitches from entrepreneurs with whom they already have a relationship. If your goal is to gain the mentorship of an incubator, be prepared to perfect and utilize your networking skills.

Advantages of being part of an Accelerator or Incubator

Whether you work with an accelerator or an incubator, there are pros and cons of both. For starters, the advice and guidance of mentors can help you avoid mistakes that could cripple your startup if you were trying to go your own way. Both options also provide access to capital that may have been otherwise unavailable, whether it’s during or after mentorship. Additionally, both accelerators and incubators provide the space to develop your idea. Lastly, being a part of an accelerator or incubator can provide invaluable connections, and some may also have networking events to help you boost your exposure.

Disadvantages of being part of an Accelerator of Incubator

Many advantages of incubators and accelerators come with an opposing disadvantage. For example, your routine and your vision are completely your own when working with only your team members. Working with an incubator or accelerator can impose the opinions of your mentors and take your idea in a direction your team doesn’t completely agree with. Working with these mentors is also a big time commitment, and will likely require you to spend time away from developing your product by attending meetings with mentors and/or investors. Additionally, your schedule depends on your mentors. Sometimes you may have to spend time speaking with mentors when you just want to get down to work without any outside influence, and sometimes you may want advice from mentors while they are busy helping other teams.

How do you choose?

Choosing whether to pursue the mentorship of an accelerator or incubator is a tough decision. First, you need to decide whether you need the guidance, capital, and other assistance they have to offer. With so many different accelerators and incubators out there, you have many options to find the one that best fits your company. Even so, an accelerator or incubator may not be right for your startup. For instance, if you’re only looking for capital, you may be better off reaching out to an expert to help you raise instead. Or if you have enough capital but need mentorship, you might want to utilize your network to acquire the mentorship of a veteran.

After choosing to pursue one of these mentorship programs, you need to decide whether you’ll benefit more from the quick growth offered by an accelerator or the unstructured progress of an incubator. In the end, only you and your team know what’s best for the future of your startup.

For early stage startups, accelerators and incubators offer great ways to grow their businesses. Here are some of the key differences between a startup accelerator and a startup incubator. Startup founders looking to start off on the right foot often turn to a startup accelerator or startup incubator for help.

The terms "accelerator" and "incubator" are often assumed to represent the same concept. However, there are a few key distinctions that first-time founders should be aware of if they are planning on signing up.

Accelerators and incubators both offer entrepreneurs good opportunities early on. Founders get help to quickly grow their business and they often better their chances of attracting a top VC firm to invest in their startup at a later point. Still, the programs are different frameworks for startup success.

Let's start by breaking down the goals of each of these types of programs. Accelerators "accelerate" growth of an existing company, while incubators "incubate" disruptive ideas with the hope of building out a business model and company. So, accelerators focus on scaling a business while incubators are often more focused on innovation.

Accelerators

One of the big difference is in how the individual programs are structured. Accelerators programs usually have a set timeframe in which individual companies spend anywhere from a few weeks to a few months working with a group of mentors to build out their business and avoid problems along the way. Y Combinator, Techstars, and the Brandery are some of the most well-known accelerators.

Accelerators start with an application process, but the top programs are typically very selective. Y Combinator accepts about 2% of the applications it receives and Techstars has to fill its 10 spots from around 1,000 applications.

Companies are given a small seed investment, and access to a large mentor network, in exchange for a small amount of equity. The mentor network, typically composed of startup executives and outside investors, is often the biggest value for prospective companies.

The mentor networks aren't small, either. According to Troy Henikoff, managing director of Techstars Chicago, last year's program had 153 mentors.

Aaron Harris, a partner at Y Combinator, said he's not sure that accelerators necessarily work as a whole, but Y Combinator's success is due to the way it approached incentives.

"A lot of that success comes back to the alignment of incentives," Harris said. "Good programs completely align all parties -- at YC all the partners who advise the companies have a stake in their success. We also do as much as we can to limit distractions. We don't schedule unnecessary meetings, don't force them to work in a big loud coworking space, etc."

At the end of an accelerator program, you're likely to see all the startups from a particular cohort pitch at some sort of demonstration day attended by investors and media. At this point, the business has hopefully been further developed and vetted.

"The goal of the accelerator is to help a startup do roughly two years of business building in just a few months," said Mike Bott, general manager of the Brandery. "If you go through a good one, you'll know at the end where your startup founding team and business stand."

Incubators

Startup incubators begin with companies that may be earlier in the process and they do not operate on a set schedule. If an accelerator is a greenhouse for young plants to get the optimal conditions to grow, an incubator matches quality seeds with the best soil for sprouting and growth.

While there are some independent incubators, they can also be sponsored or run by VC firms, government entities, and major corporations, among others. Some incubators have an application process, but others only work with companies and ideas that they come in contact with through trusted partners. A good example of an incubator is Idealab.

Depending on the sponsoring party, an incubator can be focused on a specific market or vertical. For example, an incubator sponsored by a hospital may only be looking for health technology startups.

In most cases, startups accepted into incubator programs relocate to a specific geographic area to work with other companies in the incubator. A typical incubator has shared space in a coworking environment, a month-to-month lease program, and some connection to the local community.

Coworking is a big part of the incubator experience and has been split off as its own separate business offering around country, with coworking spaces charging rent for access to utilities. Some accelerators offer a coworking space, but most provide companies with private office space or let them find it on their own.

"If you need private space, most incubators are open seating, and this can be distracting for larger teams," Henikoff said. "The economics are usually on a per-seat basis, which is great for the first few people, but at a certain point it may be less expensive to get your own office."

Both incubators and accelerators offer a great opportunity to help young companies and ideas for startups get headed in the right direction, but it's up to you where you need to start.

Seed accelerators are fixed-term, cohort-based programs, that include mentorship and educational components and culminate in a public pitch event or demo day.[1] While traditional business incubators are often government-funded, generally take no equity, and focus on biotech, medical technology, clean tech [2] or product-centric companies, accelerators can be either privately or publicly funded and focus on a wide range of industries.

The main differences between business incubators and accelerators are:[3]

1. The application process is open to anyone, but highly competitive. Y Combinator and TechStars have application acceptance rates between 1% and 3%.

2. A seed investment in the startups is usually made, in exchange for equity. Typically, the investment is between US$20,000 and US$50,000 (or £10,000 and £50,000 in Europe[4])

3. The focus is on small teams, not on individual founders. Accelerators consider that one person is insufficient to handle all the work associated with a startup.

4. The startups must "graduate" by a given deadline, typically after 3 months. During this time, they receive intensive mentoring and training, and they are expected to iterate rapidly. Virtually all accelerators end their programs with a "Demo Day", where the startups present to investors.[5]

5. Startups are accepted and supported in cohort batches or classes (the accelerator isn't an on-demand resource[6]). The peer support and feedback that the classes provide is an important advantage. If the accelerator doesn't offer a common workspace, the teams will meet periodically.

The primary value to the entrepreneur is derived from the mentoring, connections, and the recognition of being chosen to be a part of the accelerator. The business model is based on generating venture style returns, not rent, or fees for services.

Seed accelerators do not necessarily need to include a physical space, but many do. The process that startups go through in the accelerator can be separated into five distinct phases: awareness, application, program, demo day, post demo day.[4]

A business incubator is a company that helps new and startup companies to develop by providing services such as management training or office space.[1]

Business incubators differ from research and technology parks in their dedication to startup and early-stage companies. Research and technology parks, on the other hand, tend to be large-scale projects that house everything from corporate, government or university labs to very small companies. Most research and technology parks do not offer business assistance services, which are the hallmark of a business incubation program. However, many research and technology parks house incubation programs.

Incubators also differ from the U.S. Small Business Administration's Small Business Development Centers (and similar business support programs) in that they serve only selected clients. SBDCs are required by law to offer general business assistance to any company that contacts them for help. In addition, SBDCs work with any small business at any stage of development, not only startup companies. Many business incubation programs partner with their local SBDC to create a "one-stop shop" for entrepreneurial support.

In 2005 alone, North American incubation programs assisted more than 27,000 companies that provided employment for more than 100,000 workers and generated annual revenues of $17 billion.[2]

1. in·cu·ba·torˈiNGkyəˌbādər/nounplural noun: incubators

1. an enclosed apparatus providing a controlled environment for the care and protection of premature or unusually small babies.

an apparatus used to hatch eggs or grow microorganisms under controlled conditions. North American

a place, especially with support staff and equipment, made available at low rent to new small businesses.

1. ac·cel·er·a·torəkˈseləˌrādər/nounnoun: accelerator; plural noun: accelerators

1. something that brings about acceleration, in particular. the device, typically a pedal, that controls the speed of a vehicle's engine. Physics

an apparatus for accelerating charged particles to high velocities.

science park; n 1. (Commerce) an area usually linked with a university where scientific research and commercial development are carried on in cooperationResearch Parks defines research parks as property-based ventures

Accelerators Vs Incubators

Accelerators and incubators both offer entrepreneurs good opportunities early on. Founders get help to quickly grow their business and they often better their chances of attracting a top VC firm to invest in their startup at a later point. Still, the programs are different frameworks for startup success.

Let's start by breaking down the goals of each of these types of programs. Accelerators "accelerate" growth of an existing company, while incubators "incubate" disruptive ideas with the hope of building out a business model and company. So, accelerators focus on scaling a business while incubators are often more focused on innovation.

Accelerators

One of the big difference is in how the individual programs are structured. Accelerators programs usually have a set timeframe in which individual companies spend anywhere from a few weeks to a few months working with a group of mentors to build out their business and avoid problems along the way. Y Combinator, Techstars, and the Brandery are some of the most well-known accelerators.

Accelerators start with an application process, but the top programs are typically very selective. Y Combinator accepts about 2% of the applications it receives and Techstars has to fill its 10 spots from around 1,000 applications.

Companies are given a small seed investment, and access to a large mentor network, in exchange for a small amount of equity. The mentor network, typically composed of startup executives and outside investors, is often the biggest value for prospective companies.

The mentor networks aren't small, either. According to Troy Henikoff, managing director of Techstars Chicago, last year's program had 153 mentors.

Aaron Harris, a partner at Y Combinator, said he's not sure that accelerators necessarily work as a whole, but Y Combinator's success is due to the way it approached incentives.

"A lot of that success comes back to the alignment of incentives," Harris said. "Good programs completely align all parties -- at YC all the partners who advise the companies have a stake in their success. We also do as much as we can to limit distractions. We don't schedule unnecessary meetings, don't force them to work in a big loud coworking space, etc."

At the end of an accelerator program, you're likely to see all the startups from a particular cohort pitch at some sort of demonstration day attended by investors and media. At this point, the business has hopefully been further developed and vetted.

"The goal of the accelerator is to help a startup do roughly two years of business building in just a few months," said Mike Bott, general manager of the Brandery. "If you go through a good one, you'll know at the end where your startup founding team and business stand."

Incubators

Startup incubators begin with companies that may be earlier in the process and they do not operate on a set schedule. If an accelerator is a greenhouse for young plants to get the optimal conditions to grow, an incubator matches quality seeds with the best soil for sprouting and growth.

While there are some independent incubators, they can also be sponsored or run by VC firms, government entities, and major corporations, among others. Some incubators have an application process, but others only work with companies and ideas that they come in contact with through trusted partners. A good example of an incubator is Idealab.

Depending on the sponsoring party, an incubator can be focused on a specific market or vertical. For example, an incubator sponsored by a hospital may only be looking for health technology startups.

In most cases, startups accepted into incubator programs relocate to a specific geographic area to work with other companies in the incubator. A typical incubator has shared space in a coworking environment, a month-to-month lease program, and some connection to the local community.

Coworking is a big part of the incubator experience and has been split off as its own separate business offering around country, with coworking spaces charging rent for access to utilities. Some accelerators offer a coworking space, but most provide companies with private office space or let them find it on their own.

"If you need private space, most incubators are open seating, and this can be distracting for larger teams," Henikoff said. "The economics are usually on a per-seat basis, which is great for the first few people, but at a certain point it may be less expensive to get your own office."

Both incubators and accelerators offer a great opportunity to help young companies and ideas for startups get headed in the right direction, but it's up to you where you need to start.

Is A Startup Incubator Or Accelerator Right For You?

One way to help get your business off the ground, is to leverage the mentorship and investor relationship benefits of a startup incubator or an accelerator. First of all, what is the difference between an incubator and an accelerator.

What is a Startup Incubator?

An incubator is physically locating your business in one central work space with many other startup companies. In many cases, the startups in these incubators can all be venture funded by the same investor group. You can stay in the space as long as you need to, or until your business has grown to the scale it needs to relocate to its own space. The mentorship is typically provided by proven entrepreneurial investors, and by shared learnings of your startup CEO peers. Examples include Lightbank and Sandbox Industries in Chicago.

What is a Startup Accelerator?

A startup accelerator is very similar, but has some distinct differences. Your time in the space is typically limited to a 3-4 month period, basically intended to jump start your business and then kick you out of the nest. The cash investment into your business from the accelerator itself is very minimal (e.g., $20,000), but your time in the accelerator should largely improve your chances of raising venture capital from a third party entity on the back end, after you graduate from the program. Mentorship could be coming from 100 entrepreneurs that are affiliated with the accelerator (many of which are proven CEOs, or investors looking for their next opportunity or simply helping the local startup community). Examples include Tech Stars and Y Combinator.

Are These Programs Right For You?

Deciding on whether or not you should pursue starting up your business via an incubator or accelerator largely comes down to your personal confidence in the defensibility of your business model, your execution skills and your fund raising skills. If you have a credible story and your business is nicely progressing on your own, you probably don’t need to be part of one of these programs. But, if you need help fine tuning your business model or revenue model, or may be a first time CEO wanting to hone your skills from proven peers and entrepreneurs, then this type of mentorship could be perfect for you.

The Advantages?

The pluses of programs like these are: (i) shared learnings and mentorship (helping avoid typical startup pitfalls and speeding up your efforts); (ii) access to capital, either within an incubator or post an accelerator; and (iii) the PR value and exposure you get from these programs (not to be underestimated).

The Disadvantages?

The minuses of programs like these are: (i) they can be distracting, at times, with lots of related meetings and events with mentors and investors (getting in the way of focusing on your own project); (ii) they can be confusing at times (getting 10 different opinions from 10 different mentors), so you need a good “filter” on any advice–be sure to read this post on how to filter the conflicting advice; and (iii) sometimes, sharing space with other companies is not always a plus, especially in long term incubators that may be carrying dead weight of under-performing companies.

Key Takeaway?

Overall, I think these programs are terrific for first time CEOs, that can quickly get up the learning curve with the help of mentors and investors that have “been there, and done that”. Plus, your odds of raising capital are vastly improved given the tight screening processes of these groups, that naturally raise the creme-de-la-creme to the top, from the 1000 s of applicants they receive each ′year. Competition is naturally fierce to get one of these coveted spots, so make sure you have a fine tuned pitch and leverage your network to help pull some strings for you.

And, don’t forget, if you don’t get accepted into a startup accelerator or incubator, and want to get that kind of expertise for your business, be sure to check out the new startup excubator model that is being tested, an outsourced digital services suite powered by experts, that is open to anybody that is interested, provided they have the capital for the services.

EDA Study Home

The U.S. Department of Commerce Economic Development Administration (EDA), a longtime financial supporter of business incubators, funded a research study to examine the relationship between incubator best practices and client outcomes. This research - conducted by the University of Michigan's Institute for Research on Labor, Employment and the Economy; the State University of New York at Albany, the National Business Incubation Association, and Cybergroup Inc. - used a robust methodology to collect and statistically analyze data, and determine specific relationships between how an incubation program operates and how its client companies perform, as measured by a number of outcomes.

The purpose of this study is to test whether there is a causal relationship between business incubation practices and client firm success, particularly after these firms have moved out of - or graduated - from the incubation program. Using the results of this study, the research team also created a Web-based tool for incubation practitioners that measures their program's performance

compared with industry best practices and provides feedback about how they can improve their performance, and a brochure that highlights the study's findings.

Seven Signs of a Successful Incubator

Corporate renewal is essential but immensely challenging. Today’s hot stock is often tomorrow’s humdrum company. Many companies address their growth gaps by establishing incubators for new efforts, and they struggle. One study of 300 such incubators found that only 47% met their strategic goals and 24% met their financial goals. What makes for a successful incubator?

Begin by recognizing that incubation is hard. Incubators tend to be small units in much larger firms, addressing a universe of possibility with scant resources. They get stretched too thin, become captured by core business units, pursue irrelevant ideas, or all of the above. Moreover, they pursue inherently medium and long-term growth initiatives in a climate that usually values hitting short-term financial targets, and so they are prime candidates for cost-cutting when inevitable budget crunches arise.

Yet when incubators succeed, the results can be spectacular. IBM has created over $15 billion in new annual revenues through its Emerging Business Opportunities organization. Royal Dutch Shell estimates that 40% of its upstream R&D begins through its GameChanger program. DuPont’s Market Driven Innovation program, staffed with just six people, built $500 million of revenues in 6 years. The opportunity in these numbers can’t be ignored.

1. Know your archetype – Too often, companies try to become more innovative by benchmarking firms like Apple, Google, and Samsung. The problem is that these companies are completely different. The way management exercises control, the process-driven culture, the ability to experiment freely, and several other variables dictate what companies can and cannot let incubators do. (See this special report I wrote in Forbes on four distinct innovation archetypes) Ascension recognized that it is inherently decentralized, and that progress in hospitals often starts small, at the grassroots. Its Innovations Accelerator fits that archetype; it does not push out unwelcome models from the center to the rest of the organization, but rather it spots new ideas in hospitals and enables others to adopt them quickly.

2. Set a clear mandate – A major cause of incubator failure is the lack of a well-defined strategic mandate. A mandate protects an incubator against an influx of pet projects, and it gives collective coherence to individual projects requiring flexibility. For Ascension, the mandate is to reinforce the organization’s position as a leader in “human-centered care” — not going toe-to-toe with institutions such as Massachusetts General on hard-core medical research, but rather being at the forefront of how to work effectively with the softer, human side of healthcare. The mandate has led the organization to cluster activities in areas such as mobile apps and use of social networks, not just building neat apps but looking deeply at what makes use of these systems sustainable.

3. Relationship to the core – According to Scott Lambert, Ascension’s Senior Director of R&D, “It was a hard, expensive lesson to learn that we should be a catalyst, not a developer.” The Innovations Accelerator engages with the broader organization, making its relevance clear to other stakeholders and aligning them for its success. In other industries, such as software or consumer products, it is perfectly possible to sequester a half dozen people in a basement to churn out the next great invention. I know one consumer products incubator housed in a former morgue. But in industries such as healthcare or financial services it can be essential to integrate closely with the rest of the company if ideas are to have a hope of being commercialized. Ascension’s Accelerator is also “a nexus for external opportunities,” Lambert says. For instance, the group created AH Connect, an effort with Best Buy targeting people with diabetes. Piloted at stores in Indianapolis and Detroit, the effort provided remote monitoring equipment and professional medical counseling to patients in their own homes, so that they could better manage their disease and reach out to their primary physicians at the right times.

4. Capabilities – Given the clarity around its mandate and role in the organization, the Innovations Accelerator could concentrate on building excellence in a handful of key areas. The organization would help to test new ideas and advise hospitals on scaling them up, so it needed to be outstanding at designing pilots for maximum learning and at extracting lessons in a methodical way. The Accelerator works with a unit called the Living Lab that tests external ideas fast and determines which ones to adopt within the hospital network.

5. Processes – With the above building blocks in place, Ascension can be purposeful in where and how it embraces processes. The front end of the funnel is flexible, but subsequently the team looks at each opportunity through set mechanisms. The idea is to winnow ideas quickly so that the small unit does not “chase too many ideas,” according to Lambert. The unit has also learned to adapt the way in engages with external partners. Michael McGarry, head of the Living Lab, says that “larger partners are more process-driven and conscious of PR. Small ones are resource-constrained. We have to be flexible if we’re to work effectively with both kinds.”

6. Metrics – Too many heads of innovation programs lack clear metrics for success. Accordingly, they grasp for projects that will please stakeholders even if the resulting portfolio lacks cohesion and spreads energies too thin. Ascension has determined a narrow but diverse set of metrics around factors such as engagement of its associates, value generation, and impact on the poor and vulnerable.

7. Resourcing – Frequently, incubators start with a notion of who will staff them, then they back into the other factors listed above. Sometimes this is simple necessity, but the process can be backward and lead to an incubator reflecting the strengths of predetermined individuals rather than the overarching needs of an organization. Likewise, the availability of staff can lead to decisions around incubator size. At Ascension, the Accelerator is staffed by 5-6 people — not many for an organization with over $15 billion in revenue. Yet, given the unit’s mandate of being a catalyst and test bed, the numbers work.

Incubation is never easy. It creates ideas that internal stakeholders may resist, and it necessarily rocks the boat. But if an organization can succeed at it while operating in a topsy-turvy healthcare system, across 80 locations, and through independent-minded physicians, the promise of incubation should be tough to resist. The work is difficult, but the impacts can be huge.

HBR:

There is a very real knowledge gap in the early stage start-up game, on both sides of the table. First-time entrepreneurs lack the seasoning to captain a steady ship through turbulent waters. Inexperienced friends and family (and, increasingly, crowdsourced investors) lack the ability to gauge the viability of a business, or to mentor naïve entrepreneurs.This knowledge gap, I have come to believe, is best filled by savvy incubators. However, there are over 7,500 business incubators around the world. Most of them fail.The first business incubator in the U.S. opened in 1959 and is still operating. In the last couple of years, we have seen a renaissance in the incubator business. Pioneered by YCombinator, Silicon Valley’s flagship incubator led by Paul Graham, incubators have come back with a vengeance. YCombinator has seen some significant successes, including Airbnb, Dropbox, and Heroku. It has fueled a bit of an incubator bubble, I must admit. Incubators are now a global phenomenon, and there isn’t a major city in the world where an incubator isn’t cropping up.For incubators to live up to their full economic potential, they need to overcome two pitfalls: they need to provide real value, not just office space, and they need to measure success in more than just outside funding.Adding Real ValueDuring the dot-com era, every law and accounting firm decided they were going to become incubators. Many of those efforts failed. Charles D’Agostino, executive director of the Louisiana Business & Technology Center at Louisiana State University, offers some analysis: “Incubators do work, but they must be more than a real estate entity offering executive suite services. Effective incubators provide business counseling and management assistance to their client firms. The value-added business services differentiate them from an office suite.”Indeed, as I investigated why incubators fail, I was astounded to find that many incubators assume that cheap real estate, co-working spaces, used furniture, plus a phone and Internet connection equate with business incubation. Jim Flowers, president of the Virginia Business Incubation Association, says, “They mistake cheap floor space for meaningful program content.”Well, it isn’t. Neither are discounted legal services, accounting, or other kinds of commodity services.Two things determine whether a business can get off the ground successfully and sustainably: a validated market opportunity with customers willing to pay for a product or a service; and a product or service that addresses such an opportunity. The only incubators I consider “real” are the ones that help entrepreneurs achieve these two goals.Adds D’Agostino, “Incubators must evaluate the management capability of the entrepreneurs and assist in finding management for these companies. Especially when the entrepreneur is a technologist lacking business skills, it is critical that the incubator assists the owner in finding managers that have the skills necessary to manage a successful entity and take it to the next level.” My take is that technologists can, actually, be taught these skills. Hiring managers may often be expensive, but high IQ engineers have historically been very good at picking up business skills with the right mentoring. So getting to the next level is well within their capacity, and the role an incubator ought to play is to guide them in that process. The only “next level” worth getting to for a start-up is a validated business idea that has the endorsement of reference customers, and a product that caters to their needs. The rest — an office, legal documents, QuickBook files — don’t build valuation or business value. The benchmark incubators should be measuring themselves against is simply their success in helping clients validate businesses, gain reference customers, and complete at least a minimum viable product.

Success is More Than FundingMost incubators use funding as a success metric, which is a somewhat flawed criterion. Over 99% of companies should operate as organically grown, self-sustaining businesses — bootstrapped, without external financing. For them the goal is to achieve customer validation, not financing. Yet if the incubator uses financing as its success metric, it will try to force inexperienced entrepreneurs into an unnecessary financing round. And more often than not, they will fail.YCombinator has mitigated this by partnering with venture capital firms like Sequoia, Andreessen Horowitz, and General Catalyst, such that every single company in their portfolio gets $80k in seed financing as they graduate from the incubation program. But most incubators in the world do not have that luxury. Nor do they have the deal flow deserving of such guaranteed financing.Of course, where funding is appropriate and relevant, helping entrepreneurs connect with angel investors and venture capitalists is an important service. Equally important is to provide education on what is and isn’t fundable.Will this new generation of incubators perform better than the previous ones?It remains to be seen.My primary conclusion is that incubators need to be decoupled from financing. While they need to continue to act as a bridge to capital, predicating their success on getting businesses funded will keep them focused on trying to find the less than 1% of start-ups that are fundable. In other words, coming to the rescue of victory!The other 99%, then, continue to be ignored.A scalable incubation model for the other 99% is a requirement for the next rev of capitalism.

Incubator Success:

When Joseph Mancuso subdivided and rented out spaces in a mammoth 850,000 square foot factory complex in 1956 and offered business advice to his tenants, he spawned a new way of learning and working that emphasized sharing and capitalizing on the community’s pool of resources, knowledge, and network to help fledgling businesses grow and succeed.

Today’s incubator programs follow much the same formula and philosophy, offering varying degrees of spaces and services to increase the probability of businesses’ success. With 1400 incubators in North America (or more, if one expands the definition), the traditional incubator model has branched out into several different models. Some resemble traditional business incubators and other less so, though all thrive to help new businesses.

Examples of incubator programs: Co-working spaces – General Assembly; Business / traditional – Innovation Depot; University – Ryerson Digital Media Zone; Specialized – TechShop; Accelerator – Y Combinator; Virtual – Open Coffee Club

Though the incubator program landscape is growing, there has been relatively little research on what contributes to “success” or widespread consensus on what “success” should mean, be it the programs’ or the businesses’. Being able to measure and prove “success” is important—for designing better programs and attracting users and funding. At the same time, “success,” when

measured, is usually limited to economics, for example how many jobs an incubator has created or the monetary value of an incubator’s graduated businesses.

Measuring success in economic terms makes sense for many incubator programs—such as accelerators where investors are looking for returns on their investments—but perhaps not for all. The diversity of incubator programs, such as co-working spaces and virtual incubators, suggests that ideas and business have to be supported at all stages to be “successful” in the long run. Before and beyond the stages at which finances are of utmost concern, economic measures may not be the best measures of “success”.

If a business needs stepping stones and continued support, then defining and measuring “success” for all incubator programs must also be a priority, so that they are designed better, attract users and funding, and graduate people and businesses that are ready for the next step. For these programs, looking beyond economics can be key. Here are several additional ways to measure “success”:

Strength of courses / instruction: Models such as university, specialized, and virtual incubators focus as much on learning the skills and information to establish a business (be it writing business plans or the physical tools to make a product) as they do on forming the actual business. These models can evaluate the effectiveness of their courses and instruction, much like education systems evaluate teaching methods and materials. Even if an individual’s business fails, they can still use the knowledge they gained in other endeavors.

Efficiency / Relevance: A major challenge for start-ups is finding the right people to join their team and the right resources to help them grow. Incubators and incubator-like programs are generally great for networking—through contacts, events, mentors, etc.—but how relevant is the network to the business? As information providers, how relevant is their information? One measure of success could be the efficiency / time it takes for a program to connect business with whom or what they need.

Community engagement: As incubators strive to boost the local economy, one can also evaluate the extent to which they engage locals in their program. Research has shown that, in comparison to nationally-owned businesses, local, independently-owned businesses keep more money in the local economy and are more likely to use local services, thus further developing and strengthening the local economy in a positive feedback cycle. Additionally, programs can be evaluated on their engagement of community members through networking, events, mentorship, and pitching.

Social impact: One of the key tenets of incubators is that they positively impact the surrounding community. Though usually referring to positive economic impact, “B corporations” and social impact incubators emphasize social and environmental benefits and responsibility. Internally, this can mean transparency in decision-making and standards; externally, this can mean alleviating poverty and increasing access to basic needs.

In recognizing and legitimizing multiple, diverse measures of success, incubator programs can be built to attract the users they are best suited to support, and users can find the programs that best support their specific needs. With more definitions of success, each service element (such as network opportunities or shared resources) can also contribute to and be strengthened along a relevant measure, and give programs more depth and expertise.

In turn, incubator programs can incorporate multiple measures of success into their program goals and philosophy, and exemplify these goals and philosophy through their workspace design, service model, and program culture. For example, if an incubator program values community engagement and close networks, it may decide to partner with relevant local businesses to mentor and give space to start-ups as compared to incubating multiple, disparate businesses in one space. Changing what “success” means has great potential to change what an “incubator” looks like and how it operates.

Diversity and specialization in incubator programs is already taking place, as evidenced by the multitude of programs in the U.S. and worldwide. The definition of “incubator” is also expanding, such that virtual incubators can be termed “incubators” even though no physical shared space exists. Planning an incubator program then will not focus on molding traditional models of space, service, and organizations to a specific context, but on how new definitions and visions of success can best be achieved through new space, service, and organization models, and how these different models contribute to the process of building new businesses.

Tips on shaping the right environment to encourage entrepreneurial skills and create links between universities and industry. Plus the latest higher education appointments

Source: Getty

Crank it up: but first you need to know where you would like to go

“Start-up incubators can support students in developing entrepreneurial skills and provide tailored support for early-stage, high-growth businesses and ideas. They can also create a virtuous cycle of job creation, university-industry collaboration, and show tangible benefits of academic ‘impact’.”

That is the assessment of Britta Wyatt, a consultant for global technology transfer and innovation management consultancy business Isis Enterprise, part of the University of Oxford’s technology transfer company, Isis Innovation.

A recent Isis Enterprise review of UK universities found that start-up incubators were becoming a necessity rather than simply “nice to have”. Ms Wyatt subsequently devised a list of recommendations for creating a successful start-up incubator, summarised below:

Think about your objectivesThe incubator should reflect the needs of the university and the student body, Ms Wyatt says. When considering creating an incubator, universities should ask themselves searching questions about its structure and aims. Among key questions are: is it designed to bolster the local business ecosystem and create links between the university and industry; will it build student entrepreneurial skills and new ventures independent from research; and can it foster an entrepreneurial ecosystem?

Understand your clientsThere will be many groups interested in the incubator inside and outside the university. Once they have been identified, actively seeking feedback from them helps a university to determine if its vision for the incubator service fits with actual needs.

The ‘ideal’ incubator?Ms Wyatt said the study indicated that there is no ideal model. However, the most successful structure is “tailored to the specific needs” of the groups the incubator is trying to help.

University start-up incubators supported an average of “30 ventures per year”, and “most had one/two core employees…[and] programme managers had an entrepreneurial or business background”.

Be creative with your fundingOften university start-up incubators are free to participants, unlike typical business centres. “[One] model for capturing returns from participants is via equity investment, royalty agreements or loans,” she says. As such arrangements usually pay returns only in the long term, she warns that universities should expect to provide some degree of continuing support to the incubator.

Build your business caseA strong business case for internal approval and attracting partners and funders is absolutely crucial, Ms Wyatt says. Although long-term financial returns are possible, it is useful to outline earlier impact and community benefits that can come from accelerating start-ups.

Geared for success“A university will need to look closely at its intellectual property and benefits-sharing policies, [making sure that] these are both attractive for participants and structured so investors will make good returns,” she says. Just as important is creating an awareness across the university that helps to attract participants.

Ms Wyatt said the tips were loose enough that they could apply to any university, and emphasised that they do not constitute a “one-size-fits-all model”.

But she stressed that one of the most important things to consider was how to help secure investment for the businesses that do get off the ground.

“Fortunately there is a lot of seed funding available right now, but there is a bit of a cliff when it gets to the next stage of funding. People seem to be aware of that as a challenge, and we’re waiting to see how that plays out,” she said.

What makes an incubator successful?in Featured, How-To's written by Andra Zaharia July 5, 2011

There is so much going on in the world that we sometimes wonder: is there a recipe for business success? Most probably not, but to

my mind when there is a will, there is a way. Young entrepreneurs often make the mistakes of placing their whole trust and faith into

one single action; and when the end result is a failure, they lose all hope. This can also be the case of business incubators. Now, what

makes these activities a success and what is the impact on the start-ups that are part of the process? To be or not to be in a business

incubator?

The USP of an incubator is simple:”programs designed to accelerate the successful development of entrepreneurial companies

through an array of business support resources and services.” And, just as graduating from university, participating in such an action

can have significant results with long-time effects.

Why are start-ups looking for tech incubators?

Cost savings

Key advisers and insights on the market the start-up addresses

Research material

Seed investments

And does an incubator assure success? No, it is just a manner in which start-ups can define their business perspectives better and

find the marketing and financial resources to gain access to a wider a.k.a international market. Therefore, if I were an entrepreneur, I

would first ask myself what is the best measuring norm to rate an incubator a success or a failure? Let’s just take a wild guess:

1. Quality of mentors

Have you been reading of the mentors which you will be having? Have you searched for real-life results other start-ups present in

the program improved their success rate? Are these mentors passionate about their activities and do they seem committed to their

promise? There can be incubators that trigger only a slice of the entire pie; and depending on your end result, you can make the

wiser selection. Digg your way and understand how many companies got funded after the program, what types of investors have

been involved, what types of companies participated and how fast did graduating companies grow.

2. Participants

It is extremely important to understand what type of “colleagues” you will be having. Judge their interest and expertise and to some

extent you will know just how avid the competition is. Kidding, but it can be a point worth looking into.

3. Methodology for picking mentors & participants

Having a clear idea of which is the process behind the selection of participants and mentors all together gives you a wider

understanding of the proposed mission and goals of the incubator. It should be obvious that no business incubator can be successful

if every member of its governing board, its management and the public think it should be achieving different goals. All supporters

should come together to gain consensus and aim to achieve the same desires.

4. The type of activities before, during, & follow-up program

It is more important to judge an incubator by the program it offers than by the media attention it has received. More than once, an

incubator shows the actual quality and value by the appreciation and consistency it develops. A one time thing is, basically, a one hit

wonder. Developing and communicating a clear review policy can strengthen the services available for participants and help ensure

success of the incubator as a whole.

5. Funding & Additional assistance/support

What one expects from an incubator is developing powerful partnerships and pursuing grants and other funding opportunities.

Nevertheless, do not expect funding to happen immediately — just like any good thing, it takes time, patience, understanding and

constant growth. On a smaller scale, access to information, know-how and most importantly practices on accounting and

maintaining a sustainable cash flow will be essential for participants. This can be one of the business services provided by a

successful incubator.

There are, of course, many, many do’s and don’ts of effective business incubation. No incubation program, though, can become an

effective engine of economic growth – fostering the creation of an environment that is friendly to entrepreneurs and that can

promote their success – without adherence to these basic, yet most of the times struggling to achieve guidelines. In your opinion,

which are the most successful business incubators? We’ve started a list of start-up accelerators here. Let’s add some more by

leaving a comment to this post. Thank you!

Bio Ohio

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Edison became the owner of his Milan, Ohio, birthplace in 1906. On his last visit, in 1923, he was reportedly shocked to find his old home still lit by lamps and candles.

During recent years, a new phenomenon in the world of startups has risen, the accelerator program. A new way of incubating

technology startups that has proven to be at least very popular among startup founders and investors. Typically characterized by

web/mobile technology, programme/class based, short time periods (3-12 months) and the use of agile development

methodologies.

If Y Combinator is regarded as one of the first accelerators established in 2005, there are now over 200 accelerator programmes

world-wide, and new ones emerge each month.

We are a group of students at Chalmers University of Technology who have conducted our bachelor thesis on this subject, where our

aim was to find out what defines an accelerator. The thesis was done for Chalmers Innovation, a business incubator connected to

Chalmers, who is interested in further exploring the accelerator concept to develop their ongoing and future activities related to

early-stage software startups. This interest is what provided the motivation and focus of our thesis.