What is a Business Incubator and what is a Business Accelerator? These two terms have merged in people’s minds and to some degree this is justified because there is a lot of overlap in what they do. There are some clear differences so let’s have a look at what each does.
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1. Business Incubators-Business Incubators started in 1959 in the USA and have grown significantly throughout the world. According to Wikipedia Incubators “help new and startup companies to develop by providing services such as management training or office space. The range of services available can often include:
The UK Government Department for Business, Energy and Industrial Strategy (BEIS) estimates that there were 205 Incubators in the UK in 2016/17 and they continue to grow in numbers. They are spread evenly throughout the UK and their focus is broad but they often have an interest in businesses active in science based areas (Source: BEIS-paper 7).
2. Business Accelerators
Business Accelerators on the other hand can provide office space and training but they also offer access to direct funding in exchange for equity. The financing is normally from corporate sources rather than the public sector or universities. You can see a good selection of Accelerators by looking at the Entrepreneur Handbook. I have extracted an example from the 79 Accelerators listed to give a flavour of the terms on offer:
The example is Entrepreneur First (EF) - “EF is famous as one of the first accelerators to bring together talented individuals who do not know each other and forging these individuals into entrepreneurs and formidable startups teams. The startups created are focused purely on deep technology and solving significant solutions in global markets” (Source: Entrepreneurs Handbook).
“Funding offered is £16,600 – £19,900 for startups created during the programme in exchange for 8% equity (this may vary for startups that join the programme with 1 or more founders)”. The scale and amounts vary significantly so have a look at the full list for more information.
Accelerators are more recent phenomena and really took off from 2011. The Government Report noted above estimates that there are 163 Accelerators in the UK and the number is growing. At present, more than half are London based but this is a developing picture.
The continuing growth in Incubators and Accelerators can best be illustrated looking at the graph below which indicates the increasing importance of Incubators and Accelerators.
Source of Graph: BEIS-paper- Page 41
If you are a startup or early stage business you should seriously consider your options for participating in a business incubator or business accelerator. They have a great track record