Incubators, coworking spaces, and accelerators: what’s what?
As venture capitalism has grown over the last decade, new players have emerged on the entrepreneurial scene to help startups on their journey to become successful businesses. Accelerators, incubators, and coworking spaces are some of the most prevalent figures in this new ecosystem, and while all three institutions can provide significant benefits to early-stage startups, they are often misunderstood or mistakenly lumped together.
Accelerators have garnered a lot of attention as part of the entrepreneurial landscape, and are one of the most popular new players on the scene. These fixed-term programs are like boot camps for startups and tend to be more structured and have more traditional application processes for entry than either coworking spaces or incubators. Designed to rapidly scale businesses over the course of 3-4 months, accelerators accomplish their outcomes through immersive learning in a rigorous, mentorship-driven program. They have a large stake in turning their startups into profitable companies too, as most programs offer a small amount of capital investment up front in exchange for equity. Their ultimate goal is to get nascent ventures ready to go out and raise more substantial capital elsewhere, and for this reason, they culminate in a graduation or “demo day” that puts companies in front investors and other key influencers in the industry.
The benefits here are obvious – seed money, free workspace, collaborative, high impact learning, and access to the movers and shakers in the region that can help your business get on the ground running. That being said, not all accelerator programs are created equal. While studies show that many accelerators can be effective, as well as have a positive impact on the funding environment of local startup ecosystems, outcomes can vary greatly. If you’re an early stage startup that has an idea and a business model already in action, and you’re ready to catapult your company to the next level, an accelerator might be right for you. Just do your research first.
Incubators, on the other hand, are much less focused on concrete outcomes than accelerators. Since they are often publicly funded and don’t provide any capital up front, little to no equity is required of the startups involved. Instead, incubators focus on cultivating innovative ideas in order to help turn them into functioning business models.
Most will provide a shared workspace for their startups, as well as access to myriad resources like legal advice, peer feedback, and mentorship over an extended period, usually about a year. This allows a startup to grow at its own pace, without pressure to meet a graduation or demo day “deadline.” Because of this slower growth process, Incubators rely on their local professional networks to scout for promising ventures, unlike accelerators which draw applicants from all over the world. Another differentiator is that incubators are frequently sector specific, focusing on ventures in certain industries like medtech or fintech. This makes them more selective than other options, but ideal for entrepreneurs looking to nurture a new idea.
Unlike incubators and accelerators, coworking spaces are not designed to cultivate new ventures. Instead, they offer access to shared workspace and resources in exchange for a monthly membership fee, usually on a month to month or short-term agreements. Although coworking spaces are often connected in some way to incubators and accelerators in the community and are often home to a variety of startups, you’ll also find consultants, freelancers, entrepreneurs, small business owners, remote workers and more among their membership populations.
With lots of benefits and little commitment involved, coworking spaces have become a popular option for small to mid-sized businesses. They’re an affordable workspace option that allows many companies to grow as they scale up and add more team members, and their unique model allows their members access to a variety of professional resources that might not otherwise be available to them. These benefits can range from unlimited coffee and snacks to meeting rooms, networking opportunities, access to expensive tech like 3D printers, or anything else you can think of.
It’s a flexible and convenient alternative to a traditional office that remains the perfect choice for entrepreneurs, remote workers, and startups alike. The opportunities to make connections in the community, collaborate, grow and thrive are endless in a coworking space (not to mention the ability to have professional work and meeting space without breaking the bank).
With so many options available to early-stage startups these days, choosing which is right for you can be a difficult decision. Ultimately it comes down to your core needs. Are you a small, fledgeling team gathering ideas together for the first time? Are you seeking guidance, connections, and funding, or just affordable and functional workspace? Asking these kinds of questions will help determine the right next steps for your company. And of course, don’t forget that quality matters for coworking spaces, accelerators, and incubators alike! Find various spaces to work from near you inside the Cowork7/24 app. Take the time to dig deep and research what they offer and give them a one-day try before diving into a long-term commitment.