Business incubator vs startup accelerator – what’s the difference?

If you’re looking to grow your small business or get your startup idea off the ground, you might be considering a business incubator or startup accelerator. But what’s the difference? And how do you choose which one’s right for you?

This quick-start guide will explain more about how incubators and accelerators work, who they’re for, and where to find one.

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Are you looking to take your side hustle full time? Or have you got a great idea for a product or service, but lack the capital to bring it to market? Business incubators and startup accelerators are highly competitive, but could give you the support you need to achieve your business potential.

What is a business incubator?

A business incubator provides startups and new businesses with support and resources to help them grow. They’re more focused on helping you develop your business ideas than rapid growth. For example, if you need support writing your business plan, preparing investment pitches, or market research and testing.

In general, incubator business support may include:

• office or co-working space
• access to investors
• workshops
• networking opportunities
• training
• mentoring
• investor pitches

How do business incubators work?

Business incubator programmes usually involve:

• payment by fees (rather than equity)
• open-ended support (there’s no fixed duration)
• applications open all year round
• a selective application progress

Business incubators occasionally offer funding, although it’s not their main focus. In fact, a government report into the landscape of incubators and accelerators in the UK found that just 14 per cent of business incubators in the UK offered funding to entrepreneurs. And while the average amount given was £25,000, it’s important to note that this was through a mix of loans and grants in exchange for equity.

What is a startup accelerator?

While business incubators help with developing ideas over a longer period, a startup accelerator may be an option for a fast-growing business that’s ready to scale.

You’ll have a great idea and a solid business plan, but perhaps won’t have the capital you need. An accelerator programme can help deliver rapid growth by providing funding and other services.

Similar to venture capital, a startup accelerator can provide early investment (seed capital) in exchange for equity in your business.

As well as funding, support and services can include:

• mentoring
• training
• access to investors
• business support

How do startup accelerators work?

Startup accelerator programmes usually involve:

• payment through equity rather than fees
• programmes that are a fixed duration (usually three to 12 months)
• providing services remotely rather than office space
• programmes that are highly selective
• applications accepted in cohorts, so there’s a set number of places each year

How to find a business incubator or startup accelerator?

Incubators are spread relatively evenly throughout the UK. They’re often focused on helping local startups, so you can try searching for business incubators near you or speaking to a financial advisor.

Different organisations run business incubators, including:

• universities
• non-profits
• commercial organisations
• venture capital companies

For example, Barclays Eagle Labs offers a range of virtual accelerators and programmes with access to incubators. Or check out the London Business School Incubator programme or the Sussex Innovation Centre.

Startup accelerator London options

If you’re looking for a startup accelerator, London has the highest proportion across the country – more than half are based in the UK capital, according to the government’s report. And that’s no surprise as it’s one of the top cities for startups globally, according to Startup Genome.

A lot of accelerators have a broad focus on digital technology, or no specific sector at all, but make sure you choose one that fits your needs.

To give you an idea, here are a few examples of startup accelerators in London:

• Activate Capital
• Barclays Accelerator
• Bethnal Green Ventures
• Founders Factory
• Founder Institute

There’s also a growing trend for accelerators in cities such as Birmingham, Bristol, Cambridge, and Manchester. WeWork Labs, for example, offers mentorship and community to entrepreneurs across its locations.

Whatever you decide, make sure you’re clear about your actions and goals. You don’t want to give up equity in your business if you’re not getting the right mentoring or support to take it in the direction you want.

Other options for business support

If you’re still considering your funding options, you could apply to Simply Business’s annual Business Boost competition for the chance to win a cash prize to help start or grow your business. Register your interest for Business Boost to be the first to know about future grants.

Aside from our grant, you could look elsewhere to other business grants, small business loans, or crowdfunding.

Business finance is complicated, so you should speak to a professional advisor or an accountant if you’re unsure of anything.

Have you used a business incubator or startup accelerator? Let us know in the comments.

Photograph 1: Vasyl/stock.adobe.com

Photograph 2: Prostock-studio/stock.adobe.com