As we help communities across the nation map their entrepreneurial resources and build their entrepreneurial ecosystems, we often get asked, “What’s the difference between an accelerator and incubator?” We thought we’d take this to the experts, our friends at InBIA also known as International Business Innovation Association. Below, InBIA writer Liv Sunná breaks down the mystery and shares some best practice examples of how these services are helping entrepreneurs.
Entrepreneurial ecosystem builders and entrepreneurs alike are constantly searching for best practices and resources to develop their diverse communities. Yet, no two entrepreneurial ecosystems are the same, and innovators often face difficulty in identifying tools that are specialized to work with their individual communities’ assets and weaknesses. What if there was a team of experts specialized in their field that they could turn to?
This is where entrepreneurship centers fit into the picture. Entrepreneurship centers are increasingly being recognized as competitive game-changers in the U.S with over 9,122 known centers, as shown below:
Forbes has even declared incubators and other entrepreneurial hubs as more vital to the success of a startup than business school. Yet, many are unaware of the indispensable resources offered by these entrepreneurship centers or even which model would best suit their startup or community.
There are multiple types of entrepreneurship center models, including economic development centers, makerspaces, small business development centers, technology transfer or commercialization offices and more. However, we focus on three main categories of entrepreneurship centers: accelerators, incubators and coworking spaces.
Accelerators are shaped by virtual programming that allow them to serve a variety of geographic locations. This does involve required attendance and participation in programming for entrepreneurs to obtain the available funding. Accelerators invest time and resources into their client companies over a short-term period with cohort graduation in mind. Companies who utilize accelerators are typically technology-based and already somewhat established due to the quick turnover rate required by these programs that are not conducive to those in need of more time and resources.
Two types of common accelerator models are pre-accelerators and seed accelerators. Pre-accelerators differ from seed accelerators in that they do not invest in their companies with equity; instead, they usually have grant funding or have access to an evergreen fund from the community. Likewise, pre-accelerators tend to be more accepting of early-stage products and services. Seed and pre-accelerators both typically only allow 3-6 months of residence in their programs before graduation and hold a final pitch event for graduating client companies.
Snapshot: StarterStudio – Orlando, FL
StarterStudio works to power technology-based startups and offers two different accelerator tracks. Accelerator 1.0: Ideation Stage focuses on startups seeking education and tools to turn their ideas into successful companies in three months. Accelerator 2.0: Seed-Stage Growth invests between $25,000 and $225,000 in each of its accepted companies with access to programming and expert mentors in a six-month period. Both program tracks feature a day to pitch to potential funders; Accelerator 1.0 offers a Demo Day and Accelerator 2.0 offers the Investor Showcase. These programs have common accelerator features: mentors; workspaces; talent development; and legal, financial and marketing resources.
Incubators, like accelerators, have a competitive interview process that allows them to determine whether a company is a good fit for their services. However, unlike an accelerator, graduation is not fixed in a short span of 3-6 months; incubators will often assess the performance and progress of their client companies to ensure that they are reaching desired milestones. Graduation can either be based upon the achievement of those goals or a stipulated period of time. Typically, client companies will remain in an incubator for 1-3 years, but this may differ based on a number of factors, such as type of industry, the entrepreneur’s knowledge and skillset levels, access to resources, geographic location, etc. In order to remain sustainable, incubators charge program fees or membership dues as infrastructure demands capital.
Snapshot: Innovation Depot – Birmingham, AL
Innovation Depot is an incubator based in a rural region of Alabama and offers different, specialized programming according to their client companies’ needs. Innovation Depot’s entrepreneurial programming includes two coding courses, Innovative Birmingham and Covalence; a coworking space with the Ignite Collaboration Program; and the highly competitive Elevate Incubation Program. This incubator boasts of 112 member companies, $155 million in gross sales, and the creation of 1,064 jobs in 2017 alone.
These spaces do not typically offer programming for entrepreneurs. However, they do provide a space for those looking for a community-based workspace to inspire collaboration. Companies utilizing this opportunity typically pay through rent or membership dues on a short-term schedule (i.e. daily, monthly, etc.) and can leave at any time in the company’s growth.
Snapshot: dig Buffalo – Buffalo, NY
Design Innovation Garage (dig) Buffalo is a successful coworking space located within the Innovation Center at Buffalo. Dig Buffalo offers a variety of amenities, including private office spaces, conference rooms, kitchenettes, a podcast studio, and an idea lab. This collaboration center creates a community of entrepreneurs and ventures that can work with one another in the same location without necessarily offering programming for that space; however, there are often helpful networking events held at dig Buffalo. To participate in these opportunities, companies must pay a monthly membership fee.
Where does an entrepreneurship center fit into your ecosystem?
Entrepreneurship centers offer more than just advice from experienced industry leaders, funding and specialized resources that cater to your company; they also attract the interest of investors. These investors do not only have the power to take a startup to the next step but can breathe life into a market and spur job creation within the community. As the application process to be accepted into an entrepreneurship center is often rigorous, the success rate of the center alone can interest those willing to finance startups.
Empowering startups with both money and resources has proven to reshape entire cities. Detroit is an inspiring example of a city that has been rebuilt from the ground up by startups, entrepreneurship centers, and investors; as of 2016, Detroit’s unemployment rate has dropped to 5.3 percent, despite declaring bankruptcy three years prior.
So how do you connect your startup to an entrepreneurship center? Start by assessing the following:
1. Evaluate your company’s needs. Is your startup nascent and in need of extra guidance? Is your company ready to look towards funding and equity prospects? What community resources are missing that are necessary for success?
2. If you’re an entrepreneur, what are your measurable goals for your business? Would an entrepreneurship center help you get closer to that future?
3. Research the types of entrepreneurship centers and programming that will cater to your needs. For example, if you own a startup in a rural community, you may want to look for entrepreneurship centers that cater to your region with accessible resources and training for your specific market. Likewise, kitchen-based startups will not typically be well-suited for the fast-paced nature of accelerators.
4. Look into the entrepreneurship center’s graduate companies. Do those companies align with your interests? Do their success stories mirror your expectations?
5. Investigate the application process. Do you have what it takes to connect to this entrepreneurship center at your current stage? Is the center’s acceptance rate competitive enough?
Once you have finished this assessment and compiled detailed information on your startup’s metrics, apply to your chosen entrepreneurship center. Entrepreneurship and community building start with action, and an entrepreneurship center can be that pivotal step towards successful growth and sustainability of your company.
About the International Business Innovation Association
InBIA is a global nonprofit with over 2,200 members that lead entrepreneurship centers in 62 countries. For over 30 years, InBIA has provided industry best practices through education while enabling collaboration, mentorship, peer-based learning and the sharing of innovative ideas for entrepreneurs across the globe. InBIA is the premier organization for business incubators, accelerators, coworking spaces and other entrepreneurship centers. As InBIA strives to standardize terminology in the industry, we seek to use the term “entrepreneurship center” to reflect a variety of entrepreneur supporting models.
About Liv Sunná
Liv Sunná is a technical writer at the International Business Innovation Association and an English major at the University of Central Florida. Liv seeks to communicate entrepreneurial concepts in an exciting, accessible way through her background in creative writing and technical communication.
Upcoming InBIA Events and Programs
2018 e.Builders Forum — The second annual e.Builders Forum will be held from September 17-18 and hosted by TechTown Detroit. This conference creates a space for entrepreneurs and ecosystem builders alike to share best practices and innovative resources through workshops and roundtable discussions led by specialized, expert facilitators. As this year’s conference theme is inclusivity, InBIA is proud to announce that three playbooks and two research projects—funded by JP Morgan Chase grants— will be featured at the e.Builders Forum; these groundbreaking publications center around inclusive practices within the ecosystem with respect to minority entrepreneurs, women entrepreneurs and disadvantaged communities.
September webinar – InBIA’s September webinar focuses on growing entrepreneurial ecosystems and building necessary infrastructure for your ecosystem to thrive. This webinar will be offered on September 6th and 13th and taught by Kate Hodel, co-author of Beyond Collisions: How to Build Your Entrepreneurial Infrastructure.
Training catalog – Whether you are an entrepreneurship center or an ecosystem builder, you may want to check out InBIA’s course catalog. These dynamic courses deep dive far beyond the definitions listed in this article and include the Rural Incubation Success Strategies Certificate Program, Non-Dilutive Funding Opportunities for Your Companies, Fostering Your Entrepreneurship Center’s Role in Your Community and more.