If you’re thinking about starting a startup you might be looking for capital, or office space, or a team, or maybe even just an idea. The good news is that all of these things can be found in various ecosystems within the startup world. The bad news is that these benefits don’t all exist under one roof.
Pop Quiz: what is the difference between a startup accelerator and an incubator? What does co-working space offer you that neither of those two will? And how does a startup studio work?
If you didn’t pass the quiz it’s totally fine, this article is going to break down every single one of those terms in detail answering questions like: how do these programs choose who to work with? Which provide funding and which cost money? And what are the benefits of each?
Let’s start with incubators.
Goals: Startup incubators are really focused on getting from zero to one. They help founders come together and get their first customers. Typically, incubators operate within a specific niche like “tech” or “sustainability.”
Time Frame: The great thing about incubators is that they aren’t bound by a program that dictates timelines by cohorts. For the most part, they operate on with general time frames from 6 months to a year. Because they help startups move from idea stage to MVP and through to the product-market fit stage, they can’t predict how long all of that might take. As such, they give generous time to startups knowing that there will likely be some iterations and perhaps even a pivot along the way.
Joining: Incubators are not always easy to apply to and they’re almost always hard to get into. Some incubators, like FinTech Sandbox and Bolt have a simple application process for consideration while others, like Capital Factory are a little harder to apply to. One great thing about incubators is that they’re more open to letting solo founders into their program than some of the other entities on this list.
Financing: Incubators often provide capital to founders but it’s rare that an incubator would deposit the full amount immediately. Many incubators ask startups to show proof of concepts at various stages and with each advancement forward funds are released.
Financing can range from as little as $5k to as much as $100k- depending on the size of the incubator and the needs of the startup. For this investment, startup founders are typically required to give the incubator anywhere from 5–12% equity.
Benefits: Startup incubators offer incredible value for the entrepreneurs and teams that are accepted. Not only do startups not have to pay to get into the program, they also get free workspace which isn’t generally private office but instead feels more like startups sharing team rooms.
In addition to space and capital, startup incubators provide a deep network of mentors and experts who are available to help with the various stages of startup building. If an incubator is relatively established, it may have a fantastic database of alumni to connect you with. Rather than getting involved with fundraising, incubators tend to provide general assistance to founders.
Final Word: incubators are like the early foundation of the innovation ecosystem.
Next, there are startup accelerators.
Goals: The goal of a startup accelerator is clear: they exist to accelerate the growth of startups. The startups they invite into their programs almost always have a product and a few customers but don’t need to be at full product-market fit stage yet. Accelerators work hand in hand with venture capitalists and investors- it’s one of the main reasons they’re so incredibly valuable for new startups. The goal of a good startup accelerator is to align investors with their founders in order to create a synergy that facilitates fast innovation.
Time Frame: Accelerators typically operate on a fixed time frame with each year being split into two or three cohorts. The number of startups in each cohort range from 12 to 100 but with more startups in the cohort, the amount of funding available becomes limited.
Each cohort lasts anywhere from 3–6 months and through that time startups are expected to set up all of their legal and financial operations, find their target customers, market to them, make a profit. Essentially, accelerators try to do in a few months what typical startups do in a year.
Joining Almost all accelerators have clear application protocols and set dates of the acceptance periods. Some accelerators like TechStars run application cycles four times a year whereas others like and Y-Combinator have cohorts in the winter and again in the spring and summer.
Most accelerators only accept teams into their programs, but a few are open to funding a solo founder if the opportunity is right.
All of the accelerators I am aware of request an equity percentage in exchange for the benefits that come with acceptance into the program.
Financing There is no fee to join a startup accelerator and typically they will invest anywhere from $15k to $300k per team. Both Tech Stars and Y-combinator propose an investment of $150k for the startups in their programs but require a 6% and 7% (respectfully) equity exchange.
Benefits One great advantage accelerators have over incubators and some of the other entities on this list is that they offer startup founders a structured program with a curriculum. Some even offer this program to be accessed remotely using a variety of tools they provide.
As a graduate of Y-Combinator's remote accelerator program “Startup School” I can say with confidence that these programs are immensely powerful and beautifully designed to move startups quickly from one milestone to the next.
In addition to education, accelerators provide a number of other great benefits like access to their extensive alumni database, investor network, and expert staff who provide mentorship.
Final word: accelerators move existing startups through the prototype stage all the way to finished product and scale.
Pro-tip: most accelerators operate within a niche like incubators. There are those that cater to the demands of the environment, focus on cybersecurity, have a special interest in female-founded companies, etc. Be sure to search for an accelerator in your market as these accelerators will have a gold mine of experience and intel to pass on to you.
Let’s turn now to Startup Studios.
Goal: Startup studios are a fresh mix of "engineering design lab" and "startup incubator". The goal of Startup Studios is to create startups from scratch. Most often the Studio team creates multiple startups at once because 9 out of 10 of them will not find market traction.
One well-known Startup Studio, called Human Ventures, states the following as their goal, “Our Company Builder is where we spark new ideas, validate them, and provide hands-on operational support to founders as they get their companies off the ground.”
A unique element of Startup Studios is that they tend to be funded by (and sometimes owned by) venture capital funds. This is great because it provides access to capital and relations but unlike incubators and accelerators, there is less emphasis on education and more focus on operation.
Joining Startup studios are the hardest entity on this list to get into from the outside. They draw from the talent and skills of their internal team rather than hearing entrepreneurs pitch ideas and funding them to build the company. This isn’t to say that you can’t bring your idea to a Startup Studio environment but they rarely have programming or open applications so it helps to know someone or to contact the team directly with your idea.
Financing It is unclear as to whether Startup Studios take equity from founders who are brought in from the outside. Obviously, all of the companies that start from within the Studio are owned at least in part by the Studio but there is not much data on whether Studios require entrepreneurs to relinquish some equity to join with their venture.
Studios are very likely to finance the operations of a startup. There is little information on whether startup founders are paid a stipend but if you work for the Studio as a team member it’s safe to say you’re at least going to get a paycheck.
Benefits Startup studios are in a unique position to help startups build from the ground up. As such, they give startups access to a vast assortment of resources that accelerators and incubators usually don’t. As an example, Startup Studios have been known to match founders together and form teams which is something traditionally not offered with other programs.
Final Word: A big point of difference between Studios and Incubators and accelerators is their focus on providing “resource capital” rather than “human capital” as most other entities do. While accelerators and incubators provide networks ranging from investors to mentors to board members and alumni Studios provide machines, equipment, tools, and designs.
Accelerators mostly work with teams that have reached product-market fit and are looking to scale quickly. Startup incubators provide early-stage entrepreneurs and teams with the programming they need to move from idea stage to product-market fit. Both accelerators and incubators typically operate within a specific niche. Startup Studios build companies from the ground up using an internal team and all of their collective resources.