3 differences between Business Incubators and Accelerators

Starting and running a business is challenging especially in today’s economic climate. More than ever, the right support network for a small or medium-sized business can significantly improve the odds of success. This is where accelerator or incubator programmes can be incredibly useful and it’s the reason that more and more SMEs rely on these programmes to assist with their growth.

But what is the difference between the two? What benefits do these programmes provide and which one is right for your SME?

According to Kyle Ballard, Head of Accelerators, B&M Analysts, though the terms accelerator and incubator are often used interchangeably, there are important differences between them.

Accelerators help SMEs that demonstrate potential for rapid growth with expert advice, training, mentoring, networking, and often financial support too.

“Accelerators work with business owners for a set timeframe to ‘accelerate’ their growth, by facilitating access to customers and unlocking scale within operations,” Kyle says.

Incubators on the other hand are programmes that work with budding entrepreneurs at the conceptual stage of the business. Kyle explains: “Incubators nurture startups through the beginning phases of the business. They provide a conducive environment in which entrepreneurs can build on their ideas, determine product-market fit and get investment ready. They are the perfect platform for companies to set the basic foundations for their business.”

Kyle lists three of the key differences between accelerators and incubators that SMEs should consider when choosing which programme is right for their business:

1. Stage of Development

One of the key differences between accelerators and incubators relates to the small business’s stage of development. Incubators are primarily focused on startups, while accelerators target scale-ups. While both options require guidance and mentorship, the business stage alters the focus of that guidance. Incubators help entrepreneurs discover and strengthen their Minimum Viable Product or value proposition to a customer, often before any meaningful sales have begun. Accelerators focus their guidance on companies that have already developed a clear offering to their market, landed a few interested customers, yet are looking to break into larger customers and scale their offering. These ventures have a strong foundation already established and are looking for greater business traction as well as investment.

2. Duration of the Programme

Another differentiator between incubators and accelerators is the duration of the programme. Incubators typically work based on the entrepreneurs’ needs and have no time limit to the duration of the incubation services provided. These companies can be incubated for as long as is necessary for the value proposition the market to be clear and tested. Accelerators, on the other hand, are designed to rapidly provide exposure to large customers and investors, and then once commercial opportunities have been confirmed, to support the small business to scale and thus absorb the growth they have found. Accelerators, therefore, tend to take SMEs in cohorts and provide intensive training for entrepreneurs for comparatively fixed time frames (for example one to two years).

3. Investor Funding

Incubators generally provide support to start-ups by providing mentorship as the small business designs its strategy and compelling offering to a customer. Furthermore, other shared facilities and services can be offered such as shared workspaces, legal counsel, and networking opportunities to help sustain the small businesses developing their offering to customers. Accelerators on the other hand, typically help build high-potential small businesses into full-fledged companies through structured market access and scaling up support. A rapid, immersive programme, accelerators provide access to supply chain networks (usually large, successful corporates), to access both sale and investment opportunities. They make the work of potential investors easier via their strict vetting process that ensures that only the SMEs with the most potential make it onto the programme. This is why investors often prefer to invest in accelerators as opposed to investing directly in the companies themselves, thereby reducing risk.

Kyle says that while accelerators and incubators provide significant benefits to SMEs, from the differences provided, it is clear they should not be considered one and the same. Through careful self-reflection, entrepreneurs will be able to determine which is the right fit for their business.

He adds that if your SME is at the stage where you are ready to catapult your growth to the next level through market access to large corporates (including Mr Price Group, Miladys, Pepkor Speciality, Woolworths, Homewood, Mr Price Home, @home) and investment opportunities, there are two cluster-based Business Accelerators currently available to enter. “Targeting the Clothing and Textile, and Furniture industries, these Business Accelerators are proven mechanisms that can unlock unprecedented growth for your SME.”

ETHEKWINI FURNITURE CLUSTER (EFC)

Applications (open now) close: 28 February 2023

Apply here: https://furniturecluster.org.za/the-business-accelerator/

Download the Accelerator info pack here: https://lnkd.in/d23Raer2

KZN CLOTHING AND TEXTILE CLUSTER (KZNCTC)

Applications (open now) close: 28 February 2023

Apply here: https://kznctc.org.za/kznctc-business-accelerator.

Download the Accelerator info pack here: https://loom.ly/0OhSenA