When is an Incubator Not an Incubator?
I attended a workshop a few weeks ago and was immediately impressed by the facility when I walked in. I looked around at the cool, hip space full of passionate entrepreneurs clustered on designer couches discussing business models or helping themselves to free refreshments in the open kitchen as they debated the pros and cons of crowdfunding. I admired the high-tech computers and projectors and flat-screen TVs while enjoying the free wireless Internet in the cozy classroom filled with rolling desks that looked like they had come straight out of some college in the future. The workshop itself was BYOB (bring-your-own-brownbag) and it quickly filled to capacity with people of various ages, ethnicities, and personal styles interested in learning about the latest lean startup method and how to launch a company. It was exhilarating and exciting and I loved it. I complimented the director, a friend of mine, on creating such a great incubation program. “Oh, no,” she replied, “This isn’t an incubator.” Which made me think….what, exactly, is an incubator? And how is an incubator different from, or the same as, other types of entrepreneurial support programs that have been popping up lately? Here’s what I think.
The National Business Incubation Association (www.nbia.org) defines a business incubator as “a program designed to accelerate the successful development of entrepreneurial companies through an array of business support resources and services, developed or orchestrated by incubator management, and offered both in the incubator and through its network of contacts.” Incubators typically accept new client companies on a rolling basis, as space opens up due to graduating clients. Companies can enter the incubator at any time during the year and can graduate out at any time. The services the entrepreneurs receive are usually offered on as as-needed basis, with the incubator manager working closely with each company management team to determine what support is needed at what time and to connect the company to the appropriate service provider. Quarterly meetings are an important part of this process. Regular seminars, like monthly lunch-and-learns, are offered as well, but they serve as much of a social networking function as a training function.
The traditional business incubator model involves a building but, as the definition shows, incubation is much more than just a building. In fact, some incubators exist without any physical building whatsoever. These programs are usually referred to as virtual incubators since they deliver their services via technology tools such as Skype, Google Docs, Microsoft SharePoint, and many other creative methods. Sometimes dubbed “incubators without walls,” these virtual programs can assist entrepreneurs across a large geographical area without putting them into a physical facility. Virtual programs provide companies with all of the services and resources that a traditional bricks-and-mortar incubator does to help them successfully grow.
So, what is an accelerator? Personally, I don’t think there is a difference between a standard incubator and an accelerator. Some of my colleagues would disagree, however. I know some people who would argue that an accelerator is a juiced-up incubator. Where an incubator holds an entrepreneur’s hand, an accelerator puts the entrepreneur in a bear hug. Where an incubator provides basic business support services, an accelerator provides more specialized, industry-specific support services. I guess it’s a degree of service difference, but not necessarily a programmatic difference.
So is a seed accelerator just another name for an accelerator? No, not really. Seed accelerators are a recent model of a for-profit incubator program. These programs usually start with an open application process from which a small group of startups teams is selected. These teams are supported with funding (usually less than $50,000), mentoring, training and events for a definite period (usually three months), in exchange for equity. The process that startups go through in a seed accelerator program can be separated into five distinct phases: awareness, application, program, demo day, post demo day. Because of the short time frame between application and demo day, most seed accelerators focus on mobile and/or Internet startups. Seed accelerators do not necessarily need to include a physical space, but many do. The quintessential examples of seed accelerator programs are TechStars and Y Combinator.
Where does co-working fit into the picture? I’m glad you asked! Co-working is a situation in which individual workers come together to share a space, but not necessarily to work together. Co-working allows work-at-home professionals, independent contractors, or people who travel frequently the opportunity to work in a social atmosphere, reducing the feeling of isolation they often experience. Co-working spaces are open, no offices or cubicles, with minimal shared resources (maybe a copy machine) and little, if any, entrepreneurial support services or educational opportunities. Co-working is not only about the physical space, but also about establishing the co-working community first.
So which one should an entrepreneur use? Which one is the best option for supporting startup companies? All of them! There are many options available to entrepreneurs because entrepreneurs have different needs at different stages of company development. In my opinion, though, I see the path of entrepreneurship leading past each of these support options. For example, a couple of friends with an idea for a cool mobile application start making plans on a napkin at Starbucks. Soon, they may decide to join a co-working space so that they can work together with fewer interruptions and also have access to other smart people who may have ideas and skills that the two friends can utilize to advance their idea. After developing their idea in the co-working space for a few months, the two friends may decide to apply to a seed accelerator program in order to move their idea into a fundable prototype stage. If successful in the seed accelerator program, the two friends may find themselves with a real company on their hands, complete with angel and/or venture funding. With the seed accelerator program over and the co-working space too informal to meet their growing needs, the two friends may apply to an incubator or an accelerator. In the supportive environment of the incubator/accelerator, the two friends may acquire the resources, education, mentoring, training, and network connections they need to give their burgeoning company the best chance of success. And who knows? After a few years of nurturing in the incubator, the little company started by two friends in a Starbucks coffee shop might just become a thriving IT company, employing dozens of people in their community, contributing to the tax base of their region, and providing a solid return to their investors.