Every business needs capital to grow, but most entrepreneurs have limited energy and time reserves. Everyone wants to make sure that by choosing one type of financing or another they end up with access to the best connections and opportunities. So where to start?
The dream of any startup is to be accepted into a top-tier program and have the opportunity to pitch to the most prominent investors. But it’s worth understanding the two types of primary funding options that provide such opportunities first: accelerators and incubators.
Let’s take a look at key aspects of startup accelerators and incubators in Europe.
According to Harvard Business Review, startup accelerators support early-stage, growth-driven companies through education, mentorship, and financing. Startups enter accelerators for a fixed period of time and as part of a cohort of companies. The accelerator experience is a process of intense, rapid, and immersive education aimed at accelerating the life cycle of young innovative companies, compressing years worth of learning-by-doing into just a few months.
The key unique features that make accelerators stand out are that they are fixed-term, cohort-based, mentoring-oriented, and include a "demo day" for graduates – a day when startups pitch their ideas to raise first big funding.
Apart from educational services, your other benefits include:
- Support from mentors, investors, and potential partners.
- Valuable experience. The very process of filling out an application can teach you a lot.
- Database of useful contacts.
- A chance to get a look at how things work in the industry.
- Additional PR.
Assuming your startup is at its early stage, the accelerator environment can become a business community of like-minded people and help you form a good networking circle to make friends, gain new knowledge, and learn from each other’s success.
It’s worth saying that accelerators tend to focus on small teams rather than individual founders. To participate in most accelerators, you need a team that has already been formed. If you do not have enough like-minded people, it’s better to give your attention to startup incubators.
Additionally, the selection of participants can be pretty tough! While the application process is open to all, it can be highly competitive. For example, the competition in Techstars sometimes reaches 1,000 applications per seat, and less than 1% of the applications are selected.
Unfortunately, accelerators rarely give out large sums of money. More often than not, the funding is enough for the time of the program testing several business hypotheses, creating MVPs, and finding the first clients.
Let’s take a look at examples of the best startup accelerators in Europe, as well as startup accelerators in the Netherlands. Here you can find information on the top 17 startup accelerators in Europe, including general information about each program, program durations, investment sizes, among other things. Here’s the list of the Netherlands’ top 9 startup accelerators.
Before we compare the two, let’s speak about incubators. According to the US Chamber of Commerce, a startup incubator is a collaborative program for startup companies — usually physically located in one central workspace — designed to help startups in their infancy succeed by providing workspace, seed funding, mentoring and training.
Startup incubators are usually nonprofit organizations, often associated with universities and business schools that extend invitations to students, alumni, and members of the community to take advantage of the program.
What are the benefits?
Apart from an office, educational services and funding, a business incubator helps the entrepreneur communicate with official bodies, arranges business consultations (law, IP rights, taxes, etc.), assists in attracting investment, helps with advertising, branding and organization of events. Most importantly, incubators help attract sources of financing (grants from special funds).
Here you can find information on the top startup incubators in Europe, including general information about each program, program durations, investment sizes, and other things.
Here’s the list of the Netherlands’ top startup incubators. These lists also include accelerators and VCs.
So what’s the difference?
According to MassChallenge, startup incubators help entrepreneurs refine business ideas and build their company from the ground up.
Startup accelerators “provide early-stage companies that already have a minimum viable product (MVP) with the education, resources, and mentorship needed to promote what might otherwise be several slow years of growth into a few short months.”
MassСhallenge provides a great summary of both types to help you choose:
Keep in mind that while accelerators and incubators are very successful in helping startups succeed and gain recognition, getting into these programs is no guarantee of success for the startup founder and does not guarantee reliable investment for the startup.
Now you know the differences between these two funding sources and hopefully will be able to determine which is right for your business.