Business incubators and accelerators — are they for you?

November 3, 2014 - Tags: Startup

Looking for new markets or support for your business? Incubators and accelerators may improve your start-up or early-stage business' odds of success by providing financial, managerial and mentorship support. They may help you attract new customers or investors, scale up your operations or increase your revenue. 

What are business accelerators and incubators?

The National Research Council of Canada defines these two terms in the following manner:

  • Accelerator: Typically for-profit organizations owned and operated by venture capital investors, who intend to generate returns from equity-based investments in their client firms. Accelerators provide a range of services to early-stage firms, including financial support, business advice, office and development space and complementary services offered by partner organizations.1
  • Incubator: Typically not-for-profit organizations that offer similar services to accelerators, but tend to provide longer tenure for participating firms and a broader suite of services in terms of physical space and mentorship. Incubators are often sponsored by universities, colleges and economic development corporations.1

What are the benefits?

Accelerators and incubators can assist businesses in various ways. They may:

  • Help find ways to attract investment
  • Provide seed funding
  • Leverage networks of venture capitalists and angel investors
  • Offer resources, technology and test beds
  • Contribute in the development of business plans, models and strategies
  • Provide training and feedback from entrepreneurs and experts

In return for the services offered, the accelerators and incubators may charge fees or request a portion of your company's equity.

There are many incubators and accelerators to choose from, so it is important to do your research before applying to join a specific group. Criteria vary from organization to organization, so be sure to determine if your business qualifies. Also, be well prepared as it is a highly competitive process. Before applying you may also want to investigate matters such as:

  • Which one is best suited to your needs
  • What each one has to offer your business
  • The organization's reputation
  • The size and quality of its networks
  • The success rate of businesses which have participated in the program

Before taking the next step, you should first ask yourself a question — are you ready to take suggestions and recommendations from people outside of your business? If yes, then these organizations may be able to help you prepare your business for the future.

For more resources, read our blog entitled Hatching your start-up through business incubation or visit the Canadian Association of Business Incubation website.

1 http://www.nrc-cnrc.gc.ca/eng/news/releases/2014/prosper_backgrounder.html (link no longer valid).

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