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Accelerator vs Incubator: What’s the Difference?

Accelerator vs Incubator: What’s the Difference?

Words Founders Factory

March 23rd 2021 / 4 min read

Running a business is hard, and having the right support network for an early-stage founder can significantly improve the odds of a startup’s success.

This is where accelerators, incubators and other types of growth programs can be incredibly useful. Many startups rely on this kind of expert help to launch their business.

But what’s the difference between startup accelerators and incubators? What benefits do these kinds of programs provide, and which one is right for your startup?

We’ve outlined what to expect from each type of program below.

What is an Accelerator?

Accelerator programs help founders -who demonstrate potential for rapid growth - with expert advice, training, mentoring, networking, and often financial support, too.

Usually, startup accelerators work with founders for a set timeframe - typically between three to six months - to ‘accelerate’ their growth, and help build a business to the point where it is investment-ready and scalable.

In the early stages, startups are often given a small seed investment, which can be used to fund research, marketing, fine-tune a product, or hire new team members. In return, accelerators will usually receive a small share in the business.

By becoming part of an accelerator program, startups can gain access to investors, networking opportunities, skills development, and advice from industry experts.

Founders Factory’s accelerator program

Founders Factory’s accelerator is slightly different to the norm. We addressed a global market gap prioritising three main areas:

1. A fully bespoke program of support

We’ve perfected a platform that delivers a fully bespoke six-month program of intense support tailored to a startup's needs and growth objectives. There are no batches. No cookie-cutter one-to-many programs. 

Offering a fully bespoke program is fundamental to what we do. We believe that every startup and their circumstance is different, and therefore the support they receive should appropriately reflect that.

Our large team of entrepreneurs, investors and operators drive significant progress in all areas, including:

  • Product development & Design

  • Growth

  • Partnerships

  • PR

  • Fundraising

  • Data Science

  • Engineering

  • Talent

2. Access to the world's most influential companies

Startup-corporate engagement is fundamental to our model. We have received investment from the world’s most influential companies - including easyJet, Aviva, L’Oréal, Guardian Media Group, M&S, Reckitt Benckiser, Johnson Innovation-JJDC, Chinese private equity firm CSC Group and educational publisher Holtzbrinck. They deliver what we term “unfair advantage”.

From day one, our startups have access to the C-Suite innovation leaders and specialists within these organisations; sessions with their data and insights teams, mentorship and expertise from relevant business units, and opportunities for commercial pilots and contracts - and possibly even capital investment.

We also have relationships with other corporates and global organisations our startups can access.

Read the story of how Oxwash, a sustainable laundry startup, raised £1.75m in seed funding and collaborated with FMCG giant Reckitt Benckiser to scale their business through Founders Factory’s accelerator.

3. £30k in cash, for 4-6% equity

While our operational support and corporate partnerships are the cornerstone of our model, we invest £30k into all startups joining the accelerator program (terms differ in New York and Johannesburg).

Ten other notable accelerators

  • Startup Bootcamp - 3 months - €15,000 for 6-8% equity, partner services, and 6 months of free workspace.

  • Entrepreneur First - 6 months - £ 15,000 + monthly allowance for 8% equity

  • Y Combinator - $150,000 in return for 7% equity.

  • 500 Startups - 4 months - $150,000 in return for 6% equity. Companies also get access to the community, investors, and expert advice, free office space, support, and connections. Note that there is a $37,500 fee to participate.

  • Techstars - 3 months - $20,000 for 6% equity + $100,000 convertible note

  • NFX - $120,000 in return for 5% equity.

  • Antler - 6 months - €/£100,000 for 10% equity + monthly allowance for the duration of the program.

  • Bethnal Green Ventures - 3 months - £30,000 for 7% equity

  • Distill Ventures - 6 months - for drink and spirits startups. Investment (from £250k) and support.

  • Wayra - 9 months - Up to €250k, online scale-up services and access to clients.

What is an incubator?

One key aspect of incubators that sets them apart from accelerators, is that they often work with founders at idea stage and they don’t always have a fixed timeframe. Founders spend their time during an incubator networking with other entrepreneurs, building on their idea, determining product-market fit, and getting investment-ready.

These programs typically fall into one of two types: ideas developed from within an organisation, and those that recruit early-stage founders to work on an existing idea, with support and mentoring.

Much like accelerators, incubators provide startups with access to industry experts, who can provide advice and training, as well as access to networking opportunities with other startups in the program.

While there are some independent incubators, they can also be run by investors, government entities, and major corporations to advance their innovation agendas.

What is a venture studio?

A venture studio is Founders Factory's version of an incubator program.

It has many of the same benefits as an incubator or accelerator, providing additional help to startups that need a boost. However, there are subtle differences.

Ideas within a Venture Studio are usually vetted and grown from within, based on insights and thorough research from within the venture studio. In Founders Factory’s case, this is done alongside corporate partners.

Over time, our Studio concept evolved to include external founders with their own ideas - which means founders can apply with any ideas they have as long as they meet our investment agenda.

We encourage our team members at Founders Factory to also become founders. Our Chief Product Officer left to become a founder of one of our studio startups, as did our Managing Director of Travel.

Internal teams work together to build on these ideas, which eventually flourish into viable businesses, which can then seek outside investment and grow on their own.

Founders Factory's Venture Studio offer - a low-risk way to launch a business from scratch

  • £250k in total for 25% equity. £100K investment to build the MVP, and a further £150K should we decide to launch the business. You’ll be able to draw a salary from this investment and won’t need to worry about fundraising early on.

  • 12 months of support from our all-star operations team.

  • A small slush fund for marketing experiments, travel and any software you may need, plus free desk space until you're a team of 4 or more people.

Read the story of how we launched Bower Collective, a sustainable home-cleaning company in our Venture Studio.

Which is right for your business?

Accelerators, incubators and venture studios have several features in common, but there are certainly some key differences. 

You might not yet be sure which type of growth program is right for your business. Take a look at the breakdown below to help you decide which path to choose. 

It’s important to note that the features listed here are not necessarily included in all programs on offer, but most of them will include these in some form.

Accelerator - benefits:

  • Guidance from serial founders, operators and investors

Generally, accelerators offer support or mentorship from a large network of experts who can help founders overcome challenges and spot opportunities for growth.

  • Connections and partnerships

Accelerators often open doors to a variety of partnership opportunities with other founders or larger organisations. While this is true for incubators as well, you'll be at a slightly later stage so your ability to make use of, or activate, such partnerships may be more timely.

  • Early-stage investment

Startups who join an accelerator program often need early seed investment to grow. Accelerators often join funding rounds with a small cash injection, or can connect founders with investors who may be able to offer capital.

Incubator - benefits:

  • Available at idea-stage

Whereas accelerators usually require founders to demonstrate their growth potential and existing traction, startups can usually gain access to incubators at an earlier stage in their development (often idea stage).

  • Co-working environment

Incubators usually offer startups a co-working space, where your team can discuss and share ideas with other professionals, which is great for building your network (this is also offered to Founders Factory accelerator companies).

  • Mentorship and training

Like accelerators, incubators offer support or mentorship from a large network of experts who can help founders overcome challenges,set goals and priorities and make the right decisions .

Venture Studio offers all of the same benefits as an incubator, combined with:

  • Capital to bring your ideas to life, with almost zero risk

Venture Studios like Founders Factory can provide a healthy amount of capital to help you test and validate your idea, and go to market. You’ll be able to draw a salary with the initial investment, so won’t need to worry about fundraising early on, or leaving a comfortable full-time job.

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