Should You Join a Startup Accelerator, Incubator or Venture Builder Programme?
You have a brilliant idea, but you don’t know where to start… you are looking for mentorship, masterclasses, step-by-step guidance, expertise and office space to help you during those daunting early months of launch. These are a few of the advantages that joining an accelerator, incubator or venture builder programme would offer you.
All of these programs have the common ultimate goal of facilitating start-up founders during the toughest and riskiest pre-seed and early stages of launching their businesses. It is important to understand the differences in the support offered, expectations of the founder team and relationship dynamics that we will explore in this article. In this way, you will be able to find the team that aligns the best with your specific needs and future growth plan. This article is going to break down every single one to give an overview of each and the nuances between them.
Incubator: The Support You Need to Kick-Off
Incubators provide a nurturing environment for an entrepreneurial ideas to develop into disruptive and creative businesses. Therefore, incubator programs focus on the ideation stage of a potential start-up, exploring the feasible market potential in order to guide the founders in developing the first iterations of their product. Thereupon, incubators provide participants with foundational business services such as office space, networking opportunities, mentorship and legal support. Many of those are supported by corporate or government sponsorships which encourage the entrepreneurial and innovative initiative within the country or the industry.
The purpose of this model is to escort the company through its very fragile early developmental stage as founders. Before they have the opportunity to develop their team, the founder team must play all of the roles within their business and can be overwhelmed by the multiple challenges this brings. Incubators can lend mentorship in areas that the founder team has less experience in and can tailor invaluable advice and guidance where there are gaps in knowledge and experience.
If you’re looking at joining an incubator programme, it might be wise to contact founders currently in the programme, as well as alumni and portfolio companies. They will be able to let you know how long they’ve been there, how the incubator helped them achieve their growth goals and the relationships they developed thanks to their participation in their programme.
Accelerator: Add a Turbo to Your Idea
As the self-explanatory name says, accelerator programs ‘speed up’ the process of building a company by providing the right support to founders to bring a new venture to market. They can be an extremely valid tool to launch or scale up start-ups.
In most cases, they are organisations that offer a range of support services and fundraising opportunities for start-ups for a limited period, typically between 3 and 6 months. The type of service offered varies significantly based on the program. However, the most common ones, according to our analysis of 40+ programs, are mentorships along with the program, masterclasses, professional development, networking and demo days. These value propositions can make a huge difference in an early venture, as having an experienced team is the first step towards a successful fundraising and a steady future development. In addition to this, other offerings can include free office space, specialist consultation and access to market leaders through partnerships.
Some of these types of programs offer investment in exchange for equity (<15%). Applications to accelerator programs are usually selective and founders need to show passion and excitement towards their initiatives. If successful, they will either join a cohort of other founders and receive training or be provided with a tailored program for their start-up.
Here we have noted down some incubators and accelerators in London that you should know about:
Sectors — Tech
Deal Terms — Founders Factory receives a minority stake in exchange for product IP, £150,000 and 12 months of operational support; plus, they help validate ideas and build the right team.
Notable Alumni — ChargedUp, Luther Systems, Vidsky
Sectors — Deep tech
Deal Terms — Assuming you pass the first 3 months of the program, EF will invest about £80,000 for an equity of 10%. From here, EF will help to build cohesive teams and to develop ideas. Plus, the teams work closely with experienced leaders and have the opportunity to pitch to investors during Demo day.
Notable Alumni — Affable, Beyond, Marble
Sectors — Tech
Deal Terms — Startups are offered a $100,000 convertible note; plus, Techstars contributes $20,000 USD to support living expenses during the accelerator program. Techstars receives a 6% equity until the startup raises a priced equity financing of $250,000 USD or more.
Notable Alumni — Coconut, Lifebit, Tenzo
Sectors — Tech
Deal Terms — An initial investment of £100,000 for an equity of 7.5%; plus, the possibility of co-investing in seed rounds of up to £2M. Seedcamp offers a community of fellow founders to support your startup; also, access to a network of mentors and investors.
Notable Alumni — Pleo, Revolut, Trussle
Sectors — Social, Healthcare, GreenTech
Deal Terms — An investment of £30,000 in cash for an equity of 7%. They provide a workspace, 3 month-mentorship and workshops, access to industry experts and investor networks, etc.
Notable Alumni — Commonplace, Godgym, Overleaf
Sectors — Cyber Security, FinTech
Deal Terms — Access to their co-working space, networking events, meet-ups and mentorship opportunities.
Notable Alumni — Motive Partners, Revolut, Salaryfits
Sectors — Tech
Duration — 12 Weeks
Deal Terms — Cost of £600
Notable Alumni — Interrodata, Percept Imagery, Talking Circles
Sectors — PropTech
Duration — 15 Weeks
Deal Terms — £20,000 for 7% equity with optional follow-on investment between £50,000 — £150,000
Notable Alumni — Hubble, LandTech, Plentific
Sectors — Marketing and Advertising
Duration — 16 Weeks
Deal Terms — £90,000 for 5–8%
Notable Alumni — Green Story, Scircula, Survey54
Venture Builder: An Efficient Start-Up Factory
Venture builders, also referred to as start-up studios, are an emerging model for building high-growth potential start-ups. In a nutshell, they are companies that build a business from scratch by sourcing a team and providing all the necessary resources, from office space to operational teams to total funding.
They can provide all the expertise needed to build a business, such as finance, marketing, legal, development and design which enables founders to focus on the development of the idea. The success of this model lies in its exploitation of scale and standardisation in the process of producing start-ups, taking advantage of a large pool of ideas to pick from and the financial resources of large companies or VCs, in a factory-like style.
In addition to this standardized approach, the main difference with the previously analysed programs is the amount of equity stake taken, since these programmes are delivering higher levels of resource and risk reduction to the founder team.
Location — Germany
Notable Alumni — Glide, Zolando
Location — UK
Notable Alumni — Tomo, Buddyhub
Location — UK
Location — UK
Notable Alumni — Kalgera, Menu Guru
Location — UK
Notable Alumni — Lifted, Heata
To wrap up, all of them are all very valid models to consider when thinking about setting up a startup, as they all surely hedge the risk and solve in different ways many of the early-stage problems caused by either lack of expertise or access to capital. It is important that you do your own research and understand which option works best for you and your business.
To summarise the above information, we can compare each model using the following metrics:
- Breadth of offering: Venture Builder > Accelerator > Incubator
- Duration of the program: Venture Builder > Incubator > Accelerator
- Equity taken: Venture Builder > Accelerator > Incubator
Essentially, the equity taken is proportional to the help received and the choice depends very much on your expectation and vision.
‘It’s not about ideas. It’s about making ideas happen. Why not take advantage of all the support available out there?’