Recently, I was asked to address a group of executive MBA exchange students at UCLA’s Anderson School of Management. These midcareer individuals from France and Germany were interested in American-style entrepreneurship and our vast network of business “incubators” and startup “accelerators” in particular.
One question they had was about the difference between incubators and accelerators, and it struck me that most entrepreneurs in the U.S. probably don’t know the answer either. But for startup business owners seeking a jump-start from one of these entities, the differences loom large indeed.
New business incubators, of course, have been around for decades and there are thousands of them nationwide. They even have their own professional organization, the National Business Incubation Association (NBIA.org), with 1,900 members worldwide.
Accelerators, on the other hand, are a much newer breed and have concentrated in major startup hotbeds such as New York, Los Angeles and Silicon Valley as well as cities that include Dallas, Seattle, Chicago, Boston and many others.
Here is a rundown of the differences separating these two:
• Primary backing. Accelerators are strictly private entities looking for big commercial hits. Incubators are often run by educational, governmental or other nonprofit entities charged with fostering local or regional economic growth.
• Advice/mentoring. Accelerators pride themselves on their deep rosters of high-powered mentors who’ve already built highly successful businesses from the ground up. Incubators may also offer advice and counseling, but generally not at quite the level that many accelerators offer (they do, after all, have money on the line).
• Business types. Accelerators tend to focus on high-potential technology and other leading-edge types of businesses. Incubators have a broader mandate and will accept businesses of nearly all types, including those with a local focus only.