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What is the difference between accelerators, incubators and co-working spaces?

What is the difference between accelerators, incubators and co-working spaces?

8th September 2017 by Steve Bates

Investors have been asking us what it means when entrepreneurs say they are based in an accelerator, an incubator or a co-working space. Sometimes, we hear these terms being used as if they all mean roughly the same thing. But they aren’t. In fact, there are important differences. So, we thought it would be useful to explain what each term means. Accelerators, incubators and co-working spaces are especially designed for startups and really lean early-stage teams, but what exactly are they? Let’s take a closer look:

Accelerators

Accelerators are specifically set-up to help startups quickly grow during a programme that typically lasts three months. Startups have to apply to be accepted onto an accelerator programme. This a highly competitive process, with only a small percentage of companies being accepted based on selection criteria. For example, one accelerator usually only accepts as little as 2% of applicants.

Once a startup has been accepted, it will be expected to give up part of their equity to the accelerator. In exchange, it will usually receive:

  • Seed investment.
  • Work space.
  • Intensive mentoring.
  • Training on how to develop their business.
  • Networking opportunities.

Some accelerators arrange a ‘demo day’, which is the chance to pitch to angel investors and venture capitalists. It’s seen as a way to showcase how far a business has come since it joined the programme.

Many accelerators will run one to three programmes per year.

Well-known accelerators include:

A Silicon Valley (USA) based seed accelerator that’s often regarded as the world’s most powerful startup incubator. The companies receive seed money, advice, and connections in exchange for equity.

This pan-European, London-based accelerator provides startups with seed money, mentorship, office space and support, usually for about a year.

The renowned startup accelerator from the US, merged with Springboard in the UK so that they could expand their operations in UK & Europe. Also has an accelerator dedicated to the fintech sector specifically.

Incubators

A startup has to apply for an incubator programme, just like an accelerator. However, with an incubator, the focus is on guiding and growing the business for around a year or more, rather than just a short, intensive period. However, not all incubators are focussed on the business side of things. For example, some concentrate on the science side, giving access to specialised equipment that may be vital to biotech research companies. They can also be industry specific, such as focusing on the tech or food sectors.

Most incubators provide startups with work space, the chance to network with experienced industry heavyweights and create strategic partnerships. Along with business development and advice on:

Investment capital isn’t usually provided. But then again, the business usually won’t have to give up equity to the incubator in exchange for funds. In fact, some incubators are funded by development agencies.

Well-regarded incubators include:

St John’s Innovation Centre (SJIC)

This business incubator in Cambridge, UK, focusses on science and technology related businesses.

hub:raum

This incubator has three locations (Berlin, Krkow and Tel-Aviv. Owned by Deutsche Telekom, it supports early-stage startups by investing in them and providing mentoring.

Co-working spaces

Just as the name implies, a co-working space is a communal and usually open plan, shared working space. Renting commercial office space has become more and more expensive and competition for real estate gets tougher. This is where co-working space comes in, as entrepreneurs can often rent them on a flexible basis, something which they’re less likely to find in traditional commercial lets.

An entrepreneur can usually rent anything from just a desk to a larger area that’s suitable for a small team. So, the people within this type of work space will not all be from the same business. Studies have shown that workers thrive  in a co-working space. This is possibly because they are usually populated with entrepreneurs with a similar mind-set.

A co-working space offers:

  • Informal networking opportunities with other entrepreneurs based within the space.
  • A low, fixed fee – that covers office space and vital business resources, such as internet access, printers and meeting rooms.
  • Flexibility for very early-stage businesses to grow from a single desk to a few, before having to find a larger dedicated office space.

Unlike with accelerators or incubators, the business won’t have to release equity. But, neither will it receive the same level of business support or mentorship.

Well-known co-working spaces include:

WeWork

With locations predominantly across the USA, but also across the world, WeWork, is a unicorn. It’s received a whopping $3.69 billion in funding. It’s even said to have popularised the term ‘co-working’.

Mindspace

Mindspace has inspiring workspaces for teams of all sizes, mainly in Germany, but also in London, Poland and Tel Aviv. It aims to enable entrepreneurs focus on taking their business to the next level, whilst they take care of the rest.

Second Home

London-based Second Home provides stunning workspaces with all the resources a business would expect. It recently opened a space in Lisbon,  which is becoming known as the California of Europe.

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Steve Bates

Steve Bates

Copywriter for Seedrs

Digital Agency Kent