Although often used interchangeably, startup incubators and accelerators are totally different, serving different segments. So while accelerators help startups with MVP, incubators help new entrepreneurs start their businesses from the ground up. However, both play a vital role in supporting startups and building a strong entrepreneurial ecosystem that positively reflects the economy.
Role of accelerators and incubators in ecosystems
Incubators and accelerators are some of the key pillars enabling the growth of any ecosystem. They support entrepreneurs to validate and scale their ideas and prepare a pipeline of investment opportunities for investors and VCs.
They prepare the ecosystem to help build the local economy and thus contribute to reviving local economies by generating more jobs and products.
The impact of accelerators and incubators currently
There may be 100 or more startup accelerators and incubators in the region here; each has at least 2 cohorts per year, with an average of 10 startups per cohort. Yet the number of startups that continue to strive, grow and expand, theoretically, means that we should have at least 200 new successful companies every year (since only 2 in 10 startups survive their first year.) However this is definitely not the case, we hardly see this number of new companies every year, and more than 90% of the startups fail to survive to post the program regardless of all the support they got.
So, where is the problem exactly?
Incubators and accelerators create and develop strong programs that are very attractive and 100s of startups apply to join every cohort. Although they demand certain essential criteria in choosing their cohorts like the strength and skills of the team, signs of traction, and new innovative ideas, still many startups don’t really benefit from these programs. Startup programs usually focus a lot on providing the startups with lots of amenities, physical space, technical facilities, mentoring, connections, and some seed funds, however, the true value of actually working with them on developing their businesses is lost.
However, some critical points are often overlooked, like the product-market fit, which is responsible for 34% of startups’ failures. Most startups spend a lot of time, money, and effort developing outstanding solutions and products to discover they don’t fit the market needs. The second most common reason for startups to fail is running out of cash due to poor financial planning and forecasting.