Incubators vs. Accelerators

We launched Founderfuel, our accelerator program, last week. As I scanned through the launch coverage I noticed many references to the program being an “incubator”. There is a big difference between incubators and accelerators both in terms of experience and results (returns). Here is how we see it at Real Ventures:

The Accelerator Experience

When I first got into tech startups in the late nineties incubators were all the rage. Bill Gross was getting going with Idealab and there were 100s of others. When the bubble burst, incubators were among the 1st casualties and the term “incubator” quickly became a dirty word. Why? Incubated companies had little or no capital and were not able to stand on their own so they were quick to die off.

Most incubators offer a protected, nurturing environment, usually under the same roof where you bring your idea in or are recruited to execute a home-grown idea. Many offer common services from back office to marketing, UX, etc. So you can focus on your core product and leverage outside resources.

Accelerators are not protected or nurturing. They bring together entrepreneurs and mentors / advisors and leave it to the entrepreneurs to figure out how to best take advantage of that opportunity. There are no internal resources. No back office you can use. No internal marketing expert. It’s sink or swim.

Talking to people who have come through programs like YCombinator or Techstars, one of the main benefits they cite is peer exposure. You learn as much from the other founders as you do from the mentors. And peer pressure plays a big part too. You don’t really get that as much in an incubator because there is less time pressure and no demo day at the end. Most accelerator programs have a similar construct: 12 weeks followed by a demo day. The best companies at the end of that 12 weeks will go on to raise follow on funding. The others? Who knows…

What about results?

While the data is incomplete, I think it’s safe to say that incubators have largely not delivered results. Idealab has withstood the test of time, but most others are long gone.

The results for accelerators are harder to measure as they are a newer phenomenon. Paul Graham from YC recently published some numbers. Highlights:

25 out of 316 companies (7.9%) have exited

5 exited for > $10M

Estimated value per company: $22M

Portfolio value: $ 4.7B

Techstars publishes results by cohort. 7 out of its 70 companies have been acquired. Almost all of its exits required less than $1m of additional capital to achieve. Those are likely not big $ exits, but likely are great returns on an $18K investment!

We think that accelerators are here to stay. Yes, there may be too many of them. But from an investor standpoint they are a great way to find and test talent that might not be ready for a larger round. And from an entrepreneur standpoint, they are a great vehicle for bringing exposure, connections, mentorship and future funding to your company in a hurry.

If you are interested in being part of the 1st Founderfuel cohort, apply here.

  • Hussain Bandukwala

    This comment comes in really late, but I just ran into an interesting article (published 5 months before this blog post was written) about categorizing accelerators as just 1 of the 4 common types of incubators:

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  • Jerrod Bailey

    It's been a long while since this post was originally written. The landscape seems pretty similar still. Incubators are plentiful but most are struggling along. The best Accelerators are still the best, in large part because they accept the best companies from international deal flow.

    Tallwave is a next generation Accelerator. 3 years old, self-sustaining and profitable, Tallwave ( is built more like IdeaLab, but with a combination shared services and dedicated operator model, and real innovation around Lean Business and Design Thinking. We work with digital/web companies from all over the world, so stop in and check us out.

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  • Matteo Fabiano

    Mark, I do believe the distinction you make is one of substance, though I see people, entrepreneurs, Vc, angels and observers alike, use the words "accelerator", "incubator", "seed program" and their variations in a variety of meanings and sometime interchangeably. So it is in a way still a matter of semantics.

    However, I do also think that the more relevant distinction should be between two fundamentally different business models that incubacceleseederators implement: a) provide primarily real estate and services in exchange for cash, deferred fees or some form of equity or b) investing in the early product development in exchange for an equity stake.

    • Mark MacLeod

      Thanks Matteo. I have to say if all you have to offer is space, that's not a great value prop. Accelerators or incubators or whatever you want to call them are only as good as the mentors and their ability to attract follow on investors (with these two factors driving the best participants to join).

      • Matteo Fabiano

        Oh I agree, but I also know that renting desks by the hour with a sprinkle of networking and advice here and there can be a very profitable business and they call themselves incubators. They can be much better businesses than betting on future exits to subsidize an operation running at a loss. Also, many university or government incubators do in fact offer very little or zero mentoring and yet they call themselves incubators. So the difference is really if you are a service provider for a profit (or taxpayer funded) or an investor looking to make a return on a portfolio. The two strategies are at odds, I think. Yet they both tend to call themselves incubaccelerators 😉

  • davidcrow


    "Business incubators are programs designed to accelerate the successful development of entrepreneurial companies through an array of business support resources and services, developed and orchestrated by incubator management and offered both in the incubator and through its network of contacts." from

    The name means nothing. It has everything to do with the culture, the people, the activities. And the name is not enough to differentiate.

    • Mark MacLeod

      The wikipedia author may have had a clear distinction, but I see two very clear schools of thought nurturing vs. survival of the fittest.

      • davidcrow

        I think you're delusional. But I will concede the difference:

        accelerate: to cause faster or greater activity, development, progress, advancement

        incubate: to maintain under controlled conditions for the development of a reaction

        Incubation is about controlling the environment for development. Acceleration is about putting more fuel on the fire to burn faster.

        From an entrepreneurs perspective it's just semantics.

        • Newbie20

          I have to agree. This is possibly the only blog I've come across that insists on making a distinction between the two terms. As a early stage startuper in touch with other entrepreneurs, I can tell you that we (including some folks currently enrolled in YC, Techstars, etc) call them all "incubators".

  • Shanz

    Mark I regularly read your blog this difference is eye opening. Could you also possibly provide examples on what do you look in application of FounderFuel besides background of the founders?

    • Mark MacLeod

      It is alot about the founders. We encourage including video in an application so we can get a feel for you and your team. Apart from that we are looking for web, mobile apps or services that can get in market without requiring huge amounts of capital. We look for big opportunities, not another 'me too', but more than anything else it's about the team.

  • Debbie Landa

    Great article Mark, I completely agree. This is like the Olympics, you have to really push yourself if you want to win. As most people know, I'm a big fan of the tough love, tell them like it is approach. The good news it's easy to identify real entrepreneurs, they will do "whatever it takes" to win. Hopefully, between GrowLab and Founders Fuel we can help create the next generation of top entrepreneurs who can compete with anyone in the world! Congrats guys.

    • Mark MacLeod

      Thanks Debbie. I'm pretty sure you know how to dish out tough love! Very much looking forward to seeing the 1st cohort at Grow.

      Readers – here is another great accelerator program: