There is a fundamental difference between an Incubator and an Accelerator. Here is a video interview where Brad talks about the difference between Incubators and Accelerators.
An Incubator gives you real estate i.e table, chair, meeting room and power socket, internet connection, a coffee machine and/or a foosball table in exchange for rent. This has been the traditional model, and I believe the economics of this model does not work. You are trying to get rent from an Entrepreneur who is struggling to get his economic engine going. Some incubators actually take Equity + Rent for providing the above, that is just wrong!
To make a point, Iceland has a bunch of Incubators but no Accelerators! Most Seed/Angel investors when they invest in a Startup fund for all the above. I think that increases the risk to the Entrepreneur and the Investor. Think about it, every Entrepreneur needs to build a network, tinker with the Product-Market fit and build a business when operating in an environment of extreme uncertainty. This is what I believe increases the chance of failure. When I bring this topic up in Iceland, everyone comes to the defense of all the support that exists for Entrepreneurs, I don't doubt that or challenge that but the help is in the wrong direction. I want to bring attention to the successful Accelerators of TechStars and Y-Combinator. Lets look at the numbers:
TechStar (here is the link to live numbers from Crunchbase):
Companies selected through the program: 104
Failed: 8
Acquired: 8
Total Capital Raised by Companies: $126,392,305
Number of jobs created: 645
Timeframe: 5 years
Y-Combinator is by far the most successful Seed Funded Accelerator out of Silicon Valley. Paul Graham the founder has blogged about the results. He looks at the result differently. The total value of the companies that have gone through Y-Combinator according to Paul is $4.7 Billion.
I think Iceland needs an Accelerator and we are working on establishing one!
Related articles
- Incubators, Accelerators, and Your Startup...Oh My! (growdetroit.com)
- Student entrepreneurs frustrated by lack of funding (guardian.co.uk)
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