Startup Incubators and Accelerators: Are They Right for You?

By QuickBooks Canada Team

2 min read

Startup incubators and accelerators have exploded in popularity over the last decade. They offer startup founders resources, connections and guidance to build and grow their ideas in exchange for an equity stake.

An accelerator has a specific time frame when founders are under its umbrella and generate traction with their ideas. Accelerators tend to be rigorous programs, and the founders are expected to work long, intense hours. An accelerator connects founders with mentors, investors and customers to offer feedback.

In contrast, incubators are more open-ended and open to startups at various stages. Like accelerators, they offer guidance, resources and connections for businesses to grow, but they lack the structure and urgency of an accelerator.

There are application processes for accelerators and incubators. Incubators restrict themselves to specific niches, while accelerators are open to founders from all industries. Applications are judged based on the founders and the viability of their ideas.

Equity based Startup Financing

Accelerators and incubators are appropriate if you have an idea but no capital. They offer some sort of seed funding in exchange for equity to take care of startup costs and living expenses that will allow you to develop your product. This is ideal if you have an idea with large potential and a low cost of development.

After you have developed an early version of the product, they can help you find customers or users and investors so you can start earning revenue and make product improvements.

Of course, there is a possibility that the product does not gain traction. Even in this case, you will have the satisfaction of pursuing your idea. You will gain invaluable skills, connections and experiences that will be assets for future projects and positions.

One of the best parts of an accelerator or incubator is being surrounded by other like-minded people. These can turn into lifelong friendships and lead to future partnerships and employment opportunities.

Popular Accelerators and Incubators

Here is a list of some of the [most popular accelerators and incubators in Canada] (https://www.diygenius.com/creative-cities/vancouver-canada/finding-funding-sources-incubators-and-startup-accelerators-in-vancouver/).

Two of the largest and most well-known accelerators are YCombinator in Palo Alto, California, and TechStars in Boulder, Colorado. Both are open to applicants from Canada. Some famous startups to pass through these accelerators include DropBox, AirBnB, Reddit and Stripe. The application process is quite competitive, as entrepreneurs from all over the world apply, given their track records.

Accelerators and incubators are attracted to industries with the potential for rapid growth, such as software, biotechnology, and cloud or web-based technology, whether it is for-profit or nonprofit. However, they are not interested in industries like retail, food services or services, where growth is slower and fixed costs are higher. For founders with limited resources, it is an optimal solution, as they can develop their idea without distractions. Additionally, financing terms are less onerous, with no debt.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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