Incubators vs Accelerators vs Venture Builders: Which is Best for Your Startup?

Incubators vs Accelerators vs Venture Builders: the basics 

Incubators

Incubators nurture startups from their inception, offering services like mentorship, networking opportunities and office spaces. Typically hosted by non-profit organizations, academic institutions, and government agencies, incubators provide a supportive environment for developing early-stage ideas.

Duration: Incubators offer longer-term support, spanning from a few months to several years, facilitating steady growth and development.
 

Accelerators

Accelerators also offer mentorship and networking services but with a focus on rapidly scaling startups that already have market traction, a team and a viable product. By preparing startups for accelerated growth and securing larger investments, accelerators often take equity stakes in the startups they support.

Duration: Accelerator programs are intensive and short-term, typically lasting 3-6 months and culminating in demo days where startups pitch to potential investors.
 

Venture Builders

Also known as startup studios, venture builders specialize in creating and developing new companies from scratch. They provide hands-on, long-term support and match internal ideas with suitable founders, engaging closely in the startup's growth and development. These companies usually have all the resources a startup needs in-house: their own funds, experts, supportive services and a network of other startups you’re building alongside with. Venture builders usually focus on a few startups compared to incubators or accelerators who accept a larger number of startups at once. 

Duration: Venture builders commit to long-term involvement with startups, spanning multiple growth phases over several years.

Pros and Cons: A Detailed Analysis

Pros and Cons of Incubators

Pros:
 

• Long-term support, access to resources, and comprehensive mentorship
• Flexible duration allowing for incremental growth
• Access to varied resources, including office space and administrative support

Cons:
 

• Slower growth progression compared to accelerators or venture builders
• Limited funding options
• Potential dependency on provided resources, obstructing independent operations in the future

Pros and Cons of Accelerators

Pros:
 

• Rapid growth scaling opportunities
• Access to capital, robust networks of investors and mentors
• Intense, focused support within a short timeframe

Cons:
 

• High pressure due to the program's short duration
• Competitive selection process
• Insufficient preparation time for some startups to transition to the next growth stage

Pros and Cons of Venture Builders

Pros:
 

• Deep involvement and substantial support from the venture builder
• Shared risk and long-term commitment
• Extensive resources for sustained growth and development
• Higher chance of success 

Cons:
 

• Retention of less equity in exchange for using significant resources
• Founders sometimes may need to give up decision-making authority
  
  
  
  
  
  Source: Next Big Thing 

Equity Stakes and Ownership Differences

The way equity stakes and ownership are managed varies significantly between incubators, accelerators, and venture builders. 

Incubators typically do not take equity stakes, focusing instead on providing resources and mentorship in exchange for a fee or through non-profit support. 

Accelerators, however, usually take an equity stake in the startups they support, ranging from 5% to 10%, in return for their intensive, short-term assistance and capital infusion. 

Venture builders, on the other hand, often require a more substantial equity stake, sometimes as high as 50% or more, due to their deep involvement, long-term commitment, and substantial resource investment. This higher equity share reflects the venture builder's significant role in developing the startup from the ground up and their ongoing operational support.

Examples of Successful Startups

Incubator Example: TransferWise (now Wise)


TransferWise, now rebranded as Wise, is a successful European fintech startup that emerged from Seedcamp, a well-known European incubator. Seedcamp provided TransferWise with early-stage mentorship, resources, and networking opportunities, enabling it to become a major player in the international money transfer industry.


Accelerator Example: Airbnb
 

Airbnb, the popular online marketplace for lodging and travel experiences, benefited from the support of the accelerator program at Y Combinator. During its time in the program, Airbnb received crucial mentorship, funding, and exposure to investors, which enabled it to scale rapidly and become a leading player in the hospitality industry.


Venture Builder Example: Zalando
 

Zalando, a leading European e-commerce company specializing in fashion, was developed by Rocket Internet, a prominent venture builder. Rocket Internet played a vital role in Zalando's creation, providing substantial operational support, funding, and strategic guidance, helping it grow from a startup to a major e-commerce platform.

Choosing the Right Support Model for Your Startup

When to Choose an Incubator


Ideal For: Early-stage startups requiring time and resources for idea development.



When to Choose an Accelerator


Ideal For: Startups with a successful business model ready for rapid growth and investment.

 

When to Choose a Venture Builder


Ideal For: Founders seeking to build a startup from the ground up with shared risk and substantial support.

 

Additional Funding and Support Options for Startups

Apart from structured programs, startups can explore diverse funding options, including:
 

• Angel Investors
   
• Venture Capital
   
• Crowdfunding
   
• Self-funding (Bootstrapping)
   
• Bank Loans and Credit
   

Conclusion

Understanding the landscape of startup support models is crucial for founders in making informed decisions aligned with their unique business requirements and long-term goals. Each support option—incubators, accelerators, and venture builders—offers distinct advantages and challenges. 

Entrepreneurs should carefully evaluate their startup's stage, needs, and vision to select the optimal path. Evaluation of critical factors such as exit rate and fund-raising success of previous participants can provide valuable insights in selecting the right support model for a startup's success.

If you’re considering starting your own company and you’re in the initial stages of your concept, contact us at bornfight.com to explore if the venture building process is right for you. 

Additional resources:
 

List of accelerators and incubators (per country)

Venture builders list