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Business incubators and start-up accelerators: Valuable assets or a waste of time and money?

By Tim Mazzarol
What are business incubators and start-up accelerators?
Business incubators are organisations that provide support to start-up and early stage businesses through the provision of facilities, mentoring and coaching, training, networking and seed capital financing. The first business incubator is thought to have been established in Batavia, New York in 1959 within an abandoned Massey Ferguson tractor factory.

Despite this early start the evolution of business incubators really took off during the 1980s. For example, in the United States the number of business incubators grew from a mere 12 in 1980, to around 1,100 by 2003.

This growth was driven by three interconnected forces. The first was local and state governments aiming to re-use abandoned manufacturing facilities as commercial spaces for start-up and small businesses. The second was the US National Science Foundation’s funding of university programs in entrepreneurship and innovation. Finally, it was driven by successful entrepreneurs who engaged with these incubators as mentors and investors.

At the international level the National Business Incubator Association (NBIA) is the main peak body with around 2,000 members across 60 countries. It represents business incubators, start-up accelerators, co-working and makerspace or hackerspace entities.

Start-up accelerators focus on moving technology-based firms rapidly from establishment to early stage venture funding and growth. They are an education and mentoring centric model with start-up teams working through as a cohort over several months against a structured training program. The program typically takes an equity stake in the venture and uses experienced entrepreneurs as mentors and coaches.

Co-working facilities offer physical space where nascent and novice entrepreneurs or individual freelancers can operate in a supportive environment and where they may potentially expand their networks. By comparison a makerspace or hackerspace offers a similar environment but is focused on specific technologies such as software or online digital.

The difference between a business incubator and a start-up accelerator is summarised in the following table provided by the US Small Business Administration (SBA). It can be seen that the primary differences between an incubator and an accelerator are the type of technology being commercialised, the duration of the time taken to provide the assistance and the type of investment model.
Talks About How to Have a Successful Business
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