What is a Hybrid Incubator/Accelerator?

Obtaining funding, or raising capital, is among the most important steps in the life of a startup. If your startup does not have funding to build a team, conduct market research, and create a minimum viable product, you are not likely to be able to meet your ultimate business goals. But programs differ enormously in what they give you and what they take. Before you apply, it’s worth knowing which is which—and what you’ll be signing if you get in. Our startup attorneys have years of experience assisting entrepreneurs with various forms of financing for their startups.

Both startup incubators and startup accelerators are often attractive options for startup founders to either obtain access to potential funding networks or funding itself, as well as other forms of valuable support. The two terms — incubator and accelerator — get used interchangeably, and the line between them is blurrier than the labels suggest. Many programs now sit somewhere in the middle, in what gets called a hybrid incubator/accelerator. What is this hybrid model, and how does it work? Our startup attorneys can explain in more detail below, and we are here to speak with you today about your options and plans as you move forward with your company.

Startup Incubators Versus Accelerators

Start with the two ends of the spectrum.

Both incubators and accelerators are designed to provide support to founders and entrepreneurs in the relatively early stages of their startups. Yet the stages tend to be different for an incubator versus an accelerator. Typically, incubators are intended for founders who are just getting started and still developing ideas and building teams. Incubators are thus designed to offer an environment of support where founders get access to mentors, potential introductions to seed investors, and related forms of support, which are typically over a long-term basis. Most incubators don’t write checks, though some provide small stipends, credits, or free space and services. Accelerators also provide these forms of mentorship and support, but for a limited and relatively short defined period, and they are designed for startups that already have a minimum viable product and are further along. Many accelerators also invest, though plenty—especially university, corporate, and government programs—provide no cash at all.

How Does the Hybrid Model Work?

A hybrid incubator/accelerator is what it sounds like — a program that borrows from both. According to JP Morgan, these “hybrids,” as they are called, “can offer a blend of long-term support that is typically of incubators with the intensive short-term format often associated with accelerators,” and they tend to be more flexible than accelerators when it comes to the specific needs of the startup.

Here’s the part the brochures skip. Whatever the program calls itself, if it gives you money it is an investor, and acceptance is a financing event. You’ll sign real documents—often a SAFE or a note, sometimes a priced round on the program’s standard form—and you’ll take dilution before your seed round ever starts. The terms travel with you: pro-rata rights that let the program keep buying into later rounds, information rights, occasionally a board or advisor seat, and most-favored-nation provisions that reprice the program’s investment if you later give someone else a better deal.

None of that is a reason to say no. A good program earns its equity several times over. But know the number before you accept, not after, and read the documents the way you’d read a term sheet from any other investor.

If you’re weighing a program and want a read on the paperwork before you sign, we can walk through it with you.

Find the Program That Matches Where You Are

For any startup founder, obtaining mentorship, connections to funding networks, and capital are all crucial components of the process to rapidly grow a startup. One of the startup attorneys at Triumph Law can speak with you today to learn more about your company and your goals for growth, and we can help you to determine the best options to allow you to reach those goals. Contact our firm today to find out more about how we can assist you with all facets of your startup, from entity formation to an initial public offering.

Source:

jpmorgan.com/insights/banking/commercial-banking/incubator-vs-accelerator-which-is-best-for-your-startup