Written by Amanda Maher
Business incubators like Y Combinator and accelerators like Tech Stars have shown just how integral seed money, mentorship and industry connections are in helping get startups to the next level. Incubators have helped launch hundreds of companies over the past decade – including Airbnb, Reddit and Dropbox – using this model.
As discussed in ICIC’s recent report Creating Inclusive High-Tech Incubators and Accelerators: Strategies to Increase Participation Rates of Women and Minority Entrepreneurs, there is no legal business structure defining incubators and accelerators; organizations self-identify as one or the other.
Both provide mentorship and resources targeted toward early-stage companies looking to grow their business. Workspace is typically offered to entrepreneurs for free or below market rate, and many of these spaces offer business development services like accounting, branding and intellectual property training. Incubators typically provide services for a less-defined period of time based on company needs and the organizations’ graduation policies, while accelerators take a cohort of companies through a process over a specific period of time, culminating in a pitch or demo event. In general, accelerators often make a financial investment in the company in exchange for equity, while incubators do not.
Some incubators and accelerators also provide access to highly specialized equipment, which would be cost-prohibitive for seed-stage business. We’re seeing many become more industry focused. We’ve profiled CropCircle Kitchen, La Cocina and the LA Cleantech Incubator (LACI) among others.
Despite the success of many incubators and accelerators, not all startup companies are ready for or interested in such rigorous programming. Sometimes, business owners just want to be part of a supportive community while they grow their companies.
For those looking for a third alternative, co-working is becoming a popular model.
For a small fee, co-working locations offer a shared environment for entrepreneurs, freelancers and professionals who work remotely. Some co-working locations have programming to encourage collaboration among users; others simply offer the basics: a table, WiFi connectivity and a shared conference room.
Co-working spaces offer entrepreneurs tremendous flexibility. Nobody expects you to show up at a certain time. There’s no coursework or business modeling you need to complete. Come and go at your leisure; you’re responsible to nobody but yourself.
Of course, co-working locations don’t usually offer the guidance and mentorship that accelerators and incubators provide. But for some entrepreneurs, that’s okay: set up shop in a co-working space and you’ll find yourself with like-minded entrepreneurs. It’s often this peer-to-peer learning that many startups find so valuable. Derek Neighbors, founder of co-working space Gangplank, told Venture Beat that after starting an incubator, he saw that the proximity of participating companies was having a positive impact. ““What we started to see was the formula of small companies working together actually helping put together the environment necessary for all of them to succeed,” he said.
Thoughtful interior design, such as big windows, open floor plans and communal kitchens, can help foster the “bump factor” that leads to informal exchange between users. Bouncing ideas off each other, collaborating on projects and making connections can turn good ideas into great ones.
Co-working spaces have proliferated – WeWork, for example, is now the largest leaseholder in Manhattan. This popularity has created a third spatial dimension for startup companies. Co-working spaces offer a low-cost and loosely structured environment while still providing the networking and collaborative atmosphere many entrepreneurs seek out. Many may very well land in an incubator or accelerator at some point in their business lifecycle.