Do you have a business concept but need support getting off the ground? Are you a cash-strapped start-up wanting to scale? In this week’s blog we break down incubators vs accelerators and weight up various funding avenues - to really catapult a concept to success.
Incubators vs accelerators
These terms are bandied around interchangeably, but there’s a clear difference. While most start-ups could benefit from an incubator, fewer are fit for an accelerator. Incubators support start-ups still in concept stage where there is no clear business model or direction. Incubators focus on the longevity of a start-up, which is located in a central workspace alongside other start-up concepts.
Accelerators conversely focus on accelerating the growth of a company in exchange for small amounts of capital and mentorship. The focus is scaling, quickly, and there's less equity required and less time spent – typically three to four months. It’s basically intended to jump-start the business and should boost the chances of raising venture capital after.
If accelerators are greenhouses for businesses to create the optimal conditions, incubators put the right seed in the right soil to sprout a concept to fully-fledged business.
5 types of start-up funding
Ready to source funding and really capapault your business? Choosing the most suitable funding option will increase your chances of attracting the right investors.
Angel investors are wealthy individuals who invest personal funds into start-up. There's no rigid formula for an angel investor, but they might want a percentage of return or a piece of the company. Angel investment is a more informal way to source capital since it's based on instinct and interest.
Personal investors - these are basically family, friends or close aquaintences who know and like you. Ensure you still have a contract. Makeup empire Napoleon Perdis started from a $30,000 family loan.
Crowdfunding raises monetary contributions online before the concept launches. It’s also a way test your idea based off its capital-raising success. If it sinks at crowdfunding stage, it might be a flash in the pan or won’t take off in the market at all. The Pebble smartweatch is the most successful crowdfunding start-up, raising $10.2 million in 37 days. Read more about crowdfunding here.
All of these are also referred to as seed funding.
Boostrap - cutting corners and building up a company from personal savings can also build traction without outside interference. Spanx started from $5,000 of personal savings while Nourished Life which today turns $20 million a year, started humbly from $100 and no investment. Girlboss is another brand that bootstrapped it's way to success without even a credit card.
Venture Capital - this type of investor wants to see return straight up and will walk away from too much risk. They're likely to invest more money but want to be placed in a decision-making position. There are stages within venture capital from seed to early and growth.
Bartercard - sourcing funding from the bank at start-up isn't always easy or accessible. Luckily Bartercard offers a T$5,000 interest-free line of credit which can be extended up to $25,000 to cover the cost of start-up, renovation or business expansion. Call Bartercard today on 1300 227 837 or speak to your trade co-ordinator.