📱 VCs, Accelerators, Incubators - what's the difference?

Hi there - it’s Egemen 👋 Thanks for reading this week’s edition of Scalable.

This week, we are brought to you by Intercom - with a sweet 90% discount rate for startups - definitely check it out.

You’ve probably heard terms like venture capitals (VCs), accelerators, incubators, and maybe even venture studios thrown around a lot.

These might sound similar, but they’re actually quite different in what they offer and how they operate.

If this is the route you want to take, unless you are bootstrapping (🥾🥾 - had to do it), this week’s edition will help you clarify these - especially for those in the early days.

Here’s a snapshot of what’s on the menu today:

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Yet another big round for an AI startup by some top-notch investors.

Hebbia secures $130M in Series B Led By a16z - it’s the scale of the week!

Their revenue grew by 15x and they also 5x’ed their headcount in 1.5 years.

This round was led by Andreessen Horowitz and included participation from Index Ventures, Google Ventures and Peter Thiel.

The New York-based startup helps companies with data analysis.

Navigating the startup ecosystem can be overwhelming at first. especially with so many different types of support available - which is a good problem to have.

Terms like venture capitals (VCs), accelerators, incubators, and venture studios often get tossed around, but they each play unique roles.

👉 Let's break down what each of these does and how they can help your startup.

Venture capitals are the big fish in the investment world.

They provide significant funding to startups with high growth potential, usually in exchange for equity.

VCs typically stay involved for several years, aiming for high returns through IPOs or acquisitions. Throughout the journey, they offer strategic guidance and industry connections.

Whereas, accelerators, are like boot camps for startups. They’re intense, time-bound programs that provide mentorship, resources, and sometimes a bit of funding.

The goal here is to fast-track your growth and get you ready for the next big step, usually in a few months.

You’ll get lots of hands-on support and guidance, typically in a timeframe of 3-6 months where you join a cohort of other startups, which can be a great source of support and collaboration.

👉 I often times encounter the term incubator and accelerator being used interchangeably, but in essence, they are quite different from one another.

Incubators are more like nurturing environments for early-stage startups. They provide resources, mentorship, and sometimes physical space to help you grow at your own pace. There’s no fixed timeline, so it’s more flexible compared to accelerators.

Keep in mind, for incubators, there is no fixed program, support is adjusted as you grow. They can help connect you to potential investors, though they might not directly fund you. You might also get an office space, administrative support, and access to equipment.

Which, then, brings us to venture (or startup) studios. They are relatively new to the scene but are becoming increasingly popular.

I, myself, have been (still am) involved with a couple in my career and absolutely loved (also present tense 😬) here the time I got to work there.

They are companies that create startups internally. The studio generates ideas (or have a founder join and lead an idea), builds teams, and provides resources to launch new companies.

Studios offer extensive operational support, from marketing to HR to tech development, and so on. Often times, as things go well, they also provide funding and resources to get the company off the ground.

Different than accelerators and incubators, studios retain an equity stake in the startups they create for providing this facility.

Well, I guess this covers all of it, leaving you some goodies in the 🗺️ Method and 💡 Spotlight sections to complement these!

It’s one of those questions here there is no right or wrong answer.

Here’s a bite-sized method that you can apply depending on your startup's stage and needs:

Ready to scale and need significant funding?
👉 VCs might be your best bet. Make sure you got the rest covered.

Looking for structured, intensive mentorship and support?
👉 Consider an accelerator and join their programs, you’ll get a lot of value.

Need a nurturing environment to develop your idea at your own pace?
👉 An incubator could be ideal.

Have an entrepreneurial spirit but no (or a ) specific idea?
👉 Joining a venture studio might be the perfect fit.

In addition, here is a free deck that summarizes everything discussed in this week’s edition - it’s yours:

I cannot recommend the “Big Startup Studios Research” by Max Pog enough if you want to learn more about studios.

The first version of the report came out last year, and when I read it, it was clear that Max had put some serious research and effort into this for many months.

You should definitely check out his website and get the report to learn in-depth information about venture studios.

Max also leads and runs a large venture studio community as well - I suggest signing up on his website and learning more!

I was listening to the Equity Podcast yesterday when I heard this.

This has been something I have been seeing left and right in every major news site since the beginning of the year - and been a topic previously covered in one of the earlier editions of Scalable as well.

Apparently, data shows that rather than focusing solely on promising ideas, seed VCs are now prioritizing startups that have tangible, revenue-generating products.

This change aims to reduce investment risks and ensure quicker returns, reflecting a more cautious approach

This “shift” - it’s a matter of perspective, of course. It’s easy to label as a risk mitigation approach or it might as well be an indicator for how the risk appetite of global economy changes.

I do listen to the Equity Podcast from time to time - definitely a recommendation if that’s your thing.