Co-working Spaces, Incubators and Accelerators –
Which One is Right for You?
Wondering what to do with that vacant space downtown? Want to spur job growth and boost your local economy? Maybe it’s time for a co-working space. Or an incubator. Perhaps even an accelerator. Not sure which one? Don’t worry, you’re not alone.
Today, many people lump co-working spaces, accelerators, and incubators into the same category—often using the terms interchangeably. The three, however, are quite different. When deciding which one is the best fit for your community, it is important to understand exactly how each one works and what each one is designed to accomplish.
In a nutshell, co-working spaces simply offer a place to work without the strategic counsel that typically accompanies an incubator or accelerator. Meanwhile, incubators do not always make investments, but instead offer short-term resources and a supportive network for like-minded entrepreneurs. On the other hand, accelerators take a long-term project view and take a small equity interest in each start-up.
From the street they all look the same—groups of smart, innovative people working and interacting in a relatively small space. On the inside, however, each one works to achieve a different goal.
Co-working Spaces: Success from Independence
Co-working is a style of work that involves a shared working environment, usually an office, and independent activity. Individuals are not typically employed by the same organization. Co-working enables a group of people who share values and are interested in the synergy that can occur when working with like-minded, talented people, in the same space. These spaces may range from commercial operators like Mojo co-working in Raleigh, which offers a variety of membership plans in exchange for monthly fees, to someone setting up a coffee maker, copier, and a router in an open space. For example, at Mojo, co-workers can choose from a variety of closed-door offices, or can reserve non-private desk access for a certain number of days per month. All co-workers have access to the same amenities, including conference room usage, printers and copiers, and kitchen and common area access. Co-working spaces have a flexible schedule. Here, companies are not committed to anyone but themselves. Co-workers are free to come and go as they please.
Co-working spaces are substantially cheaper than office space and offer cash-based rent. Prices typically range from $100-175 for monthly access to a desk in common areas, while private offices range from $400-700 per month. These options, of course, vary by market demand and available amenities. Here, innovators work alongside other professionals and organizations. As opposed to incubators and accelerators, co-working spaces provide more peer-to-peer mentorship as opposed to more formal programs. A good co-working space usually tends to attract both investors and mentors.
One of the best things about co-working with other start-ups is the ability to crowd source common problems, and promptly address issues that, in another environment, may take days or even weeks to solve.
Incubators: Success and Lasting Job Creation
Traditionally, industry is at the heart of an incubator’s focus. Incubators are designed to jumpstart the successful development of startups and fledgling companies by providing entrepreneurs with a variety of targeted resources and services. These typically include principal mentorship, resource networks, available space at low or no cost, and sometimes even funding. Nurturing the business through its start up phase, an incubator provides all the necessary tools and advice for the business to one day stand on its own feet. With a set schedule and formal networking opportunities, incubators offer a structured environment to transform your business. Unlike its counterparts, incubators require a commitment for the entirety of the program.
Depending on the design and focus of the incubator, the amount of capital, mentorship, and influence will vary. Incubators, unlike accelerators and co-working spaces, are usually free. But, some Incubators may still choose to charge a nominal monthly rent. Should an incubator choose to charge rent, the incubator will, in exchange, generally collect 5-15% of the company’s equity.
Accelerators: Success from Investment
Accelerators offer a very structured program designed to achieve a specific goal. They are program-based, time-specific systems that provide seed-like investment for an appropriate equity stake. Accelerators are where companies go when they have reached a stage where they can be helped more quickly with things such as innovation and launching products.
Accelerators, unlike incubators and co-working spaces, take a stake in each company’s success. Usually taking less equity than an incubator, accelerators take single-digit chunks of equity in externally developed ideas in return for small amounts of capital and mentorship. Although a company may be at an incubator for an extended time, accelerators often have a much shorter duration—typically only a few months. Generally, accelerators offer things like provisions of pre-seed investment, mentoring, and access to a network of potential investors. For example, most accelerators conclude with a “Demo-day” where the startup pitches its ideas to venture capitalists or other business professionals, who may choose to invest in the startup.
Bringing Business Innovation to your Community
It’s important to realize that no two incubators, accelerators, and co-working spaces are alike. There are millions of ways to structure each, and elements of one may be combined with elements of another to create a space that best suits your community’s needs. Rather than focusing on what label an operation falls under, a better way to categorize may be to look at the stage of business development each seeks to foster—for example, incubators target new ideas, accelerators target already-established businesses, and co-working spaces target independent workers.
As a first step, you should decide what your community needs. Just need a space where people can work on a schedule that fits their needs regardless of the nature of their business? Then a co-working space is best for you. Are you looking for long-term job creation? If so, you should consider an incubator or accelerator. Are you looking to cultivate up-and-coming business ideas within your community? Then perhaps an incubator is best for you. Do you want to help existing businesses launch their ideas on a larger scale? Then an accelerator is what you’re looking for.
Whether you want to create lasting jobs, or just have space where people can come and work as they please, now you’re better equipped to make the best decision for your community. And whichever you choose—remember—success, after all, is not about the idea, it’s about the implementation.
For more information, you can browse the following resources:
· Incubators
o http://www.ncincubation.org/
· Accelerators
o http://www.launchchapelhill.com/
· Co-working Spaces
o http://www.globalworkspace.org/
o http://www.mojocoworking.com/en
As always, please see our disclaimer.