Every sunrise, new launches and entrepreneurship is now a path followed by many worldwide. Entrepreneurs have to set themselves apart in the competitive field. Successful entrepreneurs acknowledge the need to get support during the launch of their startups. Successful business-owners advice on seeking help in business incubators.
Incubators offer programs to match your startup ideas and refine them to the best probable levels. The programs cover aspects like recruiting, investors, engineering, technology advice, automation platforms and many more.
In our last guide, we discussed how to manage projects in startup companies. In today’s guide, we switch gears. We shall be looking at business incubation. Startups are turning to business incubators to get help with scaling their enterprises. To understand what a business incubator entails, and how you as a founder, can benefit from programs offered, have a read of this guide.
What Is A Business Incubator for Startups?
Many a time, business incubators are confused with business accelerators. From the words – incubator and accelerator, you can understand that incubating means helping something that is at its early stages to develop while accelerating means the boosting of something, which is already established to develop further.
What is the Difference Between Incubators and Accelerators?
In theory, a startup will seek the help of business incubators. Once a startup gains traction, it switches to an accelerator. The main disparities between incubators and accelerators are explained below.
1. What Business Incubators do
The major function of a business incubator is to help founders and startups come up with business ideas. Incubators offer flexible timeframes, which end when your startup launches its product, service, or gets an investor.
While several incubators choose candidates via rigorous procedures, others pick startups referred by teams of advisors or within their network. There exist other incubators that make choices hanging on certain parameters. For instance, Monarq Incubator only works with female-founded companies.
Geographic location is yet another vertical that incubators use to select startups. This means that the startups receiving support have to move to the incubators’ location for the entire period of support.
At the incubators’ space, founders do network with fellow entrepreneurs, discussing profitable products, refining business plans, and hacking ideas. At this stage vetting of intellectual property takes place too. The program culminates when the entrepreneur pitches their ideas to an investors’ panel.
Aspects to Consider when applying for an incubator’s program
i. Does the Business Incubator Have Industry Experts for Mentors?
You want to join a business incubator program with tailor-made and experienced guidance. You want advice for your business idea from industry pioneers. This means your mentor should have more than 30 years’ experience with helping startups get wings.
ii. Does Your Business Plan Need Funding?
The go-to program to seek business funding is an accelerator. An incubator helps with defining your business model and ready you with mentorship. After membership, you can pitch your spot-on business idea to investors.
2. Business Accelerator Explained
Business accelerators set themselves apart by expediting the growth of established enterprises. As a need, a company must have a Minimal Viable Product (MVP). Accelerators entail a shorter timeframe like three months. It is during this period that companies benefit from funding, mentorship programs and networking.
Before joining an accelerator, you want to consider the following:
- Is it the apt moment to join an accelerator? The right time to seek an accelerator is after finding a co-founder and full-time workers.
- At what pace are you growing? You fit to join an accelerator if your company is growing fast.
- Are you willing to move? For the period you are getting support, you have to move to the accelerator’s community. But this varies from one business accelerator to another.
Here are key differences between incubators and accelerators
|Feature||Business Incubator||Business Accelerator|
|Requirements to join||A business plan or idea||Specific customer profiles, a solid team, MVP and existing business model|
|Application process||Restrictions depend on the industry and community. A fairly competitive process||No restrictions (open to all startups) An extremely competitive application process|
|Timeframe||Flexible timeframes like 2 years||Fixed and shorter timeframes like 2 – 5 months|
|Purpose||To kick-start new startups||Work with established companies to speed up their development|
|Examples of support offered||Business planning Legal support Administrative support Product design and development Office space prototyping||Networking Seed funding Mentorship from experienced professionals|
|Funding sources||Economic development organizations universities||Private sponsors; they ask for equity and offer capital in return|
How Startup Incubators Work
For a business incubator to accept your startup in their programs there are specific requisites and processes. For example, application, screening stage, and acceptance.
Different incubators have different standards for screening candidates. However, many incubators ask for a workable business idea and a detailed business plan. Wondering how incubators work? The points below highlight how to join your dream incubator.
1. Geographical and Vertical: What Options Do You Have?
You are lost for options owing to the tons of business incubators willing to take you with open hands. Before starting drafting your application, do your homework well; find out about incubators in your region. This way you can tell which incubator in your area matches your business needs.
Read reviews of your top-ranked incubators online. If possible, also talk to entrepreneurs who have succeeded after getting help from specific incubators. Don’t forget to inquire about the experience from startups that dropped out midway. From your findings rank the incubators to find the best fit.
Different Models of Business Incubators
Different incubators zero in on different types of startups. For instance, when choosing fin-tech startups, there are geographic locations – startups in California or vertical markets – companies in the energy markets.
Classification of incubator models by the National Business Incubation Association (NBIA) include:
- Nonprofit development organizations
- For-profit property development schemes
- Venture capital companies
- Academic institutes
- An amalgamation of the above
Startups benefit from incubator models through shared learning and collaborations. There is quick access to credible information from industry experts, executives, fellow business founders, and mentors.
2. What Are the Admission Criteria?
You want to know what criteria different incubators use to pick startups in your industry. Give the incubator a call and have the detailed criteria explained. Some incubators need you to have reached certain milestones. Some incubators follow criteria like the number of employees, present revenue, background, capital, product fit, and entrepreneurial experience. Other business incubators require contractual commitments from the picked startups. Having said that, you must review the application in depth to comprehend all the requisites to join your preferred incubator.
3. Do You Have A Professional Business Plan?
While many business incubators don’t ask for a business plan at the application stage, it is crucial to understand your objectives firsthand. Also, a business plan helps you judge if your potential incubator matches your startup goal.
A basic business goes a long way to set your startup apart from startups with no definite plans. For example, your plan should include your brand name, target market, products and/ or services, team build, value proposition, competitive advantage, definite market strategy and, a year business projection.
4. Get Ready for Screening by The Startup Committee
Most business incubators accept applications from startups that entail the basic requisites at the initial stages. Other incubators request a clip short explaining the overview of your business model, goals and visions of your startup.
After passing the initial stage, you meet up with the incubator executives to discuss at length your plans, goals, weaknesses and/ or strengths. The screening committee may ask for a pitch or interview. Also, these interviews can be a series of different meetings.
How Well Does Your Startup Fit for A Position at A Business Incubator?
You want to look for an incubator that has proven track record churning success businesses. Seek a business incubator that entails a clear selection procedure and is in search of startups in your industry.
Good incubators offer good experts in your industry, free and fast internet connectivity, comfy cooking spaces, and any other goodies.
Note that not all startups are a good fit for business incubators. For instance, if you are in the lifestyle business, own expansive office space or looking to curate a unique company culture, you might not join an incubator.
The market is full of incubators who ask startups to offer them equity stakes. Thus, you shouldn’t join the incubator if special services are not necessary.
Ways Business Incubators Can Help Your Startup
Founders and startups get a lot of benefits from joining business incubators. Some of the benefits are:
1. Access to Industry Experts And/ Or Mentors
Business incubators offer priceless access to experienced professionals that otherwise would be hard for you to access. Business incubators focus on specific industries. For instance, some incubators look for startups in the food industry while others support fin-tech startups.
Most incubators offer support to startups and have a stake in the company in return. Other incubators request for a fixed payment. However, the fee for support is below industry standards.
Experience mentors help you avoid serious mistakes when scaling your business. That said, incubators hire mentors with wide-ranging experience with startups. These mentors help with helping businesses with various processes in business, planning and apt decision making.
2. Discounts on Software
As part of support, incubators offer different business software to startups. This software helps you scale your business and incubators provide them at lower costs. This is especially beneficial to allow portfolio startups to get down to business.
3. Access to Specialized Equipment
In their infancy, most startups need specialized equipment to run. Accessing pricey simulation software and equipment is vital. To help in scaling the startups, incubators invest in these on-demand programs. Examples of equipment include software development tabs, 3D printers, modelling software, and prototyping equipment.
4. Low-priced Office Spaces
Several startups lack physical premises due to high renting fees. To solve this issue, incubators provide companies with office spaces at no cost or below-average rates. Here, founders access professional working space for their workers to work in without renting. This is especially helpful as many startups are not sure of the time it takes to scale production.
5. Group Education and Training
Startups benefit a lot from several business training programs they undergo in incubators. Trainings cover an array of areas including how to deal with difficulties like:
- Product shipping
- Handling startup documents
- Procedures used in business marketing
- Establishment of sales or quality culture
- Legal advice
- Solving challenges in business
- Handling IP issues
- Incorporation terms
6. Working with Diverse Minds
Intangibles are among the greatest characteristics of business incubators. Having the chance to work with people from various walks of life, with diverse ideas, but one goal is a privilege you cannot ignore. You get to network with prospects and successful persons at no cost.
7. Shared Business Services
Besides gaining free access to business software, your startup benefits a lot from services offered by business incubators. Some of these services that help scale your company are manufacturing, marketing, banking, and accounting.
8. Connecting Startups to Investors
Startups have to prove to investors that their business ideas are viable and profitable in the long-run. Standalone startups spend many months working on finding sources. Other hire intermediaries who charge exaggerated prices.
Successful incubators help save lots of resources like time and money since they are in contact with angel investors. Also, incubators are connected to venture capitalists and huge networks of investment companies.
Your incubator can introduce you to connections looking to fund startups in your industry. Another benefit of being under the arms of an incubator is that you get immense help with crafting pitches that convert. Thus, you stand a better chance of winning over hard-to-impress investors.
Ideal Startup Incubators for Your Startup
There are so many incubators out there! What you need to do is identify the one which deems the best fit. The National Business Incubation Association created a search engine that shows various incubators. Another resourceful directory of handy incubators is the State Business Incubation Associations. Another source is the state and local economic development departments.
Examples of business incubators with proven track-record include:
Parallel 18 is a well-known and impactful business incubator. Portfolio startups seeking support must move to their office spaces located in Puerto Rico for about six months. The beneficiaries must prove that they are socially accountable before acceptance.
Another business incubator located in the Pacific Northwest. Many startups around this geographical location have benefited much. Some businesses are highflying and expanding to other parts of the world.
Dreamlt Ventures have specific verticals. The renowned business incubator mainly accepts applications from startups in urban-tech, secure-tech, and health-tech genres. To join the incubator, a startup must have revenue.
Does your startup use technology to offer solutions to huge global markets? If so, Seedcamp, located in Europe, is the go-to business incubator.
Known for its diversity worldwide, 500 Startups offer its support to startups that are neglect on racial grounds. These startups occupy 45% of the incubator’s space. Also, there are scholarships offered, but only for underrepresented investors.
Alchemist is your ideal business incubator if your major revenue source is enterprise. This incubator provides businesses with funding, industry-expert advice and access to marquee clients.
You should choose Amplify LA if you are looking to grow your startup into a successful business empire. However, the business incubator offers support to founders in the technology genre. Note that Amplify is an early investor.
One of the most coveted business incubators, Y Combinator, sets aside $120,000 to invest in several startups. After selection, the startups shift to the famous Silicon Valley for around three months. During the mentorship period, startups benefit from lots of impactful programs and support.
TechStars provides startups with an intensive three-month mentorship program. During the program, the benefiting companies receive training like rapid restatement and preparing for fundraising.
This business incubator helps startups land clients, helps founders create a good rapport, and build profitable products. You can also apply for funding from the same incubator too.
Located in Chicago, Excelerate Labs offer support in areas like demo day preparation, financing, business acceleration and mentor engagement.
This incubator is located in Texas and connects business with employees, customers, mentors and investors.
Every startup is unique even if all shared a common goal – scaling their businesses. This is similar to incubators. No two incubators are similar yet the help startups with one thing: pushing startups from a simple business idea to a successful and impactful empire.
This write-up is the definitive guide to help you how business incubators work and how your infant business can benefit from programs offered. Do your homework well to identify your most valuable business incubator.
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