Is a Business Incubator Right for Your Business?

             If you are looking for a way to get your business off the ground, then you might be interested in an idea known as a business incubator.

             A business incubator is typically an organization that provides support and resources to new companies, helping them successfully launch their products or services. Sometimes this assistance comes in the form of money, office space, mentoring, or other ideas and assistance.   

Some commonly accepted definitions for “business incubation” include:  

The action of fostering the growth of startup companies through shared space and/or financial support

An organization that assists early-stage companies in creating and maintaining successful operations

A firm that takes an equity position in exchange for its services

So, an incubator is defined as a group that provides support in launching your business. You may be wondering exactly what kind of support you can expect when working with a business incubator. Let’s take a look at some of the things they typically provide in regards to starting your own business:

Financial Assistance- Many incubators will offer direct financial assistance in the form of loans or grants (if you are asking for money it should be fairly obvious). Some groups offer indirect financial assistance, like office space or equipment. Mentoring- A lot of organizations understand that there is more to running a successful business than just having an idea and available cash; which is why many help aspiring entrepreneurs by offering mentoring programs. This can include anything from weekly meetings with other entrepreneurs or one-on-one time with experts in the specific industry your business falls under. Office Space- Some incubators will actually provide office space for you to work out of, while others may only offer services like administrative support and meeting facilities. Many times this office space comes at a reduced rate because it is subsidized by the organization itself.

             Obviously, not all organizations that claim to be business incubators are created equally; but there are some key things you should look for before deciding whether or not they’re right for your needs:       

Select an Incubator That Fits Your Needs- There are lots of different types of incubators out there (from university programs, private organizations, government agencies, etc.) so you want to look around and find an incubator that is right for your business. Make sure you understand what they can offer you, what kind of support they provide (mentoring, networking opportunities), and the length of their contract (some incubators require a commitment of 1-3 years). Select Bigger Organizations Over Smaller Ones- The first thing you always need to keep in mind when finding a business incubator is that bigger organizations are better. This is because bigger companies have offices in multiple locations (so if one closes down there’s likely another nearby) and also because larger organizations generally have more resources on hand than new startups.

If these are things that appeal to you then it would probably make sense to take a closer look at business incubators. However, you should also be aware of some of the potential drawbacks that come with working with an incubator:

You Need to be Prepared to Share Ownership- Since most incubators are looking for equity in exchange for their services it is important that your business is prepared for this arrangement. This means having a clear executive leadership structure, including designated roles and responsibilities, etc.   

             The next question you probably have is how much money can I expect to get in exchange for equity in my company? Well, there isn’t one answer to this question since each organization will determine their own rates (if they even offer financial assistance). Plus, it really depends on your unique situation and what you’re looking for. Some incubators offer only a small amount of financial assistance in exchange for equity, while others might offer more to attract high-quality startups. Again, it’s important that your business is prepared before signing any contracts with an organization because coming up short on funds has the potential to torpedo your entire business (if you don’t have enough money to get started or sustain operations nobody will be willing to invest in your company).

Conclusion- While starting a business can be exciting and rewarding it also can be incredibly challenging; which is why many entrepreneurs seek out the services of a business incubator. The best thing about these types of organizations is that they provide lots of valuable resources to help launch and grow your new venture, but you will have to give up a bit of equity in your company in order to get them. If you are willing to make this sacrifice then business incubators can be an excellent choice for entrepreneurs looking to launch their company in today’s competitive market.

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