Updated on 21/02/2023
A business incubator is an organisation dedicated to accelerating the development and progress of early-stage and startup businesses. They're frequently a decent way to get funding from angel capitalists, local governments, sustainable growth coalitions, and other sources.
However, not all company incubators are created equal, so if you have a unique business concept, look for the incubator that best fits your business model.
You know you need capital to grow your business, but have a limited amount of time and energy -- you want to make sure to choose the funding option that gives you access to the best connections and opportunities but aren’t sure where to start.
Most startups dream of being accepted into a world-class mentorship program and the chance to pitch big-name investors.
Business incubators are specially designed programs to help young startups innovate and grow. They usually provide workspaces, mentorship, education and access to investors for startups or sole entrepreneurs. These resources allow companies and ideas to take shape while operating at a lower cost during the early stages of business incubation. Incubators require an application process to join and usually require a commitment for a specific amount of time.
Many of them have access to finance or connections to alternative funding streams. There's access to accountants and attorneys, as well as invaluable coaching and networking opportunities by the incubator's employees and other entrepreneurs.
To sign up for a business incubator, you will need to apply and get accepted into an incubator program. Each business incubator, much like accelerators and pre-accelerators, has a unique application process. However, it's often less competitive than startup accelerators. The application process is usually comprised of a few steps:
If you're interested in participating in an incubation programme, be prepared to apply for a complete business plan. A selection committee will go at the plan and see whether you follow the admissions requirements. Incubators closely screen prospective entrepreneurs because they have little room, infrastructure, and funds, and they want to make sure they're nurturing the best.
For a growing startup, there are many advantages of using a company incubator. Here's what you'll get if you apply:
Although there are many advantages of using a business incubator, there are a few drawbacks to remember. Have the following in mind when you apply for programmes:
It should have a well-established network comprising of mentors, investors, and other relevant resources that can offer support to the businesses.
It should provide educational opportunities and resources that entrepreneurs can use to develop their business skills and gain knowledge on best practices.
It should have access to resources such as office space, technology, and other relevant infrastructure that can help entrepreneurs get their businesses off the ground.
Incubators are less structured than accelerators and aren't normally intended to accelerate development. Incubators, on the other hand, nurture and guide entrepreneurs over a longer period of time, usually a year.
Incubators vary from accelerators in that they usually meet a less linear timeline and can be customised to a company's specific needs. These programmes are similar to residencies, but they provide instructional programming and mentoring. As a result, the business incubation process can vary based on the needs of the organisation. In general, you should remain in an incubator for as long as you want.
|Early-stage founders often focused on a sector and are still recruiting their founding team
|Technology focused (Apps, Bots, Cloud based softwares
|Competitive application process from the local community
|Extremely competitive when it comes to selection, usually 1-3% applications are accepted
|The average duration is about 2 years
|Cohort based - 3-6 months
|Offers office space, admin support, access to partners for general business services
|Rapid validation of ideas with mentoring, support and guidance from the startup ecosystem
|Incubators generally take equity in the early stage, amount varies widely on the model and majority
|Some portion of equity taken depending on the business accelerator
Below is a diagrammatic summary of the differences between the both and areas where the both overlap and offer similarities.
If your business isn't yet ready for an acceleration programme, an incubator might be the solution. Incubators help startups solve technical and design issues when building the product, learn how to run lean, and build a successful team.
Incubators can also assist startups who have no prior experience running a venture-backed enterprise or are facing regulatory or organisational challenges relating to the business structure.
The majority of incubators are searching for successful pieces and startups that will scale up with time. Although several venture incubators concentrate on assisting you in developing a business model, some require applicants to submit a fully developed business plan.
Any incubators are affiliated with specific businesses or educational initiatives. They search for business ideas and growing businesses that share the same industry in these situations. A hospital-funded incubator, for example, would search for businesses in the medical or pharmacy industries. Software production and technical services are two popular incubator industries. Other services are looking for a broad audience.
Both incubators and accelerators seek out promising businesses, but incubators are more forgiving. A strong MVP and business plan aren't always needed, but a brilliant idea is.
The same can be said about a company's prospects for expansion. Since incubators are longer-term agreements with further space for learning and development when the initiative progresses, they are more accommodating to firms that haven't yet proven themselves.