How to Choose a Business Incubator





Where to Find an Incubator

Below is a sampling of notable incubators, to give you an idea of the range of programs currently available.  A comprehensive list of startup business incubators can be found at the NBIA’s incubator search page.

YCombinator (@YCombinator)

What it is:  YCombinator, one of the earliest startup incubators for Web businesses, has become a poster child for successful outcomes. It has funded startups like Dropbox, Wufoo and Bump.

What’s involved: During the three-month program, participants are required to relocate to the Bay Area to attend weekly dinners, where mentors and entrepreneurs speak. Participants also have office hours with the advisors from the program. On Demo Day, participants demonstrate their products or services to investors.

Participants typically receive $11,000 plus $3,000 per founder.

What you’ll give up: Participants give YCombinator two to 10% in company equity.

Who’s Eligible: Recently, YCombinator added a new track for founders who don’t yet have an idea for their business. While the site doesn’t specify it funds tech only, its focus is heavily in the tech arena. Apply here.

What to Know:  YCombinator graduates are sought after by investors. Just looking at the list of successful companies who have come out of the program means if you are accepted, you are in good company.

500 Startups (@500)

What it is: 500 Startups provides early-stage startups with funding, a startup accelerator program, and micro-fund options. There’s more focus on online distribution techniques, user experience and customer acquisition than at some incubators.

What’s involved: Participants have access to the community of more than 120 mentors, as well as education sessions, special events and dedicated workspace. The 3-6 month accelerator is held in Mountain View, CA. Founders receive $25-100,000 in funding.

What you’ll give up: 500 Startups typically takes around 5% of your startup’s equity.

Who’s Eligible: 500 Startups looks for Internet-based businesses.

What to Know: 500 Startups makes applying more difficult than filling out a form. Founder Dave McClure says getting a referral from a past participant is one way, or finding a domain expert to vouch for you.

The Founder Institute (@Founding)

What it is: The Founder Institute’s goal is to “Globalize Silicon Valley” by launching 1,000 technology companies annually in the 30 global cities where it offers programs.

What’s involved: This four-month program includes weekly meetup sessions and assignments. Participants hear mentors speak on topics relating to funding, legal and marketing, and learn to craft their ideas and pitches for investors. See sample curriculum.

What you’ll give up: Each Graduate contributes 3.5% of his company equity in warrants to a 10-year Bonus Pool.

Who’s Eligible: Even if you don’t yet have an idea, but know you want to start a company, you can apply. Startups at different stages are eligible as well. Apply to a chapter in your city.

What to Know: Although The Founder Institute claims that you don’t have to quit your day job to participate, the majority of the graduates don’t have a 40-hour workweek in addition to their startup. The level of commitment is such that juggling the two becomes very difficult. The Founder Institute admits 50% of applicants, and out of those, only about 30% graduate.

TechStars (@TechStars)   

What it is: TechStars considers itself a “startup accelerator,” and has programs in Boston, Boulder, New York City, Seattle, and San Antonio. Graduates average over $1 million in outside venture capital raised after participating in the program.

What’s involved: Founders participate in a three-month program, and receive $18,000 in cash, as well as a $100,000 convertible note from the network of VC firms and angel investors who fund the program. Mentors like Dennis Crowley of Foursquare speak to the founders, who are encouraged — but not required — to participate in as many activities as possible.

What you’ll give up: TechStars’ site doesn’t specify the equity it requires from participants.

Who’s Eligible: Startup founders from all stages are encouraged to apply. Emphasis is in web-based tech services.

What to Know: While TechStars says it doesn’t discriminate against single-founder companies, it seems to favor co-founded companies, simply because you have a better balance of skills between more than one founder.

The Brandery (@Brandery)

What it is: This consumer marketing accelerator is based in Cincinnati, Ohio, and is a launch partner of TechStars Network and StartUp America. The 14-week program emphasizes research, consumer marketing and brand building.

What’s involved: Participants relocate to Cincinnati for the 14 weeks, and receive $20,000 in seed funding. The mentoring centers around branding, as you would guess from the name.

What you’ll give up: The Brandery’s site doesn’t specify the equity it requires from participants.

Who’s Eligible: The Brandery assists high growth B2C technology companies in Consumer Internet, Marketing SaaS, Consumer Services and Products, and Media and Entertainment with a total annual addressable market of at least $250 million.

What to Know: While no incubator can guarantee funding, The Brandery boasts that 75% of its graduates either receive funding or become profitable after the program.

Greenstart (@greenstart)

What it is: Greenstart is a great example of a niche incubator, as it focuses on early stage cleantech startups. The program, based in San Francisco, aims to help 250 startups in the next ten years.

What’s involved: Each participant is assigned two mentors that provide advice throughout the 12 week program. Founders receive $15,000 in cash, and a $100,000 convertible note, as well as guidance in legal issues, product and service design and media training.

What you’ll give up: Greenstart’s site doesn’t specify the equity it requires from participants.

Who’s Eligible: Greenstart looks at all areas of cleantech, but especially likes Smart Grid, Smart/Efficient Buildings, Consumer Behavior/Services, and Electric Transportation. Apply here.

What to Know: Focusing on a more niche-specific incubator will ultimately be more beneficial than a catchall one, as you’ll get cleantech and environmental contacts as a result.

Virtual Incubators

If attending a physical incubation facility in your local community or relocating to one isn’t possible, you may be tempted to look for assistance and tools online to help you instead. “Virtual incubators” are more of a theoretical concept than a reality today.  There aren’t many virtual incubators where you can participate 100% online, but sites like JourneyPage can help you set goals and action items for your startup.

Startup America and Microsoft’s BizSpark are other accelerator-type initiatives that may not call themselves virtual incubators but use the Web to offer some elements akin to incubator support.

Virtual incubators tend to simply be online portals of information, and may not give you the same results that having face-to-face meetings with experienced entrepreneurs and mentors can bring. Nor do they give access to all the hard fiscal benefits of some incubators, such as facilities.  Still, if it’s your only option, using these tools can help keep your business on goal — if you are motivated to use them.

Reap the Rewards

As a small business owner and startup founder, you owe it to yourself and your business to do everything possible to help it succeed. Incubators can give you much needed financial assistance, keep your expenses down, and put you on the path to profitability, investment and/or exit.  They help you with industry contacts you may otherwise have found difficult or impossible to make. You get out what you put into an incubator, and just like the blood, sweat and tears you pour into your business, you’ll reap the rewards in the long run if you are committed.

Business Incubator Photo via Shutterstock

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Susan Payton Susan Payton is the Communications Manager for the Small Business Trends Awards programs. She is the President of Egg Marketing & Communications, an Internet marketing firm specializing in content marketing, social media management and press releases. She is also the Founder of How to Create a Press Release, a free resource for business owners who want to generate their own PR.

7 Reactions
  1. That’s a great list of potential incubators and a very extensive explanation of the requirements and expectations. It’s almost overwhelming to think of how much effort it takes just to get it, let alone succeed once you’re there.

  2. It would be great to see an article focused on L.A. incubators. There’s a bunch of them now and “silicon beach” is exploding!

  3. Love the article, just hate that he’s using “i.e.” incorrectly.

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