What is a Business Incubator?

What is a Business Incubator?

What does a startup need to survive and thrive? Start-ups often need access to regular capital, a range of structural resources and professional mentoring in order to survive. Finding all of those tools in one place is incredibly difficult.

That’s why more and more startups are turning to business incubators for support.

What is a Business Incubator?

Business incubators are organizations that offer startups shared operation space. In doing so, entrepreneurs enjoy a collaborative work environment with invaluable mentoring and networking opportunities, funding support and shared equipment. In short, they offer fledgling young companies a warm, safe place to grow and prosper.

Incubators have been around for quite a while, but the concept only began to gain traction in the 1980s after an influx of higher education institutions decided to launch school-affiliated business incubators in order to offer students better employment prospects. Fast-forward a couple of decades, the sound reasoning behind the founding of those university incubators has led to the creation of thousands of new, diverse incubators across the globe.

Most of America’s top incubators are industry-specific. For example, the Houston Technology Center specializes in supporting energy start-ups, the Massachusetts Biomedical Initiatives in Worcester focuses on biotechnology and The Incubator in Chicago centers on technology companies.

That being said, there are plenty of non-industry-specific business incubators, too. Incubators like The Research Park at the University of Illinois and the MGE Innovation Center in Madison, Wisconsin are recognized as two of America’s top incubators because they place emphasis on what they’re able to offer tenants – rather than who it is they’re offering those resources to.

What Does a Business Incubator Offer?

Because the vast majority of startups lack the experience and networks required in order to grow, business incubators seek to offer entrepreneurs a range of essential resources and skills development programs.

Every business incubator is different, but the vast majority provide companies with marketing assistance, market research and analytics tools, access to accounting professionals, access to loan facilities or grant programs and legal advice. Bearing in mind that a huge number of incubators continue to enjoy affiliation with area colleges and universities, tenants can also typically expect some sort of access to higher education resources – perks normally include discounted access courses or library access.

Incubators also run loads of workshops on all the basics like business etiquette, management, presentations and pitches.

What is the Goal of a Business Incubator?

Simply put, the goal of a business incubator is help your startup succeed. Most incubators are non-profit organizations that select tenants on a non-competitive basis. They receive their funding from government or lottery grants, donations and rent you pay as a tenant. They provide both virtual and on-site tactical support if and when you need it, and they gauge success based upon the success of their tenants.

Incubators have plenty of hybrid cousins, like accelerators, that are far more intensive and profit-driven – but as cheesy as it may sound, incubators are genuinely there to help.

What are the Benefits of a Business Incubator?

Based on the typical offerings, the implications for a startup taking up residence at a business incubator are clear. Unrivalled access to funding, mentors, skills development programs and a collaborative work environment can make a world of difference to your success. There are less obvious benefits, though.

Unlike accelerators, incubators don’t put a time stamp on their support programs. That means you aren’t bullied into growing too quickly, and are free to scale and expand at your own pace. Likewise, business incubators don’t ask for equity in your company in return to access for resources. That means you reap all the benefits without having to hand over a piece of your company in the process.

What are the Drawbacks of a Business Incubator?

Incubators do have a couple of drawbacks, too. Because most incubators are non-profit organizations, they generally can’t offer you the sort of access to capital you might enjoy from an accelerator or wooing an angel investor.

Furthermore, business incubators aren’t quite as intensive as accelerators – which means the support you receive from an incubator will be a bit more ad hoc and spaced out. An incubator is a place your company will generally live and grow for years on end, and so if you want instant results, an incubator might not be for you.

Yet by and large, incubators are invaluable safe havens that the vast majority of start-ups should seek to benefit from. Incubators aren’t for everyone, but they’re definitely worth checking out. Remember to do your homework, though. Just like any other organization, no two incubators are alike, and some are undeniably better than others.

Business Incubator Concept Photo via Shutterstock

Nash Riggins Nash Riggins is a Staff Writer for Small Business Trends and an American journalist based in central Scotland. Nash covers industry studies, emerging trends and general business developments. His writing background includes The Huffington Post, World Finance and GuruFocus. His website is NashRiggins.com.

2 Reactions
  1. I think that these are essential as it helps ideas come into fruition. Businesses start with an idea anyway. If there are organizations that can support them, then their chance for success is higher.

  2. A collaborative organization that assists budding businesses succeed and flourish. Startup Incubators help entrepreneurs overcome shortcomings and challenges that a budding business often faces. They offer these startups with workspace, initial capital, coaching, and training.

    Startup Incubators operate with the sole aim to help entrepreneurs in growing the scale of their business. They are involved in every stage of a startup’s growth, from the conception stage to the revenue-generating, late stage. But their prime objective is focused on the early stages of the businesses as it is when the business often requires assistance from the outside.