Business incubators are programs aimed at helping to develop start-ups by providing them a wide range of services such as: resources, office spaces, access to various professionals from different domains (accountants, lawyers, marketing experts or business mentors). In some cases, incubators are willing to provide money in order to get the business started.
However, some may actually ask themselves what differentiates this type of starting a company. What are the advantages offered by this type of “investment” in comparison to traditional ones?
One major advantage is that business incubators stimulate startup businesses and help them grow and have a fully successful development. This type of development brings new services on the market and maintains the growth of the economy.
In the new market based economy, there have been radical changes in the way a business starts – technology incubators are institutions that facilitate collaborations which produce new high-tech systems on an extremely competitive market.
Even though the number of technology based startups has grown substantially during last years, entrepreneurs behind them have a lack of experience in managing and growing their business. Incubators have the role to assist business entrepreneurs with this long term process by making it more effective.
Business incubators can be private or public, for-profit or non-profit organizations. Incubators can charge a fee in exchange for the services that they offer while others require an equity share in the company.
Before committing to an incubator, you should take these things into account
- What type of services does the incubator provide?
- Can the incubator connect you to service providers, in case they can’t meet your needs?
- Do you meet the incubator’s selection criteria? Some are looking for clients with fully developed businesses whereas others require a less developed idea and offer business plan development assistance.
- How do they charge in exchange of their services? In case your startup needs a cash infusion in order to be brought on the market, then you may need to give up equity in your company.
Advantages offered by incubating a startup: access to different resources and entrepreneurial advice, networking, sharing ideas and legitimacy, which can attract investor’s interest.
Disadvantages: some incubators are more successful at achieving goals than others, companies that went through this process can provide you useful information regarding what they went through.
A startup company may not necessarily need collaborating with a business incubator, the big “challenge” is to weigh the advantages and disadvantages, measure the risks involved in giving up equity in exchange for services while maintaining a very clear image over the provided benefits. [Source: http://en.wikibooks.org/wiki/Getting_Started_as_an_Entrepreneur/Team/Incubators]
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