So, you’re thinking of launching a startup. You have a great idea that you believe will change the world. Or maybe your business idea won’t necessarily change the world but will change your life — propelling you from your boring old 9-to-5 to successful entrepreneur. Unfortunately, it takes a lot of time, work, and capital to turn your idea into a thriving business. If you’re new to entrepreneurship, finding the resources you need to help ensure your success can be a challenge. If you’re like many aspiring entrepreneurs, you may not even know where to get started!
Do a quick internet search for startup resources, and it’s easy to get overwhelmed. Angel investors, P2P lenders, venture capitalists … it all gets so confusing. While these are certainly great resources to consider, this post is going to focus on one startup resource in particular: Business incubators.
While the words might sound confusing or even intimidating, a business incubator could potentially be one of the greatest resources to help you launch your startup. While not for everyone, it’s important to understand what a business incubator does and how it can help your startup take off with an abundance of resources, from financing to shared office space. Whether business incubators are totally new to you or you’re actively weighing out your options, you’re in the right place.
Keep reading to learn more about business incubators, how they work, and how to determine if this is the right financial resource for your startup.
A Business Incubator Can Help You Launch Your Startup Idea
There are roughly over 7,000 business incubators across the United States, per the International Business Innovation Association. These incubators have helped launch countless startups across the nation. But what exactly is a business incubator?
The InBIA defines an incubator as “a business support process that accelerates the successful development of startup and fledgling companies by providing entrepreneurs with an array of targeted resources and services.” Still scratching your head? Don’t worry — the concept is actually quite simple.
Think of the term “incubator.” In a hospital, an incubator is a device used to help support the health and growth of a baby born with an illness or that was premature. The incubator provides ideal conditions that can help the child thrive despite these challenges. On a farm, incubators are used to create the perfect conditions for successfully hatching eggs despite environmental challenges.
A business incubator works in much the same way. While it isn’t a physical device, the concept of a business incubator itself is similar to other types of incubators: To provide resources and ideal conditions for launching and growing a startup. An incubator helps the business navigate common challenges (for example, a lack of funding or a need for networking) in order to give the business a higher chance for success. We’ll further explore what incubators specifically offer and how these benefit small business owners a little later in this post.
A number of startups can benefit from business incubation, including businesses in these industries:
Why Entrepreneurs Work With Business Incubators
Why do entrepreneurs work with business incubators, and why should you work with one? There are a host of benefits that come with working with business incubators, including:
- Access To Capital
- Networking Opportunities
- Business Advice & Mentorships
- Management Tasks
- Internet Access & Shared Workspaces
Access To Capital
One of the major challenges faced by startups is access to capital. A lack of business credit, a short time in business, and low (or non-existent) revenues are just a few of the barriers startups face when seeking capital to launch or expand their businesses. A business incubator can help you navigate these challenges and open up opportunities for financing that wouldn’t otherwise be available.
A business incubator can refer its startups to venture capitalists, angel investors, and other investors. Business incubators can also connect businesses to loans, grants, and guarantee programs.
In addition to these resources, business incubators can also help startups prepare presentations for investors and banks and complete other tasks to secure financial backing.
Business incubators open up opportunities for meeting key players, including potential partners, future investors, and leaders within your industry. Business incubators can help you connect with other entrepreneurs and can give you a heads-up on relevant networking events and help spark connections that can help your business now and well into the future.
Business Advice & Mentorships
Let’s just say it: Starting your own business is tough. Growing that business and ensuring its success can be even tougher, especially if you’re a new player in the game.
As part of a business incubator, you can connect with others who have been in your shoes and who now have insight that can be passed along to you. Sure, it isn’t necessarily the key to success, but having someone in your corner that can help you navigate the rocky road of entrepreneurship is never a bad thing.
Your mentors can help you identify your current objectives, determine your goals for the future, help you find your target audience, and can even help you navigate regulatory hurdles and manage your intellectual property.
Management Tasks & Marketing
A business incubator can help its startups with management tasks and marketing. This includes:
- Assistance with marketing plans & campaigns
- Helping with market research
- Accounting & financial management guidance
- Management team identification
Internet Access & Shared Workspaces
A business incubator also typically provides high-speed internet access and shared workspaces. Not only does this give you the space and tools you need to launch your startup, but it can also help you cut your expenses by saving money on rent, utilities, and internet access.
Types Of Business Incubators
Depending on who you ask, there are a number of different types of business incubators. The InBIA classifies its member incubators into five separate groups:
- For-profit property development ventures
- Non-profit development corporations
- Academic institutions
- Venture capital firms
- Combination of two or more of the above
These broad categories can be broken down further into groups such as:
- Public incubators
- Medical incubators
- Virtual business incubators
- Venture builders
When A Business Incubator Is A Good Choice For Your Startup
Business incubators sound great, but unfortunately, they’re not a good fit for every business. How do you determine if a business incubator will benefit your business? Consider these points:
- Time Commitment:Â Are you ready to commit serious time to launching and growing your business? If you view your new venture as just a side project, avoid working with a business incubator. Business incubators are best for startups and businesses that are prepared to commit time to meetings, events, and other tasks.
- Access To Business Resources:Â If you just need financing to get your business off the ground, consider other options, such as a ROBS plan or taking out a personal loan for business use. However, if you’d like access to capital, the opportunity to network with investors, mentors, and resources that can take your business off the ground and to the next level, a business incubator may be right for you.
- Speed Of Growth: Business incubators are a little different from business accelerators. If you want to propel your growth to the next level in a short amount of time, consider a business accelerator. If, however, you’re comfortable with slower, steadier growth that may stretch out over a couple of years, a business incubator may be a good fit for your business.
- Your Industry: Most of the business incubators in the U.S. are industry-specific (i.e., the tech industry or the medical industry.) This isn’t always the case, but if you need help breaking through in a niche industry, a business incubator may help.
How To Find & Get Accepted To A Business Incubator
Think a business incubator can help you get your startup off the ground? If so, the next step is finding the right one for your business. Fortunately, there are a number of free resources at your disposal to help you explore different business incubators in your area.
The InBIA that has already been mentioned in this post is a great resource to learn more about business incubators. You can learn more about business incubators, check out webinars, and state-specific information and resources on incubators.
The Small Business Administration (SBA) is also a top resource for learning about business incubators, accelerators, and low-cost business loans. Unsure of where to start? Check out the SBA’s list of local offices that offer business development resources, counseling, and training. These experts can help point you in the direction of local business incubators.
Finally, you can get in touch with your local or state economic development departments to learn more about incubators and other helpful resources in your area. A quick online search can help you find the department you’re looking for. Once you’ve found an incubator that you’re interested in joining, contact the organization to find out more about the application process. While this varies across incubators, there are some commonalities, including:
- Meeting Admissions Criteria: Admissions criteria varies, so make sure to do your research. Some incubators may require you to be in certain industries, have specific revenues or headcounts, or meet other criteria. In some cases, you may also be required to sign a contract or pay membership fees, so make sure you know what is expected of you before applying.
- Showing Your Business Plan: Incubators are ideal for businesses that are primed and ready to grow and become successful. One of the first things you should always have ready is your business plan. Not only may this be a requirement for admission, but a business plan can help you clearly outline your goals to help you maintain focus.
- Meeting With The Screening Committee: In most cases, you’ll need to speak with members of the incubator before you’re admitted to the program. This committee may ask you questions about your past experience, what your business offers, and your future goals to determine if you’re a good fit.
Learn About Other Resources For Entrepreneurs
While business incubators have certainly helped their share of businesses, they aren’t exactly the right choice for every business. If you’re still on the fence or you’ve decided to go another route, don’t worry — there are lots of great options out there that can help your startup dreams become a reality. Of course, we here at Merchant Maverick want to help you find the right option for your business. From our list of entrepreneur financing options to finding an angel investor or venture capitalist to back your business, we’ve got you covered. Check out our additional resources to find the strategy that’s best for you. Good luck!
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