What Is Startup Incubation?
Getting a startup off the ground can be challenging. One of the things an entrepreneur must assume when starting a business, is that there is a good chance it will fail. At the start, a business is often only made up of its founders and a couple of employees, with the team probably focused on developing a product or service. But there are many other moving parts like funding, administrative tasks, legal obligations, etc., on top of learning the ropes of successfully growing a startup. This hectic list of responsibilities is where startup incubators, or programs designed to help startups build a scalable business, come in. Startup incubation allows newly founded or early-stage startups to take off.
What Is A Startup Incubator?
Startup incubators are collaborative programs created to help startups succeed by providing various services such as workspace solutions, funding, training, etc.
Incubators are often non-profit organizations run by both public and private agencies. They’re usually associated with universities and business schools that extend the program to students or alumni who present business plans with great potential. That said, there are also for-profit incubators like property development ventures and venture capitalists.
Though often linked to tech startups, incubators cater to different industries; some incubators are even multi-purpose, considering startups from various industry types. Perhaps the most famous startup incubator is Y Combinator which has helped over 3,000 startups since 2005, including Dropbox and Airbnb.
How Does A Startup Incubator Work?
To get into an incubator program, candidates go through a selective admission process. It differs per incubator but, generally, the process involves completing a form and attending interviews. The incubator will decide if a startup’s idea is viable and if its team can bring the concept to life.
To help establish, grow, and scale startups, incubators provide business services such as:
● Business coaching - CEO training, company structuring
● Marketing assistance - sales, advertising, and marketing principles
● Financial services - financial planning and accounting, expenses and income management, and funding access (e.g., bank loans, helping startups understand the three types of business investors)
● Network access - connections with strategic partners, investors, employees,
● Legal services - regulatory compliance, intellectual property management, legal counsel
● Human resources - employee hiring and team management
● Office solutions - supplies and office or co-working spaces
Startup incubators usually foster startups for a period of a few months, up to two years. The incubator program can then transition into an accelerator program.
Benefits Of A Startup Incubator
Here’s a breakdown of the benefits startups can enjoy in incubation:
Resources
Accounting, legal, HR—these are some things that can be an overwhelming aspect of running a startup business. Incubators assist in all these departments and more, allowing teams to focus on building a brand, product, or service. Additionally, incubators can aid the funding of startups, helping the business stay afloat while it’s yet to become profitable.
Environment
Startup incubators are often located in an ample co-working space—one that is available for use to all the startups in the program. This type of space provides startups with the needed collaborative environment to accomplish tasks, allowing the mingling of ideas between different businesses.
Mentorship
Mentorship is one of the main pillars of incubation. The programs often come with a rolodex of experts who can advise and train teams to succeed in their respective fields. These professionals can also teach you concepts like the best ways to invest in startups, to help you better understand how funding stages work.
Networking
If you’re under one roof with several other startups, you’re bound to build a network of industry experts and founders with whom you can share knowledge. Outside of incubators, getting advice from these people could cost a fortune. But in this environment, not only is it free, but it’s also willingly given.
Support
The great thing about incubators is that they act as a cushion of sorts for startups just beginning to get on their feet. That means if you fail, you have some insurance that allows you to get back to the drawing board and do better the next time.
Is Startup Incubation Right For My Business?
A startup incubator is ideal for a newly founded or early-stage startup that lacks the experience and resources to realize its idea. Being in incubation can help it build a foundation and make the right decisions to propel the company in the right direction. Joining a startup incubator will equip founders and founding teams with the necessary knowledge and network to jumpstart the business.