Should you explore an incubator relationship for your company? If you are still relatively young (age and size of client vary significantly among incubators), you should check out the options.
History/Purpose The “business incubator” concept is attributed to Joseph Mancuso, who founded the Batavia Industrial Center in New York in 1959. That Center is still thriving.
In recent years, incubators (and their big brothers and sisters, “accelerators”) have been springing up everywhere, not only in the US and Canada but all over the world. There’s a detailed history of incubators along with some recent stats at wikipedia. The goal of an incubator is to help new companies grow successfully and become independent. Incubators serve a wide variety of industries, the majority of clients being technology or software companies, but run the gamut from food service and the arts to construction and healthcare services.
Variety Incubators come in all shapes and sizes. Some are economic development engines for their region, aggressively seeking client companies from around the world. Others focus on companies starting up in their region or on technologies being invented within universities. Still others focus “mom and pop” type businesses primarily designed to provide employment for the owners. Incubators come in for-profit and nonprofit versions. For-profit incubators are often affiliated with venture capital firms, who take an equity stake in the client company in exchange for services provided. Nonprofits often charge for space and services, typically at well below-market prices, and do not require an equity position. Either version can be right for you under the right circumstances.
Services Incubators provide space, consultation and outsourced services, business and financial guidance, access to capital (investments and loans) and a community of peers. Often they connect clients with faculty and students who help to develop the founder’s technologies. There’s a vast range of services, all focused on making each company successful and ultimately independent of the incubator. Small Business Administration offices, SCORE, Small Business Development Centers and other local, regional, or state economic development programs are often co-located with the incubator.
How to Proceed If you are still an “early stage” company for whom an incubator might be right, do some research. Start with the National Business Incubator Association and check out their members and their tips for entrepreneurs. Google “business incubator” to see what’s available in your region or what programs might make it advantageous for you to move.
You will need a business plan, a financial forecast, and a clear definition of the product, service, or technology that you want to bring to market. Many incubators will help you complete these items or at least provide you guidance. They are not looking for just an “idea”; they are looking for sound leadership, a promising product/service, and the opportunity to make a big difference in the company’s growth trajectory.
So don’t be afraid that you are too small or too large. If you know where you want to go, if you are lacking some key resources to get to the next level, if you are about to make a commitment to new office space or new personnel or new outsourced services, I urge you to explore incubators first.
Does it work? NBIA reports that among incubation programs whose average age was nearly ten years, 87 percent of graduate firms were still in business.