We’ve said it before: startups are a hot topic right now. With small businesses and entrepreneurship trending in everything from popular culture to the employment market, it’s no wonder that so many new programs, resources, and associations are popping up all over the map.
Some of the most intriguing and innovative businesses to sprout up out of the newly fertile startup ground are incubators and accelerators—companies designed to nurture and grow the ideas and concepts of entrepreneurs and small businesses.
Never heard of them, or want to know more? Then take a look at this post to find out what exactly they are, what they do, and whether they’re a good choice for you.
What is an Incubator?
In the business world, an incubator is a company that provides support, resources, services, and other benefits to startups that are in the infancy of their development. Often, they offer discounted office space, contacts like lawyers and accountants, and information about grants, funding, and more.
But, incubators need to make money in order to do all of the above, and they usually do it in one of two ways:
- By charging a monthly fee to entrepreneurs using their space and resources (anywhere from about $200 and up).
- By investing in a business and providing services in exchange for equity (usually between 4-8%).
There are incubators for various niches and industries, and entrepreneurs will need to meet certain requirements, as well as complete an application, in order to be considered since space is limited.
Incubators are mostly for businesses that haven’t reached the development stage, or that are still working on market research and defining their product or service.
What is an Accelerator?
An accelerator is fitted more towards entrepreneurs with refined business plans and offerings. Think of them as a sort of “boost” to businesses with solid products that may need help with marketing, PR, or connections.
An accelerator, like an incubator, is there to provide guidance and support, but an accelerator is more focused in on getting your product to market and making it shine as opposed to help you to create and build it.
As with incubators, you still have to apply to be part of an accelerator, and they generally have predesigned “schools” for you to take part in that run for about 3 months (depending on the accelerator).
What do Incubators Provide?
Aside from services and resources, incubators can provide a ton of other great benefits to companies that need some help getting off the ground, such as:
- A business address to use for mail, business cards, and meeting clients.
- Shared expenses with other entrepreneurs.
- A shared secretary to take messages, forward calls, sort mail, etc.
- Networking opportunities with other entrepreneurs, potential partners, investors, and industry experts.
- Business coaching from onsite professionals.
Incubators can also provide funding, access to grants and government programs, competitions with monetary and PR awards, and more.
Aside from being geared towards different niches and industries, some incubators are even specific to hardware, such as physical products, or software, like web and mobile applications.
Are There Negatives to Incubators?
Incubators are great for a lot of entrepreneurs. They provide them with the opportunity to grow faster, stronger, and more successful, which they may have not had otherwise. But that doesn’t mean that incubators and accelerators are a good option for all entrepreneurs.
Some of the downsides to incubators include things like:
- Varying quality. Some incubators have excellent resources and mentors. Others are mediocre. Often, you get what you pay for, so try not to only look for the cheapest option.
- Sometimes they require a move. Accelerators usually run in 3 month courses, and the best ones are spread out all over the world. You may have to move, at least temporarily to participate, and this can be difficult for people with families and full-time jobs.
- In order to get the most bang for your buck (or your equity), you’ll want to gain as much knowledge and support from the incubator as possible. This can be hard when you have a job already as some incubators host speakers, short courses, and seminars.
- Not everyone has enough extra money to pay a monthly fee in order to boost their chances at success, and not everyone is willing to give up equity. These options can be difficult, and aren’t always ideal for everyone interested.
Taking part in an incubator or accelerator requires a lot of thought and consideration. Make sure to be aware of the risks, such as what happens if your business does not succeed if you decide to take part in one.
What do I Need to Start?
The first thing that you need to do after you’ve decided that you are interested in joining an incubator is to find one that suits you and your business. As mentioned above, you’ll need to determine your budget, your time restraints, and your needs, as well as the quality of the incubator.
After you narrow down your list to a select few, you should ensure that you meet their requirements. Each will have different ones, so do some research into their needs and see if you’ll be a fit.
Most incubators want to see a solid Business Plan at the very least, which covers your marketing, operations, and financial goals as a business, as well as information about your company mission and vision.
You may also want to have a name, logo, and other branding concepts beforehand to show that you are thinking ahead and that you have a clear idea of what you would like your business to become.
Should I Join an Incubator or Accelerator?
Only you and any partners you may have can decide if participating in an incubator or accelerator is right for your business. If you are comfortable with researching law, business, or finance issues, and don’t feel that you need support in those areas, an incubator may not be the right choice for you.
However, if those are your weakest points as a business, and you could really use some guidance, it might be a good idea to at least sign up for a month or two to see if these options can provide the resources you need.
If you are interested in finding an incubator or accelerator for your business or idea, you can take a look at the National Business Incubation Association.
Have you ever joined an incubator or accelerator? Would you recommend it to others?