Incubator - Explained
What is an Incubator?
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What is a Business Incubator?
An incubator is an organization that helps to build a startup or growth-business into a larger-scale business operation. It does this by monitoring and facilitating the business progress at all stages of development. Most incubators acquire an ownership interest in the business. These shares serve as a means of payment to the services provided by the incubator, as most start-up business can hardly pay for the service charge of the incubator.
Back to: Entrepreneurship
What does an Incubator Do?
An incubator offers quite many services which includes
- Event networking,
- Renting and provision of office space,
- Sales and marketing support
- IT support
- Strategic coaching
- Accounting and Legal Assistance
- Research and development.
- Access to capital
The primary determinant of the compensation from the business owner to the incubator is the goal and vision of the business owner. An incubator helps in writing a success story for every small business, by walking with them on their journey to success and greatness. Listed below are the five major types of incubators, recognized by the National Business Incubation Association (NBIA).
- Venture capital firm,
- Academic institutions,
- Non-profit property development ventures
- Profit property development ventures
- Combination of any of the listed incubators above.
The incubators serve different functions.
What is a Private for-Profit Incubator?
These types of incubator focus on recruiting new startup business with good prospects of profit-making margin. The incubator may then decide to provide an incubating service in exchange for an ownership share in the business. In the other hand, an incubator can choose to offer services for free on the pretense of investing in the company in the early stage. The most common incubator is the Y-combinator. There are also Public, non-profit incubators that share this kind of functions as well.
What is an Accelerator?
Accelerators are very synonymous to incubators. Accelerators objective is to nurture the growth of a business that has already broken even, rather than just nurture for an extended period, unlike an incubator. Accelerators offer legal advice/assistance, building business connections between businesses and lastly giving strategic advice. Accelerators charge a flat fee for a short period they work with a company.
What is a Small Business Center?
Small business centers funded by the Local, State and Federal government also require the service of an incubator. These entities focus more on economic development, social enterprise, minority or low-income business e.t.c services offered to small business centers differs. A typical example of small business centers is the Small business Development Centers- (SBDC) which is founded by the U.s Small Business Administration.