Business incubator
A business incubator is an organization that helps startup companies and individual entrepreneurs to develop their businesses by providing a fullscale range of services, starting with management training and office space, and ending with venture capital financing.[1] The National Business Incubation Association (NBIA) defines business incubators as a catalyst tool for either regional or national economic development. NBIA categorizes its members' incubators by the following five incubator types: academic institutions; non-profit development corporations; for-profit property development ventures; venture capital firms, and a combination of the above.[2]
Business incubators differ from research and technology parks in their dedication to startup and early-stage companies. Research and technology parks, on the other hand, tend to be large-scale projects that house everything from corporate, government, or university labs to very small companies. Most research and technology parks do not offer business assistance services, which are the hallmark of a business incubation program. However, many research and technology parks house incubation programs.[3]
Incubators also differ from the U.S. Small Business Administration's Small Business Development Centers (and similar business support programs) in that they serve only selected clients. Congress created the Small Business Administration in the Small Business Act of July 30, 1953. Its purpose is to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." In addition, the charter ensures that small businesses receive a "fair proportion" of any government contracts and sales of surplus property.[4] SBDCs work with any small businesses at any stage of development, and not only with startup companies. Many business incubation programs partner with their local SBDC to create a "one-stop shop" for entrepreneurial support.[5]
Within European Union countries, there are different EU and state funded programs that offer support in form of consulting, mentoring, prototype creation, and other services and co-funding for them. TecHub is one of the examples for IT companies and ideas.[6]
In India, the business incubators are promoted in a varied fashion: as technology business incubators (TBI) and as startup incubators—the first deals with technology business (mostly, consultancy and promoting technology related businesses) and the later deals with promoting startups (with more emphasis on establishing new companies, scaling the businesses, prototyping, patenting, and so forth). The mission on creating specific innovations among the young minds of researchers via. 101 specialized incubators have been boosted in various parts of India through AIM-India. For instance, AIC-IIITKottayam,[7] a startup-based incubator, specializes in IoT Cloud research jointly with world class incubators from Germany, the US, Austria, and so forth.[8][9][10][11][12]
Since startup companies lack many resources, experience and networks, incubators provide services which helps them get through initial hurdles in starting up a business. These hurdles include space, funding, legal, accounting, computer services and other prerequisites to running the business.
According to the Small Business Administration's website, their mission provides small businesses with four main services. These services are:
Among the most common incubator services are:[15]
There are a number of business incubators that have focused on particular industries or on a particular business model, earning them their own name.
More than half of all business incubation programs are "mixed-use" projects, meaning they work with clients from a variety of industries. Technology incubators account for 39% of incubation programs.[15]
One example of a specialized type of incubator is a bio incubator. Bioincubators specialize in supporting life science-based startup companies. Entrepreneurs with feasible projects in life sciences are selected and admitted to these programs.
Overview[edit]
Incubation process[edit]
Unlike many business assistance programs, business incubators do not serve any and all companies. Entrepreneurs who wish to enter a business incubation program must apply for admission. Acceptance criteria vary from program to program, but in general only those with feasible business ideas and a workable business plan are admitted.[20] It is this factor that makes it difficult to compare the success rates of incubated companies against general business survival statistics.[21]
Although most incubators offer their clients office space and shared administrative services, the heart of a true business incubation program is the services it provides to startup companies. More than half of incubation programs surveyed by the National Business Incubation Association[22] in 2006 reported that they also served affiliate or virtual clients.[15] These companies do not reside in the incubator facility. Affiliate clients may be home-based businesses or early-stage companies that have their own premises but can benefit from incubator services. Virtual clients may be too remote from an incubation facility to participate on site, and so receive counseling and other assistance electronically.
The amount of time a company spends in an incubation program can vary widely depending on a number of factors, including the type of business and the entrepreneur's level of business expertise. Life science and other firms with long research and development cycles require more time in an incubation program than manufacturing or service companies that can immediately produce and bring a product or service to market. On average, incubator clients spend 33 months in a program.[15] Many incubation programs set graduation requirements by development benchmarks, such as company revenues or staffing levels, rather than time.
Silicon Valley Founder Houses[edit]
San Francisco and Silicon Valley are home to 'founder houses.'[26] These involve a collective of founders sharing an apartment or house while working to get their companies off the ground. Similar to tech/hacker houses in the same area, the founders collaborate to promote one another's success while enjoying the financial benefits of co-living in one of the most expensive regions of the country.[27] These collectives are typically located in San Francisco or near to Stanford University's campus.[28] Many of the founders have dropped out of Stanford University to pursue their careers– in fact, there is a more than a 1 in 10 chance that billion-dollar startups have one or more founders who attended Stanford.[29] In addition to the financial incentives of co-living, founders share investor recommendations, funding strategies, VC contacts, and other elements critical to a startup company's success in its early days.[30] These set-ups allow for largely virtual work, eliminating the burden on new founders to find a physical space for their company.[30] Due to the collaborative nature of these spaces, residents who have failed companies often pivot to taking a high-ranking position at a roommate's company.[26] Collectives such as these build on a legacy set forth by Mark Zuckerberg and Facebook. The house featured in the film The Social Network was a hacker's den rented by Zuckerberg that ultimately gave rise to a tech supergiant.[31] This house and the fortune it gave rise to was well-documented in the 2010 film The Social Network.[32]