Aug 20,2021 Aug 20,2021

What is a Startup Incubator? How do startup incubator programs work?

Startup incubators can help businesses get off the ground by providing networking and mentorship opportunities. 

The failure rate of US startup companies after five years stands at over 50 percent, and over 70 percent after 10 years. Starting a business from the idea stage to the point where a final product is introduced into the market is no mean task. Some of the common challenges that startups face include limited funds, limited access to markets, lack of support services, as well as challenges with personnel. The journey is bound to be even more challenging when someone who is new to entrepreneurship does not know how to overcome these hurdles to grow their business. This is why it has become important for various organizations to provide relevant solutions.

The good news is that startup incubators exist to nurture business ideas and make it easy for entrepreneurs to ensure the success of their businesses. Some of the services that incubators offer new businesses include low-cost workspace, access to mentorship and expertise, and working capital. Entrepreneurs also get the chance to work around entrepreneurial businesses that have a similar focus as theirs. Before applying to and joining an incubator program, entrepreneurs need to understand the different options available to them. Below are a few things you may want to know.

What’s a startup incubator?

Most startup businesses don’t start with a well defined team. Tech startups, in particular, need much less people to work on their prototype than any other type of startup. This lack of talent and creative diversity in these first days of their lives makes them exceptionally susceptible to failure. Especially when the founder – or co-founders – have not built the management or people skills required to effectively steer the boat where they need. A startup incubator can greatly help a startup business find their bearings, at a fraction of the time — and cost — needed otherwise.

How do startup incubator programs work?

In helping a company establish their business, grow and scale to success, a startup incubator provides all the important business services, pertinent to management training, basic marketing training and a well thought out, clean and practical workspace.

While providing access to funding, a startup incubator will typically not provide funds to startup companies. In accordance with that, a startup incubator will, consequently, not seek an equity stake in its portfolio companies. Their cash flow normally comes from sponsorships and other participants, IP royalties and liquidity events. And they use these proceedings to support their portfolio companies.

Startup incubator programs have different lengths, but you can get great results within three months. To take part, a startup needs to go through an application process, which will vary from program to program. Although each program varies, most startup incubator program offer:

  • Comprehensive business training program;
  • Information/Educational sessions;
  • Industry Mentors;
  • Keynotes;
  • Networking events.

The application process for incubators are often competitive. This is the reason you need to understand the stage your business is at in order to apply for the right program.

Understanding the Concept

The dictionary is always a fun resource when learning a new concept, especially in the startup world. According to the Cambridge Dictionary, an incubator is “a container that has controlled air and temperature conditions in which a weak or premature baby (= one which was born too early) can be kept alive.”

So, how can we relate the definition to startups? 

While the apparatus described by the Cambridge Dictionary is designed to keep a baby alive, a startup incubator helps a business in its early stages thrive. Startup incubators are often non-profit organizations run by public or private institutes that offer programs to help entrepreneurs develop their businesses. 

STARTUP INCUBATOR BUSINESS PROCESSES

The business incubation process is a unique and flexible mix of business development that focuses on people and infrastructure. With the difficult and vulnerable stages that characterize the transition from an idea to an existing business, incubation helps to ensure that new and small businesses are nurtured and get the help they need to survive, grow and succeed.

One of the best ways to join an incubator is to speak to the entrepreneurs currently in the program. This will give you a picture of how long they have been there, what their growth goals have been, and the particular successes they have achieved over that period. You can also consider looking at the alumni to establish whether they have recorded success after leaving the startup incubator. This will give you some information on the quality of the incubator program. However, making an informed decision will also require that you find out whether they use the for-profit incubator business model.

For a new company, being part of an incubator means having the physical space required to launch your business. Also, you will get administrative assistance that will help you overcome some of the common challenges that startups face. You will also be exposed to a competitive environment full of ideas from fellow entrepreneurs. What a startup incubator does is to prepare a business for the next stage where they can benefit from a startup accelerator structure and startup accelerator business model to grow their businesses further.

The startup incubator program is all about learning. Take the most from your mentors in every single aspect. Learn about all topics related to startup creation, from marketing to intellectual property. This is the moment to gain a general idea of the whole business. 

Our last and most important tip is: don’t be afraid to fail. This is something that is going to happen…and not only once. Failing is part of the process and key to development. So, go for it and get ready to conquer the world!

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