Startup Incubators – In a nutshell

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Around 11 years ago, the founder of Dropbox pitched his idea to Y Combinator, a well-known business incubator. Fast forward to today, the value of Dropbox stands at $12 billion.

Can we attribute Dropbox’s meteoric rise to Combinator’s incubation program? We will go on a limb and say yes. Data provided by FiveThirtyEight validate our belief.

As per FiveThirtyEight, only 10% of Combinator’s startups haven’t done well.

The crux is, if you envision a successful startup then you better join hands with an incubator and get your business off the ground.

A journey of a startup is fascinating but equally challenging as well. Read this guidebook of ours to understand what a startup journey is all about.

So what exactly is a Startup Incubator?

Entrepreneurs are problem solvers, but can they bail out their startup from every problem? Maybe not. This is where a Startup Incubator comes into the picture. It’s a collaborative initiative, designed to take care of functional challenges and help entrepreneurs smoothly run their startup.

It’s a framework to support Startups through the fragile stages of growth.

A Startup Incubator can help with workspace (providing co-working spaces), seed funding, mentoring, and training. If we look at things with a wider perspective, apart from encouraging entrepreneurship, Startup Incubators play a role in developing local economies, promoting technology transfer, and creating new enterprises.

Startup incubators think beyond business theories and focus on solving real-world, practical problems.

Practical necessity determines the workability of an idea or a business model. For an entrepreneur, profitability is no more an exam question that warrants a bookish solution. This is what a good Startup Incubator understands.

A startup incubation program is not one-dimensional, and there are a variety of such programs depending on the startup’s needs. There are times when economic development programs come into the fold of incubation programs.

There is a thing called “Pre-incubation”

It’s not necessary that entrepreneurs look for Startup Incubators, only after they have launched their startup and found an investor or two. Actually, most incubators help startups in the early stages, in other words, during the ideation phase. They help startups nurture ideas, address networking challenges, and even provide access to investors.

If startups go for Pre-incubation, they can get an idea of the high-intensity environment, before participating in a full-fledged incubation program. This can be done through “demo days”. During this period, no capital or equity stake is on the table.

Facts and figures on Start Incubators’ success

National Business Incubation Association (NBIA) did a study in 2010. As per that study, companies who participated in business incubation programs enjoyed a success rate of 87%.

If you compare this with the success rate of companies that didn’t incubate, it’s almost double. In 2014, a study was done in the UK and the results were similar. It states that the survival rate for businesses that collaborated with incubators was 92%.

In 2017, the Department of Business, Energy, and Industrial Strategy published a research paper on business incubators. The paper stated that there were 205 active incubators in the UK, supporting around 3500 new businesses.

 

According to a report by NASSCOM, there are 2400 incubators and 1500 accelerators in the US, providing unique benefits to young firms. Some of them provide office space and networking opportunities, while others prefer to work remotely and help businesses with operational or product support. Some of them are affiliated with government agencies, while others work with universities to address issues with research facilities.

Adding on, as per InBIA’s IMPACT Index, 90% of incubator programs focus on developing an entrepreneurial culture, and 75% of them focus on mentoring. Interestingly, 70% of them focus on encouraging minorities and women.

As a Startup, what should you look for in an Incubator?

You must know your business needs, and there is no point scampering around. It’s better to collate your short term and long term goals. You need to see the bigger picture first and then figure out which incubation program can take you there.

If you have a few incubators in consideration, then do check their track record, their success rate, and their alumni.

See what kind of groundwork they do and how they have helped startups in the past, to find investors. Whether the investors were found directly through incubation programs or they were found laterally through networking, which is a byproduct of the program.

That being said, no incubation program is all-encompassing. You need to do a lot of picking and choosing, and try to get the best outcome from the existing incubators. Still, the above-mentioned points will make life easier for you.

Your industry determines your Incubation program

When your startup caters to a specific industry, be it manufacturing, food, or fashion. Therefore you need to follow a certain trajectory and your incubation program must vary accordingly.

Depending upon your industry, you might be concerned more about connections than infrastructure and vice-versa.

If you take the example of the Food Industry, not only you need significant infrastructure but you also deal with health concerns. So if you want to jump from home kitchen to a large scale manufacturing facility, then you might need some outside assistance.

There are industries that dominate specific geographies. Let’s say, if you have a tech business, then it will be ideal for you to have an incubator from London. Similarly, if you have a fashion-oriented startup, then you should have an incubator from New York.

 

We hope you found this write-up helpful, especially if you are in the ideation phase of your startup. Do share your views and queries on the same.

Sadanand is a content curator and strategist. He understands the Startup gamut, be it ideation, product development, team building, sales, or marketing, and likes to keep up with the trend. His lucid writing style makes up for an intriguing read. His writeups are greatly followed and admired in various communities.