Hey… Buddy entrepreneur. Want to know what is all about a Startup Incubator. You’re stepped in the right place to get a comprehensive understanding of the incubators and their purpose for the Startup Company.
Imagine what will happen if we are asked to write an exam without proper coaching or mentorship. Do we approach it in the right manner? Obviously not. We just need some mentorship to come across different stages in life, that would make us serve a purposeful career with the knowledge and wisdom acquired through them.
This avoids failure and helps us to make the right decisions whenever needed and that promotes our growth and development.
Likewise, the incubator program guides Startup Company to run and grow a successful company which avoids startup failure at the early stages. Especially it would be useful for the new entrepreneurs who are straight away from the business schools or without any business background.
If you are one such person planning to start a business or aspiring to become an entrepreneur, this article helps you to discover about startup incubators and how they will benefit the startup company.
What is A Startup Incubator? – Meaning
A Startup incubator is an organization that helps new entrepreneurs or startup companies to develop and grow their businesses through their mentorship program.
This startup incubator program includes services like mentoring, training, sharing working space, utilities, and essential resources to build a startup company.
Also, it helps you to get the financial assistance that includes different stages of startup funding, i.e. from Seed funding to Series or Venture capital funding.
They help startups in
- Idea generation
- Problem Solving
- Business planning
- Creating a Prototype
- Develop a Minimum Viable Product
- Product development that fits the market
Startup incubators are non-profit organization normally works for the economic development of the region, by helping the founders to run a profitable company. Some might earn an equity share from the startups as a return.
In these aspects, the incubators are categorized into four different types.
Types Of Startup Incubators
- Non-profit organizations help Startup Company without expecting any profit share from the company. Their main purpose is to help the startups nurture their business and improve the economic activity of the region.
- Private organizations help startups by getting equity share after it launches a product in the market.
- Government-owned incubation program which is region-specific.
- University Operated.
Startup Incubator Vs Accelerator: The Big Difference
Unlike incubators, a startup accelerator helps to grow the startup company that is already established.
It provides mentorship and guidance from the industry experts and accessibility to reach potential investors for series funding.
- Purpose: The main concept of the accelerator is to accelerate the growth of the business that has developed the prototype and the minimum viable product. But the incubator helps in developing the business model from the scratch, i.e. From ideation to launching a product.
- Accessibility: The accelerator program is open to all, but only a few applicants (less than 2%) get through this valuable program and benefited from that. This is because of the high competition that exists among companies around the world. But, Incubators are not open for all, instead, they are industry or community-based.
- Timeline: Accelerator program is a short-term, ranging from 1 to 3 months that focuses on mentorship and network building, which determine to scale a startup business. But for an incubator, it will take much time, say 1 or 2 years to develop the product, by mentoring, giving legal support, sharing working space, etc…
- Equity Share: When it comes to equity, accelerators expect a 5-10% share from the company, but the incubators are a non-profit organization that works for economic development. More or less, it acts as a free service. It is important to note that, despite the fact, they also ask for an equity share, and not all the incubators offer free service.
How Do Incubators Help Startups? – List Of Services
The ultimate purpose of an incubator is to provide mentorship guidance to the founders and startup team. They use the knowledge and experience of the industry experts to critically think and solve a problem.
This leads you to analyze and make strong decisions in the company’s operations. They help you to find a startup idea using several idea generation techniques and tools. All the basics for starting a company would be covered with a proper business plan and objectives for the company.
With less amount of cash in hand, entrepreneurs struggle to rent or buy office space for their operations. Incubators solve this problem by providing coworking space for handling and managing the office works at a low cost.
They share their cabins, meeting room, computers, and other office equipment with the team.
The incubators will create an opportunity for the founders to network with many people related to the industry. You could meet the fellow founders who are getting trained in the incubation centre. You would get the opportunity to meet many industry leaders and experts during their visit to that place.
This helps you to learn and share a lot of things, and maintain a long-term relationship with them. This further helps you to get access to the market, generate sales leads and expand your business through them.
When you meet other startup teams, there is a possibility to collaborate and create a strategic partnership with them. This gives you additional support and strength for your capital investments, team building, market promotion, and this again validates your business model to be a successful one.
Research And Marketing Assistance
Experts guides you to conduct market research that determines the potential markets, customer behaviour, and buyer personas. Identifying and accessing the global market, its competitors is crucial for any business, thus it helps in customizing the product for buyers.
Access To Funding
The foremost important thing to run a startup company is capital investment. Though you get initial assistance from the incubator, you may need further seed capital or venture capital funds to take the business into the next stage.
There would be more instances, where you could meet the investors like Angel Investors and Venture Capitalists. With the help of incubators, you could gain the credibility to attract those investors by creating a killer pitch deck.
Startup incubators provide necessary skill training to the new founders through conducting seminars, workshops, and webinars. This helps in dealing with clients by negotiating, generating new leads, and marketing skills.
Some of the entrepreneur skills you will by the time of completing the course are:
- Time management
- Strategic Thinking and Planning
- Financial skills
- Marketing and Sales
- Customer service
Resources And Utilities
In the office space, you get access to use multiple resources, equipment like computers, printers, high-speed internet, paid tools for market and consumer research, and other marketing technologies.
When you register your company independently, you may have to pay a high sum of the amount. But with the support of startup incubators, you would have less burden to manage all the legal formalities including registration and intellectual property management.
Top 5 Startup Incubators In The World
Y Combinator is Founded by Paul Graham in 2005 that provides seed funding for startups. It pays expenses while getting started. They make small investments in return for small stakes in the companies they fund. They have invested in more than 1500 startups. They receive applications twice a year.
The most important thing they do is work with startups on their ideas and help founders deal with investors and acquirers.
Each year, Techstars give a 3-month mentorship program for more than 500 early-stage startup companies. They help technology-oriented startups to access investors and network of corporate partners, and alumni. They provide funding and fundraising opportunities, by investing $120K each year.
500 Startups is a global venture capital firm that helps early-stage startups around the world. It is founded in 2010 by Dave McClure and Christine Tsai. They have backed more than 2,400+ companies or 5,000+ entrepreneurs in 75+ countries.
They are the most active early-stage investor in the world. They are on a mission to uplift people and economies around the world through entrepreneurship. They help entrepreneurs regardless of the geographical location by investing through seed funds and the last stage fund is the corporate round.
AngelPad is a seed-stage accelerator program founded in 2010 located in NYC and San Francisco. They have helped more than 150 companies. Every 6 months they select about 15 teams from around 2000 applicants all over the world.
During the program, they help the startup team for finding product-market fit, defining a target market to get the first validation for the company. They are instrumental in helping companies prepare for fundraising and of course for investor meetings.
Seedcamp is a seed-stage venture capital fund, located in London and launched in 2007. As of 2017, they have helped over 250 companies by the investors around the globe. The team consists of 30 European investors.
Seedcamp team helps startups in finding a product-market fit, understanding in growing a team by training them in sales and marketing.
Let us know if we missed out on anything in this article how startup incubators help startups and share your thoughts in the comment section.