Once you launch a startup, you soon realize that being an entrepreneur presents a set of unique challenges. A part of the challenge when starting a business is to find resources to make the process of entrepreneurship easier — and shorten learning curves.
A business incubator, or seed accelerator, is an old concept that has experienced momentum in recent years. These programs are specifically designed to accelerate the successful development of startups through an array of business support resources and services, whereby increasing the opportunity for success.
Early stage investment programs provide small businesses with heavy mentoring, guidance and resources in the hope of producing a viable product or service in a condensed period of time. Think of it as a business bootcamp that will either kill you, or build you into a strong, lean and profitable business.
Why are business incubators important for startups and small business?
Dedicated to start-up and early-stage companies across various industries, statistics show that the successful completion of an incubator program plays a significant role in the success rate of a company.
For example, eighty seven (87%) percent of firms that graduated from incubators since inception were still in business, according to an NBIA ‘Business Incubation Works’ Report (NBIA). Do they work?
“In 2005 alone, North American incubation programs assisted more than 27,000 companies that provided employment for more than 100,000 workers and generated annual revenues of $17 billion,” according to a 2006 State of the Business Incubation Industry study by the NBIA.
The main difference between a seed accelerator and a business incubator is that it will:
- Begin with a cohort intake process whereby they accept applications for entry and pick a set number per round.
- Make an equity investment in the startups, in-turn, the business model is based on generating venture style returns, not rent, or fees for services.
- Add value to the entrepreneur via mentoring, connections, and notoriety of being chosen to be a part of the accelerator.
The more popular examples of these programs include Y-Combinator, TechStars and Betaspring — among many others across the U.S. and abroad. I am a huge fan of Y-Combinator and TechStars because of the amazing companies that they develop. Both programs have remarkable mentors and professionals and have resulted in tech companies that do some amazing things.
These programs have been operating for under 5 years, but they graduate so many companies because they offer a spring class and a fall class, each program lasting 3 to 4 months. Typically, they take a small equity portion (normally around 6%), and provide you with all the tools you need to succeed. Most good programs will already be well connected with angel investors, as well as venture capitalists.
Is An Incubator Right for My Business?
If you have recently started a business, or just have a business idea, you should definitely look into services of your local incubator. Furthermore, if you think a seed accelerator is better for you, look into the one that meets the needs of your business.
You would be doing a disservice by not looking at all your options. The statistics don’t lie. There are almost no downfalls to participating in an incubator or seed accelerator. Basically what I am saying is, check them out. It may be the factor that can help you reach your dreams of success. You can find the incubator closest to you by contacting your local Chamber of Commerce.
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