by R.A. Rowell; Startup Extraordinaire
Image © Lyn Lomasi; All Rights Reserved
Have you heard of startup incubators? Incubators are a unique form of business mentorship which combines traditional investing with streamlined mentoring. They are designed to offer budding entrepreneurs both funding and experience in building a successful startup. Learn about what incubator mentorships involve, so you can decide if one is right for your business.
What Are the Basics of Startup Incubators?
A startup incubator is a business coaching program. They are run by highly successful former entrepreneurs that have decided to use their success to help fund the dreams of those who are looking to start a business and have a quick exit. Startup incubators typically provide between $10,000 and $30,000 in funding while taking anywhere between a two percent to ten percent stake in the company. The funding and stake depends on a wide variety of factors.
As part of a startup incubator program, you have access to the incubator facilities, as well as their network. You have the ability to work out of a shared office for free. Not only that, but you have access to the incubator’s in-house accounting and legal services, too.
You also get to start your company at the same time as others in the same startup incubator program. That means you get to work as a team with other entrepreneurs building their businesses. This team spirit can help make the big task of building a business more fun and allows you to figure out what works well and what doesn’t together.
Also, beyond the primary mentor at the startup incubator program, you gain access to other successful individuals, too. Incubator programs often bring in alumni of the program to share their own successes and advice, as well as other business mentors or speakers.
Are There Any Cons of Working with a Startup Incubator?
While the advantages of working with a startup incubator are plenty, there are some disadvantages to startup incubators to consider. The first major downside of a startup incubator is that they are very industry-focused. This makes sense, of course, since the more specialized an incubator is, the more likely they will be able to bring success to a startup.
Most startup incubators focus on the tech industry. There are also incubators that involve biotech and green tech. If your business is not in any of these industries, it may be difficult to find a startup incubator that will work for you. But if you are in any of these industries, then you don’t have to worry about this potential drawback.
The other major disadvantage of startup incubators is that they are often looking to cash out quickly on the equity they’ve put into your business. Most incubators want you to build your idea into enough of a business that someone else is looking to buy relatively quickly at a substantial profit. If you’re looking to hold onto your company for the long-term, a startup incubator is likely not for you.
Of course, your business could be so wildly successful that you can buy out the incubator’s stake and all parties are happy. But if you’re not the type of entrepreneur who is just looking to build a business with the intent of selling it, startup incubators are likely not for you.
Startup Incubators Operate with a Highly Specific Business Model
In order to work, startup incubators must operate with a highly specific business model. Incubators fund multiple entrepreneurs with the expectation that a large portion of them will fail. Even with substantial funding, a great idea, and superb mentorship, most businesses still inevitably lose money.
Of course, for the incubator to be successful overall, the successful investments must bring in substantial revenues. That way, the incubator can cover the losses, plus the overhead costs of offering the facilities and services for its members.
Is a Startup Incubator Right For Me and My Business?
The best type of business to be funded and mentored by a startup incubator is one that’s expected to become a hyper-accelerated growth company that you plan to sell for massive profits. That way, the incubator makes a huge gain that can then be put back into funding other entrepreneurs. If you’re into doing just that, in an industry that the incubator has been highly successful in developing profitable companies, definitely consider a startup incubator.
Startup incubators offer some of the best mentorship you’ll find in any business mentoring program. They offer experts in every stage of business development, from building your idea into a profitable business plan, to incorporation, to building out your infrastructure and assets, to inevitably selling your company.
Perhaps you want to build a company that you plan to hold onto for yourself. A startup incubator isn’t really best for that. Or, you want to build a company in an unrelated industries to those you can find incubators to fund and develop. Still, if you’ve always wanted to try your hand at building a company quickly enough to sell off to fund your other business ventures, then trying out a startup incubator may be worth it to you!
Whatever you decide to do in your business ventures, the experience of working with a startup incubator may be worth it. If you’re successful, you can create a lot of capital for building a more permanent business, or businesses, for yourself. If what startup incubators do sounds exciting to you, then definitely give it a shot. Startup incubators aren’t for everyone, but now that you know what’s involved, you’ll know if looking into one is right for you!
What Are the Basics of Startup Incubators?
A startup incubator is a business coaching program. They are run by highly successful former entrepreneurs that have decided to use their success to help fund the dreams of those who are looking to start a business and have a quick exit. Startup incubators typically provide between $10,000 and $30,000 in funding while taking anywhere between a two percent to ten percent stake in the company. The funding and stake depends on a wide variety of factors.
As part of a startup incubator program, you have access to the incubator facilities, as well as their network. You have the ability to work out of a shared office for free. Not only that, but you have access to the incubator’s in-house accounting and legal services, too.
You also get to start your company at the same time as others in the same startup incubator program. That means you get to work as a team with other entrepreneurs building their businesses. This team spirit can help make the big task of building a business more fun and allows you to figure out what works well and what doesn’t together.
Also, beyond the primary mentor at the startup incubator program, you gain access to other successful individuals, too. Incubator programs often bring in alumni of the program to share their own successes and advice, as well as other business mentors or speakers.
Are There Any Cons of Working with a Startup Incubator?
While the advantages of working with a startup incubator are plenty, there are some disadvantages to startup incubators to consider. The first major downside of a startup incubator is that they are very industry-focused. This makes sense, of course, since the more specialized an incubator is, the more likely they will be able to bring success to a startup.
Most startup incubators focus on the tech industry. There are also incubators that involve biotech and green tech. If your business is not in any of these industries, it may be difficult to find a startup incubator that will work for you. But if you are in any of these industries, then you don’t have to worry about this potential drawback.
The other major disadvantage of startup incubators is that they are often looking to cash out quickly on the equity they’ve put into your business. Most incubators want you to build your idea into enough of a business that someone else is looking to buy relatively quickly at a substantial profit. If you’re looking to hold onto your company for the long-term, a startup incubator is likely not for you.
Of course, your business could be so wildly successful that you can buy out the incubator’s stake and all parties are happy. But if you’re not the type of entrepreneur who is just looking to build a business with the intent of selling it, startup incubators are likely not for you.
Startup Incubators Operate with a Highly Specific Business Model
In order to work, startup incubators must operate with a highly specific business model. Incubators fund multiple entrepreneurs with the expectation that a large portion of them will fail. Even with substantial funding, a great idea, and superb mentorship, most businesses still inevitably lose money.
Of course, for the incubator to be successful overall, the successful investments must bring in substantial revenues. That way, the incubator can cover the losses, plus the overhead costs of offering the facilities and services for its members.
Is a Startup Incubator Right For Me and My Business?
The best type of business to be funded and mentored by a startup incubator is one that’s expected to become a hyper-accelerated growth company that you plan to sell for massive profits. That way, the incubator makes a huge gain that can then be put back into funding other entrepreneurs. If you’re into doing just that, in an industry that the incubator has been highly successful in developing profitable companies, definitely consider a startup incubator.
Startup incubators offer some of the best mentorship you’ll find in any business mentoring program. They offer experts in every stage of business development, from building your idea into a profitable business plan, to incorporation, to building out your infrastructure and assets, to inevitably selling your company.
Perhaps you want to build a company that you plan to hold onto for yourself. A startup incubator isn’t really best for that. Or, you want to build a company in an unrelated industries to those you can find incubators to fund and develop. Still, if you’ve always wanted to try your hand at building a company quickly enough to sell off to fund your other business ventures, then trying out a startup incubator may be worth it to you!
Whatever you decide to do in your business ventures, the experience of working with a startup incubator may be worth it. If you’re successful, you can create a lot of capital for building a more permanent business, or businesses, for yourself. If what startup incubators do sounds exciting to you, then definitely give it a shot. Startup incubators aren’t for everyone, but now that you know what’s involved, you’ll know if looking into one is right for you!
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