Incubators: Great Places to Hatch Your Company

Incubators offer affordable rent, accessible office equipment and administrative help, and on-hand managerial and business advice to nurture new businesses. Would this benefit your fledgling company?

Imagine a place where you can focus on getting your company off the ground. A place with affordable rent where office equipment and administrative help are provided, and managerial and business advice are close at hand. If you imagined such a place, would you be dreaming? Maybe not, if you can hook up with one of the small business incubators springing up worldwide.

As the name suggests, business incubators provide a nurturing, supportive environment for fledgling businesses. While offering perks such as low-cost rental space, shared office services and equipment, access to capital, and business counseling and planning, incubators help new firms survive the initial startup stage.

Like venture capital investors, individual business incubators tend to focus on a specific type of company (such as technology, manufacturing, service, minority-owned and so forth). An incubator's objectives vary depending on what type of organization is running the incubator. Nonprofit incubators usually focus on creating jobs, diversifying the economy, expanding the tax base and trying to revitalize a community. Privately owned incubators primarily exist to turn a profit. College or university incubators aim to develop and transfer new technology. Joint public-private venture incubators seek to use the expertise of the private sector combined with access to public funds.

A Great Idea Is Hatched
The concept of the business incubator isn't new -- the first one opened in 1959 in New York. Though the idea was slow to catch on, today there are an estimated 600 incubators operating in North America and 2,500 worldwide. Not only are they increasingly popular, research shows that incubators really work. According to 1997 statistics from the National Business Incubation Association (NBIA) more than 87 percent of incubator graduates are still in business five years after leaving the incubator.

If you've got a great idea, a fairly solid business plan and the drive to succeed, an incubator may be just what you need to move your company to the next level.

Where to Sign Up
Joining an incubator is kind of like a fraternity or sorority rush -- they size up your business to determine whether it's right for their program, and you contemplate whether this is a community you really want to join. Also like fraternity rush, the incubator program screening and qualification process may not be free -- don't be surprised if you're required to ante up.

Prepare for your screening as you would prepare to meet with a venture capital investor. Be ready to articulate your business's goals and vision; if you already have a business plan, be sure to present it. Keep in mind that the incubator's goal is to produce successful graduates -- businesses that are financially viable and freestanding when they leave the incubator. Think about ways you can present your business that will project that strong, successful image.

When the tables have turned and it's your chance to ask questions, here are some things for you to ask:

• What do the other tenants have to say? Interview current and previous tenants to get a feel for what the incubator is like and what level of help the incubator has provided to them.

• What are the community obligations? As a member of the incubator community, you'll be required to participate in communal events. For example, some incubators expect successful graduates to give back 1 percent of their profits each year to a cause that the incubator sponsors. Know what you're committing to before you sign up.

• Statistically, where does the incubator stand? Ask for specifics on how many jobs have been created and what percentage of graduating companies have survived outside of the incubator.

• Read the rulebook. Get the lowdown on the incubator's policies and procedures before you join. Some incubators have limits to how many months or years a company can rent space at the incubator. Others don't allow companies with more than 25 employees for space reasons.

Incubators are one of several sources of support for your business in its very early phases. If you're planning a business that will remain home-based for some time you might also consider these Ten Sources of Free Help for Your Home-Based Business.

If you have the kind of business model that can attract venture capitalists, you might also pursue that route for getting the support you need. Venture capitalists usually give strategic guidance as well as financial support. It's not an option open to all businesses, but it can be a great launch for many.

Find more great tips and advice on buying, starting or selling businesses at AllBusiness.com.

Copyright © 1999 - 2007 AllBusiness.com, Inc. All rights reserved.