A Looming Boom for Business Incubators

Startup entrepreneurs rejoice!  After decades of living in the shadows and back alleys of entrepreneurship, business incubators are about to enter a Golden Age.  Incubators – some now donning the updated moniker “seed accelerator”– are shared resource groups that nurture entrepreneurs and their fledgling ventures with mentoring, market research, office space, technology and other services.

At long last the stars are beginning to align for incubators to take a bigger, more coordinated and better-funded role in helping get businesses off the ground, starting with just the germ of an idea.

The latest jolt of juice comes from the newly-formed TechStars Network (www.techstars.org/network), which will facilitate the sharing of resources and best practices among independently-owned and operated incubators in the U.S.  And to seal the deal, the Kauffman Foundation, the premier non-profit organization backing entrepreneurship, just coughed up $200,000 to develop software to coordinate, track and analyze what’s going on with seed accelerators across all industries.

With some deep pocket funding, and exposure as part of the federally-backed Startup America initiative, the new network ensures that millions more potential entrepreneurs will know about expanding incubator opportunities.

TechStars Network – which didn’t exist until February 2011 – counts as its members the top incubators coast to coast, including TechStars itself, one of the hottest and most successful incubators going. TechStars offers entrepreneurs up to $18,000 in seed funding, plus mentoring and, most importantly, the opportunity to pitch to hundreds of angel investors and venture capitalists at the end of the incubation period.

Other network members include Alphalab (Pittsburgh), Betaspring (Providence), BoomStartup (Salt Lake City), The Brandery (Cincinnati), Excelerate (Chicago), Founder’s Co-op (Seattle), Incubate (Miami), LaunchPad (New Orleans), Tech Wildcatters (Dallas), Jumpstart Foundry (Nashville) and many others. There’s a list with links on the TechStars Network website. These groups alone will back at least 6,000 young entrepreneurs over the next three years, says David Cohen, Founder & CEO of TechStars.

Not to be overlooked in all the sparkle coming from TechStars is the much older but finally breakout-ready National Association of Business Incubators (NBIA) which has spanned 25 years to become one of the world’s leading organizations advancing business incubation and entrepreneurship. While NBIA’s main mission is to help incubators (about 1,900 worldwide are members), the best (free) benefit the organization has for entrepreneurs is an incubator locator tool which lists incubators by state.  Click the “Find a Business Incubator” link under “Directories” on the right side of the NBIA home page (www.nbia.org).

How Incubators Work

Incubators come in both non-profit and for-profit forms. Acceptance criteria vary.  Some expect you to have a fully developed business plan.  Others require only a good idea and will help you develop a plan.

Most for-profit incubators will want an equity share in the business in exchange for space and services.  Most non-profits simply charge fees for space and services.  If speed to market is critical to your business idea, giving up equity to secure quick cash may be right for you. But if you think you can raise your own funding, don’t want to give up equity and are willing to build your biz more slowly, then paying fees for services and space may be a better choice.

If you want to work with an incubator – and especially if you have more than one choice – here are nine things you should ask about:

  1. How long has the incubator been operating and how well is it performing?
  2. Has it successfully graduated startups, and if so, how long have they been in business outside the incubator?
  3. What do graduates and current clients think of it?
  4. What’s the incubator’s “graduation” policy or exit requirements?
  5. How flexible is that policy in case your idea needs more time?
  6. How long do entrepreneurs usually remain in the program? (Incubators typically graduate companies within three years.)
  7. How long has the current staff been there?
  8. How much time does the staff spend on site?
  9. Have the program’s mentors had entrepreneurial successes of their own?
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Filed Under: StartupSmarts

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About the Author:

Daniel Kehrer, Founder and Chief Content Officer of BizBest Media, is a senior-level leader in digital media, content development and online marketing with special expertise in startups, SMB, social media and generating traffic, engagement and leads. He holds an MBA from UCLA/Anderson and is a passionate entrepreneur (started 4 businesses), syndicated columnist, blogger, thought leader and author of 7 business and financial books.

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  1. Great Article! Lots of good information about how the US government has recently gotten involved, and a good quick overview for people looking for an incubator.
    But what about the best answers to the questions at the end? What are the best practices of the successful incubators?

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