Business Incubators

• Is It a True Incubator?—Some office building owners falsely advertise themselves as incubators in order to lure tenants. Entrepreneurs need to study the details of each offer to determine whether such claims are legitimate.
• Length of Operation—Incubators take some time to establish their reputation in an area unless they are sponsored by a very high-profile corporation or a well-funded government agency.
• Incubator Leadership—Many analysts contend that entrepreneurs can learn a great deal about the fundamental quality of an incubator program simply by studying the program's leadership. Is the incubator managed by people with backgrounds in business, or by general college or agency administrators? Can the managers provide long-term business plans that show how they intend to guide the incubator to financial independence?
• Location—Does the incubator's setting adequately address your fledgling company's needs in terms of target market, transportation, competition, and future growth plans?
• Financing—Is the incubator's financial base a reliable one, or is it on shaky ground?

Entrepreneurs interested in exploring the incubator concept can request information from several sources, including the Small Business Administration, area economic development agencies, area educational institutions, or the National Business Incubation Association.

Would-be small business owners should have a complete business plan in hand before applying for entrance into an incubator program. Most incubators maintain a stringent screening process to ensure that their resources are put to the best possible use.

RECENT INCUBATOR INNOVATIONS

Internet Incubators

"Internet incubators—a for-profit variant of the old-time government- or academic-supported not-for-profit entities—are sprouting up like dandelions in summer," wrote Thea Singer in Inc. As with traditional incubators, Internet versions provide dot-com startups with office space, business information and advice, financial assistance (either directly or by connecting them to potential sources of seed money), and management, accounting, and other infrastructure services. According to Internet incubators, these kinds of assistance can provide entrepreneurs with essential tools to accelerate their all-important "speed-to-market" in the fast-paced Internet economy. The price of membership in an Internet incubator can be steep, however. In return for providing their various services and funding, incubators receive a percentage (anywhere from 5 to more than 50 percent) of the dot-com's equity.

Entrepreneurs who are considering membership in an Internet incubator should study the benefits and drawbacks closely before making a final decision. Potential other sources of funding and assistance should be explored, as well as the level of autonomy that is present in the program. In addition, entrepreneurs should examine whether their e-business is prepared to take advantage of the incubator's ability to accelerate the launch process. Analysts note that speed-to-market is of little benefit if you do not have a complete, focused business plan in place. Finally, entrepreneurs need to objectively weigh whether increased speed-to-market is worth giving up a piece of the company.

Internalized Business Incubators

Another recent wrinkle in incubator creation has emerged in the corporate world in recent years. Weary of mass defections of valuable employees who decide to launch entrepreneurial ventures of their own, some companies have established business incubators within their own corporate structures. In these programs, employees can use the company's resources (including their already established name and reputation) to build and promote their own new business ideas. "The company will provide the management guidance, infrastructure, and financial support to 'incubate' these ventures," explained David Cutbill in Los Angeles Business Journal. "The outcome is a clear win-win. Existing companies stem the hemorrhaging of top talent to Internet start-ups, while profiting from the high multiples investors are willing to pay for a share in Internet ventures'¦. And entrepreneurial employees get the challenge—and the profits—of creating their own 'companies' with little of the risk they would face on their own."

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