A sad number of great business ideas are lost to history because the inventor or entrepreneur lacked the experience or network to take it to the next level.
Enter business incubators.
As the name suggests, business incubators are organizations that assist startup businesses with getting off the ground, offering a variety of resources and services meant to nurture and accelerate its development. These resources include unmatched access to experienced entrepreneurs, consultants, talent, and sometimes even startup capital.
These services come at a cost, however, which includes a commitment of your time, a portion of your startup's equity, and even straight up fees. Additionally, applying for an incubator can be a long and grueling process, with thousands of companies vying for a handful of spots.
Regardless, incubators are an invaluable resource for startup entrepreneurs.
Recently, I had the great fortune to have a startup business idea accepted to a South Carolina business incubator, Startup.SC. I spoke with Mike Schroll, founder of Startup.SC, who is a also a successful entrepreneur who successfully completed startup accelerator himself, TechStars, and I asked him for tips for other entrepreneurs who might be considering a business incubator.
1. Research your options. Not all business incubators are the same. Understand what the incubator offers in terms of resources and services and costs. These should match the needs and capabilities of your startup and startup team. Also, do not prioritize access to startup capital as your goal, as many great incubators offer much more than money in terms of experience, talent, investors, and more. Here are few things you can look for:
- Mentors: How much experience do they have? Do they have an influential network? Is the experience and network pertinent and relevant in the industry you are pursuing?
- Location: Where is the incubator located? Does its location offer benefits in terms of access to investment capital or other resources? Will you be able to grow your business from this location? Will you be able to be present as often as the incubator requires?
- Curriculum: Can you handle the training, practice sessions and mentoring, and balance it with your personal and professional schedule
2. Talk to alumni. If possible, contact alumni of the program and discuss their experiences. Inquire about their individual projects and how the incubator helped. Take all feedback with a grain of salt, as some aspects of the experience will be more or less important to you.
3. Assemble your team. Before diving into a business incubator, consider having your founding team together first. Incubators and investors place a great deal of value on strong founding teams, so you will have a better chance of being accepted if your team is solid. Ultimately, your business model may (and very likely will) pivot and change, as will your team, so be flexible once you are accepted.
4. Master your pitch. Start preparing and rehearsing your business pitch, which is the selling point of our business. Business incubators want success stories and, if the case may be, lucrative equity holdings, so they are looking for business ideas with the greatest potential for success. Put time into perfecting your pitch.
More important than selecting winning businesses, business incubators want founders that demonstrate the ability to execute. Be sure to focus on how your business will succeed, not just what it is and what it needs.
5. Decide what you want to give. Cost for being accepted and participating in business incubators vary greatly. In addition to your time and energy, costs include fees (either paid up front or in arrears) and/or a share in your startup equity. Be honest and ask yourself how much of your company are you willing to exchange for the services offered.
6. Seek legal advice. Because equity is often involved, it would benefit you to consult a qualified legal professional to walk you through the terms, conditions and final term sheets.
In the end, the most important thing is to make sure you will be completely comfortable with the business incubator experience. To a great extent, a business incubator will be your partner while you build, refine and sell your idea to clients and investors. Like any partner, you want to make sure you have some someone you can trust and rely on.
Do you have experience with a business incubator? Please share with others below!