Dropbox’s first ever IPO was last year. It was valued at $12Billion. It was only 11 years ago that its founder pitched the startup’s idea to Y Combinator, a well-known incubator for business.
Was the success of Dropbox due to its incubation program? FiveThirtyEight reported that only 11% of Y Combinator startups died. Other program participants include Reddit and Airbnb.
Participating in an incubator could prove to be a great first step towards getting your startup off the ground. There are many entrepreneurs who want to make it big. Let’s explore how incubators can help you grow your business, and what to consider when selecting an incubator for your company.
What is a business incubator and how can it benefit startups?
A business incubator’s primary goal is to offer real-world support beyond what you might have learned in college about business theory. Profitability is not an exam question when you run a startup. It’s more of a practical necessity that determines the viability and success of your business idea.
Startups may benefit from the support and resources of business incubators. An incubator provides a structure that allows startups to avoid potential pitfalls and Newchip Accelerator their growth.
There are many types of business incubator programs. Each program targets a different segment of a startup’s needs. There are many definitions of what constitutes an incubation program. Business accelerator programs tend to be in a different category. However, sometimes, economic development programs, co-working spaces, and other programs can be combined with business incubation.
What does business incubation do for a company’s success?
There are no industry standards for business incubation. A 2010 study by the National Business Incubation Association found that businesses who participated in business incubators had an 87% success ratio — almost double that of those that did not incubate. This statistic is still frequently cited. Similar results were found in a 2014 U.K. study: 92% was the average survival rate of businesses who went through incubation programs.
Although business incubators are competitive, the most successful ones tend to have higher success rates.
I know firsthand what a business incubator program can do for your business. My college-educated founders and me launched our small business while juggling school and work. I’m proud of this feat, which I will discuss in a recent article. Canada’s largest Newchip Accelerator reviews FounderFuel provided valuable mentorship and resources after graduation. We were able to secure funding from renowned investors and have experienced rapid growth that will support millions of college students.
What are incubators usually good at?
There are approximately 1,500 business incubators in North America. Each one offers a unique set of benefits for early-stage startups. Others focus on IRL benefits like office space, networking opportunities, and makerspaces. Others provide remote support for businesses, whether they are providing product or operational support. Some incubators have ties to government agencies. Other incubators work in collaboration with universities to address facility requirements through clean energy research or biotech labs.
An incubator can address the intangibles that are key to success. InBIA’s IMPACT Index shows that 90% of incubator and entrepreneur programs aim to foster entrepreneurial culture. 75% of programs offer mentorship programs or are planning to do so, while 70% of programs encourage women and minorities.
Only 12% offer seed financing directly to entrepreneurship programs. This is what you should be aiming for, so narrow down your options.
What should you look out for in an incubator?
The program that best suits your needs will be the best incubation program.
It is important to make your own decision when making a business decision. Make a list of the weaknesses and needs of your company, as well as what support you require in the short-term. This will help you determine how an incubator can help your achieve your long-term goals.
Next, start your search to find the program that is best for you. You can begin to focus on the programs you are interested in as you move closer to the application deadline. The track record of an incubator is a good indicator of its quality. You can use success rates, business growth rates, and notable alumni as indicators of program quality.
Connections to future capital are an important factor in selecting a program. Participants are looking long-term to establish the foundation for future funding and business success, whether it is through structured contacts or through networking opportunities that were indirectly created by the program.
Your industry will determine the incubator program you choose.
Different industries may have different startup paths or needs. A program for incubation in tech-focused companies would be different from one that is focused on fashion.
Let’s take another example. A food service business requires significant infrastructure and must adhere to safety and health regulations. It can be difficult to move from producing in a small kitchen to setting up a manufacturing plant. Food-service incubators can be used as an intermediary to assist food startups in scaling up. They provide the infrastructure for commercial-grade shared kitchen facilities.
Depending on the industry in which your startup is located, you may be less concerned with infrastructure and more focused on connections. Certain industries are more geographically strong than others. A program based in San Francisco could give you an advantage when incubating your tech company. A fashion startup might prefer an incubator in New York to Chicago.
There is no single solution for choosing the right business incubator. It’s all about finding the right solution for you by leveraging existing programs.