Deciding on joining an incubator: the ins and outs

Deciding on joining an incubator: the ins and outs

WHAT IS IT?

A business incubator is a programme that helps new and start-up companies to grow, by providing an assortment of business support services, ranging from the potential provision of start-up capital (which may or may not involve the acquisition of equity in the start-up company), structured training and guidance on how to commercialise an idea and to develop a business out of it, operational support (data, phones, admin etc), networking activities, links to strategic partners and investors, marketing assistance and office space, amongst other things.

Unlike many business assistance programmes, business incubators do not serve any and all companies. Entrepreneurs who wish to enter a business incubation programme, must first apply for admission. Acceptance criteria vary from programme to programme, but in general, only those with feasible ideas and a workable business plan are admitted.

WHY SHOULD YOU JOIN AN INCUBATOR?

Focus: Joining a good incubator gives you incredible focus. You can make great leaps in realising and achieving your business goals.

Credibility: As a start-up business, it’s always a good idea to be affiliated with a well-known / prestigious institution, since investors will know that you have undergone a stringent selection process, giving investors more confidence in your ability to commit and deliver.

Administrative Support: The administrative side of the business, including basic bookkeeping and secretarial work, is taken away from you so that you can focus on developing your business.

Professional services: Incubators often have a wide range of support structures and professional networks which will be able to offer assistance that is suited to your business needs, ranging from legal to tax and even immigration.

Facilities: Joining an incubator offers advantages of being able to work (together with other entrepreneurs) in a professional atmosphere (rather than in your basement or garage for instance), which includes a shared office space, board rooms and access to computer and internet facilities.

Access to capital: All types of investors work with incubators, ranging from angels, seed funds, and venture capital.

Building your network: Connecting with fellow incubatee companies and the opportunity to interact with like-minded people presents an excellent shared space to work in. You get real life business people to review, critique and / or validate your business idea, allowing you to start off on a better footing than if you had no input or support.

Learning Opportunities: The more structured incubators will involve you in formal lectures and workshops, dealing with the most important elements of starting, funding, growing, and presenting a business to investors, customers and / or buyers.

WHAT SHOULD YOU WATCH OUT FOR?

The success of any business depends ultimately on the company being able to deliver on its goals, to develop the products and services people care about and the ability of the founders to adapt and innovate. An incubator will only take you so far. Although incubators are a good place to consider when starting out, different incubators have different requirements and goals of their own. An incubator is run just like any other business, and has specific goals which they want to achieve. Understand what that goal is and what they want from you, so that you are well-informed and know what is expected of you and what to expect of them.

Some incubators may really just be investment vehicles which use the incubator as an opportunity to find early stage businesses and create the opportunity to invest in them. The incubator will most likely want preferential terms, so be very careful to make sure you understand what these terms are and how they could affect the way another investor views your company. Good incubators add enough value to justify their equity stake in your company (rather than tagging along for a free ride). So, as with any investor, remember that their money is the least valuable contribution to your business and that they should add value strategically first!

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