What is a Business Incubator?
A business incubator is a workspace created to offer startups and new ventures access to the resources they need, all under one roof. In addition to a desk or office, incubators often provide resident companies with access to expert advisors, mentors, administrative support, office equipment, training, and/or potential investors.
Most incubators are created as temporary launching pads for new businesses, with the expectation that participants will eventually graduate and move out. However, not all graduates are successful, unfortunately, and some decide their business concept wasn’t viable and shut down instead.
Incubators vs. Accelerators
Many people use the terms “incubator” and “accelerator” interchangeably when the two types of program often have different goals and different timeframes.
Incubators vary, but most exist to help a founder or team determine if a business concept is viable and then set them up for success. Some incubators put a time-limit on how long a company can stay in the space, but one to two years is fairly typical. Some incubators take an equity stake and others simply charge a fee to be in the space and able to tap into the many available resources.
Accelerators, on the other hand, are short-term, fast-paced, structured programs lasting 3-4 months. Many accelerators are competitive, limit the number of participants, and may provide cash infusion up front or on achievement of a milestone. Most companies hope that an accelerator will put them on an aggressive growth trajectory.
Incubators are typically partnerships or collaboratives sponsored by one or more pro-business organizations, such as:
- Local colleges and universities
- Government entities, such as municipalities
- Economic development organizations
- For-profit ventures, including investment-related
Though 19% have no sponsoring organization, according to the Northeast Indiana Innovation Center.
Types of Incubators
While the term “business incubator” generally refers to commercial space provided to new businesses, many incubators specialize in a particular industry or type of business and work to bring similar companies together. Some specialized incubators cater to:
- FinTech, or financial technology
- Green technology
- Homeland security
Other incubators are generalist spaces and welcome a wide variety of businesses, rather than companies that serve a particular market or industry.
Finding a Local Incubator
The International Business Innovation Association (IBIS) serves incubator sponsors worldwide. A member directory lists many of the incubators currently in operation.