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What Is a Business Incubator? Definition and Guide

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, 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. However, 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 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 a cash infusion up front or on achievement of a milestone. Most companies hope that an accelerator will put them on an aggressive growth trajectory.

Sponsors

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

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:

  • Education
  • FinTech, or financial technology
  • Ceramics
  • Green technology
  • Homeland security
  • Fashion
  • Food

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 (InBIA) serves incubator sponsors worldwide. A member directory lists many of the incubators currently in operation.

What Is a Business Incubator? FAQ

What does a business incubator do?

A business incubator is an organization that helps new and startup businesses to develop by providing services such as management training, office space, access to financing, and networking opportunities. The purpose of a business incubator is to accelerate the successful development of new businesses and help them to survive and grow.

What is the example of business incubator?

  • Techstars: Founded in 2006, Techstars is a global network of business incubators headquartered in the United States. It has offices in over 20 countries and has helped over 2,000 startups since its founding.
  • Y Combinator: Y Combinator is a famous Silicon Valley-based startup accelerator that has helped launch over 2,000 companies. It provides seed funding, mentorship and access to its network of investors.
  • Startupbootcamp: Startupbootcamp is one of the largest networks of business incubators, with 20+ programs across the world. It provides mentorship, access to its network of corporate partners, and investment opportunities.
  • The Brandery: The Brandery is a Cincinnati-based business incubator focused on helping startups in the consumer product space. It provides mentorship, resources and access to its network of investors.

What is an incubator and how does it work?

An incubator is a facility designed to nurture and accelerate the growth of new businesses. It typically provides resources such as office space, access to mentors and investors, shared services, and other resources to help entrepreneurs launch their business. Incubators typically offer a variety of services, such as educational programs, mentoring, networking, and access to capital. Incubators also provide a supportive environment where entrepreneurs are encouraged to take risks and learn from their mistakes.

What are the 3 key factors that make a good business incubator?

  • Network and Connections: A good business incubator should have an established network of mentors, investors, and other resources to support the success of incubated businesses.
  • Education and Training: A good incubator should provide educational opportunities and resources to help entrepreneurs develop their business skills and learn best practices.
  • Resources and Facilities: A good incubator should have access to resources such as office space, technology, and other infrastructure to help entrepreneurs get their businesses started.
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