An incubator, from a fairly definitive perspective, refers to a device or micro-atmosphere which helps an organism to live and function in its very nascent stages while providing it with the necessary requirements for its survival without hampering or altering its natural life-cycle. Thus, Business Incubator came into the picture with a lot of promise.
The importance of an incubatory ambiance for a start-up came up with modern management theories which treated an enterprise more like an organism than just a constructively ordered set of operations with a motive to generate revenue.
Similar to the human life cycle, the life span of a start-up has certain formative stages of growth wherein the fundamental idea backing a particular business model needs to be conditioned or incubated in order to facilitate a smooth market implementation.
WHAT EXACTLY IS A START-UP INCUBATOR?
A start-up incubator essentially provides an eco-system for the start-up to achieve desirable growth and functionality.
This primarily includes temporary work-space and requisite specialized necessities including web access which the start-up could use for little to no rental charges.
Other than these facilities, an incubator offers help with basal business ethics and protocols, rudimentary networking assistance, enhancement of marketing capacities, leveling internal discontinuities in communication, corporate connects, financial mediation and managerial functionalities.
WHAT IS AN ACCELERATOR? HOW IS AN INCUBATOR DIFFERENT FROM AN ACCELERATOR?
Another facility resembling incubators is a start-up accelerator. Accelerators, though quite similar in service with start-up incubators, are subtly different.
While an incubator is an eco-system designed to boost an enterprise in its alpha stage, many-a-times just confirming the viability of the entrepreneurship thus offered; an accelerator comes into play when a fairly confirmed business plan with a functional revenue scheme has been established which needs to push its boundaries and expand.
An incubator could nest a start-up for years before it finally manages a stable and functional business scheme wherein accelerators allow time windows of two or three months to gain the desirable flow.
ARE INCUBATORY SERVICES REALLY FOOLPROOF?
An environment endorsing entrepreneurship quite naturally allows accelerators and incubators to fit in aptly.
But the need for an enterprise to enroll in an incubator or an accelerator and its effectiveness has to be questioned and verified skillfully.
Accelerators often attract venture fund, which requires the company to disburse equity share to the venture fund capitalist in return for the initial monetary grants.
This again is a point an entrepreneur is not supposed to overlook. Though the grant thus sanctioned might look temporary, the equity continues to remain with the financing firm even after the start-up has come out of the accelerator scheme.
The ownership bestowed in the initial stages of the start-up might turn out to be burdensome in its flourishing years.
BUSINESS INCUBATORS: EXPECTATION VS REALITY
In an entrepreneurship venture, it is important for the leaders to understand whether an incubator is actually offering what they need.
For most entrepreneurship, just a continuous flow of ideas and strategies is enough to obtain the desired traction. An incubator may look like a goldmine from outside for any new enterprise but there is always a specific procedure for getting inducted in one.
A start-up has to apply for the incubation and get itself approved before availing the incubator services.
In this phase, it is important for the start-up leaders to check on the incubator from a number of different aspects as post induction, regular rent is to be paid to the incubator.
Venture fund if any, has to be looked for with all their terms considered before an equity share is promised.
For most start-ups, it is important to choose an incubator which promises the exact work-force that it requires. While an incubator may have been successful for a lot of start-ups in the past, it is essential to know whether it will do so for each new one that wants to be inducted.
Beyond mentorship, there are certain other factors which need to be scanned namely incubator cost, location and previous performance statistics which on a larger scheme of things are interlinked.
An incubator demanding a costly rental plan or heavy loan terms could end up increasing the overhead expenses of the firm for a good one or two years.
If there isn’t noticeable growth in the revenue stream, this could be a heavy detriment for the firm.
The location of an incubator plays a major role in the process of streamlining and making the resources work in synergy.
If an incubator wants a start-up to relocate to a different spot or city, it is essential for the firm to verify if the relocation could cost them a loss of potential customers or compensate their already stabilized network of stock points.
In many cases, an already sanctioned venture fund could clash with the decision of relocation, resulting in loss of funding and goodwill.
A very important thing to do before induction into an incubator is to catch up with the alumnus which has been a service obtained for the incubator previously.
A transparent knowledge of what and how the problems and frictions were for them could help a firm to decide whether or not they are on the right track.
Interacting with the successful alumni not only helps to gauge the problems that could come up in the incubation process, but it also gives the leader a clear idea about the exact way of utilizing available resources.
A major criterion which many start-ups fail to realize while entering an incubation scheme is to time their induction correctly.
An incubator boosts a company during a very specific time region of its growth and to enter too early or too late could turn out to be detrimental for the company.
If a start-up firm is not ready with a concrete business plan or adequate traction, an incubator might end up being more of a friction to the firm’s growth while if the firm is already having a smoothly operating business model and is able to generate substantial revenue by itself, an incubator wouldn’t be of much purpose and profit to the firm.
It is to be noted that before entering an incubator facility, the firm needs to sign a deed which would require the firm to commit an involvement for one or two years.
An accelerator or an incubator are eco-systems where even though one can enhance one’s start-up idea, one needs to be answerable to somebody for the growth it has been projected to achieve. Herein, another person is invested in the growth of the start-up.
Though business incubation is pro-entrepreneurship and it optimizes the possibility of success, there are many failed business incubation cases worth considering. Before induction, thorough research of alumni firms, their success rate and loopholes in terms of service of the incubator is desirable.
Share your thoughts on Incubators in the comments below. Let us know what is the current situation of Incubators in your country. How are they providing aid to deserving startups?