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From idea development to investment opportunities, there are several benefits to business incubators. — Getty Images/pixelfit

If you’re a small business or startup that is looking to find external methods to scale and grow, it’s worth looking into a business incubator program. These programs are designed to speed up the startup process of new businesses while fleshing out and sharing new ideas. They are created by private companies or public institutions, such as universities, and provide entrepreneurs with financial and technical services.

If you believe your business idea or startup would benefit from being a part of a larger system through a business incubator, you’ll want to familiarize yourself with how it works. We’ve outlined the process and pros and cons of being a part of one.

[Read: 5 Thriving Startups that Bootstrapped Their Way to Success]

How business incubators work

No two business incubators are alike as they all have different processes and timelines. While companies will typically spend two years in an incubator, the amount of time could vary based on the program. Other variables include the types of resources shared, production expenses and office space.

While every business incubator program is different, they all start with some sort of application process. Each of these processes is unique, though they typically have the same steps:

  • Apply: Every application will ask you for your professional and business information, as well as some questions to get to know you better. The application will likely also ask you for your business plan and your previous business experience.
  • Interview: Once your application has been accepted, you’ll be asked to interview with the program. These usually occur over a video conference and are an opportunity for the leaders of the program to learn more about you and your business plan.
  • Final decision: After a few weeks, you should hear back from the incubator about their decision of whether you got accepted or rejected. Generally, you’ll hear back fairly quickly, though some take longer than others.

Examples of business incubators

There are a few different types of business incubators which aim to promote growth for new businesses. They include:

  • Academy institutions. Colleges and universities will often work with their students or recent alumni to help develop their business ideas.
  • Non-profit development corporations. There are nonprofit agencies whose goals as incubators are to help stimulate economic development. These nonprofits typically search for business plans that are in service to the public's well-being.
  • For profit development ventures. Tech companies and major corporations develop in-house incubators for various purposes, including investment opportunities, or as a way to develop a new business or product from one of their employees.
  • Venture capital firms. Often these firms will create business incubators as a means of an investment opportunity. When working with a venture capital business incubator, they often look for equity in exchange for their service and funding.

[Read: 12 Food, Fitness and Gaming Startups That Are Thriving Amid COVID-19]

There are nonprofit agencies whose goals as incubators are to help stimulate economic development.

Business incubator vs. business accelerator

Oftentimes the term “business incubator” and “business accelerator” are used interchangeably, and while they both share a goal of growing a business, their processes are different. Business accelerators are for businesses at any stage of their lifespan, not just startups. While a business incubator program tries to define a business's ideas and plans, a business accelerator operates within a specific timeframe to deliver a set of goals. Business incubator programs typically last a couple of years, while business accelerator programs last only several months.

Pros of business incubators

Business incubators can be beneficial for startups in many different ways. Here are some of the advantages you can expect:

  • Free/low-cost workspace. Incubator programs typically offer a free or reduced rent for a working space, saving you that money as you begin to grow your business.
  • Access to benefits. The reason you apply to a business incubator program is the many benefits they offer you including mentorship, capital, office space, networking and development programs — all of which are hard to obtain in one place outside of these programs.
  • Structured environment. There is no right way to start a business, nor is there an exact step-by-step process. When you're in a business incubator program, you'll be devalued and groomed by experienced business development professionals who have seen through the growth of many different types of businesses. Instead of feeling confused as to what the next right step is, they'll guide you and keep you focused on the right ways to grow.

[Read: 5 Crowdfunding Sites to Fund Your Startup]

Cons of business incubators

While there are great advantages to business incubators, there are some negative side effects to consider.

  • Competitive application process. Because of the opportunities they grant their participants, business incubators have an incredibly high degree of selectivity, especially the ones with good reputations. You may have to apply to many programs before you even hear back from one.
  • Rigid schedule. An incubator program requires strict attendance and attention, all on top of the demands of running a new business or even working a full-time job while starting a new business. Some people just don’t have all the hours in a day to get it done.
  • Long duration. As the name implies, incubators are not fast-paced programs, especially compared to accelerator programs. An incubator program can last a couple years to fully develop a business idea or plan.

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Published November 13, 2020