Business incubators are organizations (usually nonprofits) that offer startups physical space to get their operations off the ground. These collaborative work environments offer not only a location at which to start your new venture, but also mentorship and networking opportunities, funding support and the use of shared resources.
Incubators provide a competitive advantage to new businesses, and as a result, it can be difficult to gain admission into an incubator. A study by the National Business Incubation Association (NBIA) in 2010 reported that companies that participated in a business incubator had an 87% success rate—almost twice the success rate of companies that didn’t participate. Here’s what you need to know about applying to and participating in a business incubator.
[Read more: Could a Startup Incubator Benefit Your Business?]
Find the right fit
Like startups, incubators come in all shapes and sizes. The first step toward joining an incubator is finding one that is best positioned to support your business idea. Incubators tend to specialize in a certain area, like a market (for instance, green energy) or type of company (like direct-to-consumer e-commerce). This allows them to more effectively share resources and expertise.
An incubator is most likely going to fit into one of five general models:
- An academic institution.
- A nonprofit development corporation.
- A for-profit property development venture.
- A venture capital firm.
- Some combination of the above.
Look for an incubator in your area first, and then narrow down your choices to find one that best fits your startup business.
Ask for reviews
As part of your research, reach out to companies that have participated in the incubators you are considering to learn about their experience. Most incubators will post a list of companies that have gone through their program. Contact their founders to find out what mentor opportunities were available and what the business accomplished (or failed to do) during their time. Some incubators require that founders go through extensive leadership and management training; ask about the curriculum and whether or not it was useful.
Incubators will look for a strong idea, but may give more weight to the team you've assembled to bring your idea to fruition.
Prepare an application
Incubators all have different selection criteria to gain acceptance into their program. “Some require certain milestones or criteria, like headcount, capital, entrepreneurial experience, background, revenue, or product fit,” wrote Hubspot.
Generally, incubators require that you submit a business plan as part of your application. Incubators will look for a strong idea, but may give more weight to the team you’ve assembled to bring your idea to fruition. The reason for this? It’s because the incubator knows it can work with talented, motivated experts to refine and build a business that works, evolving the initial idea into a sustainable company. Incubators specialize in developing people to turn ideas into feasible business models. So, while your business plan is important, it’s more crucial to have the right management team to back up your proposal.
[Read more: Startup Checklist: 20 Things to Do Before You Start Your Business]
Go through the screening process
If your application makes it through the first round, you’ll then be invited to present a pitch. Expect to discuss your company’s goals, plans, strengths and weaknesses with a screening committee.
This is your opportunity to demonstrate how your business will succeed.Your pitch should spark excitement in the incubator’s screening committee. “Remember, people are investing in you more than your idea. Businesses are fluid in the startup stage,” Michael Margolis of Get Storied told VentureBeat. “While pedigree or experience matter, your curiosity, obsession and commitment matter more. Character trumps credentials.”
You may also be asked about exchanging equity in your business for acceptance into the program. This is a common practice, especially for incubators that operate as venture capital firms. Be prepared by understanding how much your idea is worth and anticipate how much you’d be willing to trade in exchange for the connections and expertise of the incubator’s team.
Make the most of the program
While gaining entry to an incubator can boost your business idea, it isn’t a guarantee that you’ll be successful. Remember, there are still nearly 20% of businesses that graduate an incubator program and fail. The reason for this? Many entrepreneurs view a business incubator as a shortcut to raising capital—and fail to take advantage of mentorship and training opportunities.
An incubator is a big commitment: Most programs require one to two years of workshops, training, meetings and networking events. These are intensive professional environments, but if you commit to the process, the end result will likely be in your favor.
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