Members of the Norfolk Startup Community attending an Akcela event
Before you take the leap and launch a start-up, it’s a good idea to spend some time thinking through your options and weighing the pros and cons. One popular option is to base your startup out of an incubator. A business incubator offers workspace, guidance and other resources to entrepreneurs launching new businesses.
Business incubators are essentially small enterprises that support startup ventures with affordable (or in the case of Akcela, free) offices, mentorship programs and services such as access to investors or potential partners. This article outlines how business incubators help fledgling business succeed and looks at the different types of incubator out there.
How do incubators help startups?
There are a number of ways incubators can help the startups they host. They can provide a range of resources and support, from physical workspaces to mentorship and advice from people who have experience in business
Many incubators offer affordable, or completely free office space for your business. This can help you save money and enable you to focus on your work without worrying about renting or buying your own office. They also give you the flexibility to scale up or down the number of desks you need for your team.
Some incubators (including Akcela), follow a defined programme which helps work through all the various areas a startup needs to cover to incorporate, get trading and move into growth. This includes preparing your business plan, applying for SEIS, creating a financial model and exploring product-market fit.
Experienced entrepreneurs and mentors
Incubators often pair you with mentors who have experience in your industry. Mentors can help you learn more about running a growing business and give you advice so you don’t have to learn all lessons the hard way. The know-how of people who have started, grown and sold businesses is invaluable, so taking a good look at the credentials of people running an incubator is important.
Incubators can also often help you find investors to give financial support your business. In some cases, incubators themselves may offer investment from their own fund. In others, they make connections between startups and the wider investment community. Either way, incubators can show you how to pitch and secure investment that will help you grow.
Working within an incubator, you will meet other entrepreneurs on the startup journey. Collaboration is a key part of incubator culture, which means you have access to a lot of talented people to share ideas and resources with. Running a startup can have some lonely moments, so it’s good to have people to share the experience with. In a good incubator community there’s always someone to help you rethink a problem or overcome a challenge.
To join an incubator, you usually need to meet certain criteria. Different incubators have different requirements, but they usually look for startups that have a good business idea and a strong understanding of the target audience for the product or service. Incubators typically want to see that you have a solid and dedicated team (even if it is just one person at first) with relevant skills and a plan for how you’re going to succeed. Before you apply to an incubator, it’s a good idea to do some research first. It’s important to find out what incubators expect from applicants and make sure you have everything you need in order to meet their requirements.
Members of the TechEd Team, an Incubated Company at the Akcela Incubator on their Students Demo Day
Types of incubators and their benefits
Every startup incubator is different, so it’s important to find one that’s the right fit for your business. With the help of an incubator, many startups see higher success rates than those that work independently.
In return for the services, space and support you receive, equity-based incubators receive a small equity stake in your business. This stake is typically less than 15 per cent and will usually dilute as you raise further investment and shareholders. The length of incubation in an equity-based incubator will usually be a fixed term of free desks and support, in return for the equity, ranging from six months up to two years. Equity-based incubators are usually run by private organisations and offer a wide range of services in return for the equity stake.
Desk-based incubators offer a community and ad hoc support services but aren’t usually as structured as other offerings. Desk-based incubators will give desks in return for rent, and the term is dependent on how long the company is willing to pay to stay. Desk-based incubators are more passive in their relationship with their startups which might be a good option for experienced entrepreneurs, but less good for people going into business for the first time.
Lab and Engineering Incubators
These incubators give access to specific and usually expensive lab or engineering equipment and have space suited to specific business types. The key here is access to high-quality manufacturing or lab equipment that a startup would usually not be able to access without large capital backing. A good example of this type is Hethel Engineering, a specialist incubator in the hi-tech engineering space. These incubators can operate on either as desk-based or equity-based incubators, so look at their model when you consider joining one.
Business incubators are a great way for startups to get the support they need to grow. They can help you find investors, find office space and connect you with experienced entrepreneurs who can advise you. Choosing the right incubator for your business can be a challenge, but it is worth it. With the help of an incubator, it’s possible succeed and grow your business much faster than if you were working alone.