What is the difference between an Incubator and an Accelerator?
There is another format called a Business Accelerator that is also quite popular. Accelerators are for later-stage businesses – usually ones that already have a product/service and some market traction – and are usually operated as for-profits, and funded by investment funds. And whereas Incubators do not usually have set time-frames for “graduation”, most Accelerators do.
Do Incubators provide funding for start-ups?
Not directly. By joining an Incubator, a start-up/ entrepreneur may receive quicker and more direct access to funding sources – banks, angel investors, and institutional funds – than going it alone. This is due to the profile of the managers and board members of the Incubator who themselves are typically well-connected in the business environment, and because Incubators often host presentation/pitch events that attract investors as the audience.
How do I know if I am qualified to join an Incubator?
The only way to find out is to apply. But generally, an entrepreneur should have good knowledge of the market or type of business being contemplated; should have some experience in that market or technology; be skilled in developing the product or service being contemplated; have most or all of a plan or already have a minimally required embodiment of the product or service; and of course, all entrepreneurs must have significant energy, desire, and fortitude.
What does it cost to be a member of an Incubator?
Most incubators charge a monthly fee for membership and require an immediate 6-9% equity commitment. Some incubators include co-working or office space in their fees. The prices and equity commitments vary based on location and extent of services provided.
At StartUpNV, our fees are $100/mo for the incubation program. Co-working space rental is additional. We also ask founders to pledge 1% of the company’s equity to our non-profit foundation at the time of an exit. This is our long term funding strategy — to succeed along-side our member companies. The 1% amount is dilutable at the same rate and on the same terms as founder equity. Our goal over time is, with enough successful exits, to eliminate all fees and provide “starter” capital for every company admitted to the program.
How long would the average entrepreneur/start-up stay in the Incubator?
Time-frames vary depending on a number of factors. A start-up that already has a product/service built, or already has an initial “beta” customer base, may need 6 months or less; but a fresh-start effort may need 18 to 24 months.
What kinds of businesses are appropriate for an Incubator?
One of the great things about business is it is always changing. So one is never able to know for sure what kinds of businesses will blossom from or in an Incubator. All Incubators have practical limitations as to the kinds of businesses that can be helped via the Incubator format. These limitations are mostly due to the areas of expertise represented by the staff (volunteers and employees) and the facilities themselves. StartUpNV is interested in being agnostic as to business categories and sectors; but we are always honest with entrepreneurs as to whether or not we believe StartUpNV can be helpful. As with anything in business, if two parties see a good fit, it is usually worthwhile to work together.
What should an entrepreneur do to prepare to apply to an Incubator?
As with the Incubator process itself, an entrepreneur should be always be striving to be as far along as possible in every aspect of creating a business. In entrepreneurship, one’s work is never done. So, first of all, make sure that the type of business or product/service is something the entrepreneur is truly passionate about. Otherwise, all the work required will seem like, well, like work. Try to establish a solid plan – a business plan that is formally written out, or a way to convey that plan verbally in a presentation. And if the product or service is already developed to the point of being demonstrable, great. Practice pitching the business to others, and learn to take critique and incorporate suggestions for the next time. Be determined and politely aggressive. And always keep learning.