What is a Startup Incubator

What is a Startup Incubator

A lot of amazing startups with brilliant ideas are born everyday, and the founders are young, energetic, determined to do whatever it takes to build their business. But still there is over a 90% failure rate amongst startups within the first year of  launch, not because of problems in the idea or effort, but because founders lack the knowledge about business strategies and money management.

Possibly every startup copes with limited funds and never ending expenditures. More importantly they lack the proper knowledge of the market and competition which leads them to making uninformed rash decisions ultimately leading to failure of the startup.

So what’s the Solution?

The answer is Startup Incubators.

A startup incubator is a collective well-designed plan or a program that helps the young startups to establish when they are at very initial stages. Incubators assist the young businesses in their infancy and take them to operational or profit generation stages. Business incubators help a new business by providing assistance and guidance to get through various hurdles while starting a business. These hurdles can be operational space, funding, legal-accounting-technical assistance, network & logistics, mentoring, training, and other essential services. As per various management websites and books, every business has four stages: Planning, Launch, Operations, and Growth. A business incubator can help to shape up the business in any of these stages. The arena of business is expanding day by day and there are new domains, offshoots and industries everyday getting born. Every year we are experiencing that a new sector is shaping up to be the next big thing in the market. A new business has endless opportunities to capture in the market. However, it requires many resources too. 

 How does it work?

Startup incubators serve just about any business which comes for assistance irrespective of industry or stage. Although few incubators have specialized themselves to become niche specific like engineering, digital, technology etc. Startups have to follow proper guidelines and procedures in their journey to become valuable businesses. Generally incubators select startups through a very detailed application process. Acceptance of the application totally depends on the idea and feasibility of investment required in the business. Once the application is accepted the incubator can spend various amounts of time on a startup based on certain factors:

  1. Stage of business – Idea, Prototype, MVP, Traction, Scaling
  2. Product brand Value – The identity of the startup in the market.
  3. Funding – Seed, Series A, Series B, Series C etc.

During the development phase of new businesses, Incubators can be really helpful in many ways:

  • Network Development

Networking plays a vital role in developing the entrepreneurship skill. Established entrepreneurs, marketing genius, tech giants and many more subject matter experts are part of the incubator groups. Young entrepreneurs and businessmen can get precious knowledge and support through Incubators.

  • Mentoring

Incubators can encourage, provide guidance and share experience through the mentoring. Mentors lays down a powerful positive impact on young entrepreneurs when starting fresh. Experience is an expensive asset which can help the startup overcome the initial hiccups.

  • Flexibility

Bringing an Incubator on board helps a startup to manage issues related to – sales, marketing, legal, accounting and many more. It gives the flexibility to the entrepreneur to focus solely on the core of their product or service.

  • Cost Saving

Saving money is a great aid to the success of a new startup. Specially, at the beginning stage this factors decides whether business will sink or sail. Saving every penny can determine how business will tackle the unforeseen situations, unavoidable investment opportunities and slow market time. Incubators play a role of a saviour for new startups. Getting investors on board quickly, getting facilities at reasonable prices like office space, technology development, legal help and many more.

  • Well Managed

People involved in the incubators firm are the experts and highly experienced professionals. Their efforts direct the new startups towards the smooth and right direction. Resulting in better management with less margin of errors.

  • Getting Investment

Getting the right capital at the right time is the key to every business. Incubators help startups to get the early critical investment. It can be done by incubators itself or by attracting investors from the industry. 

  • Increase Success rate

According to the survey of Executive Coaching in 2013, 80% successful CEOs accepted that they received some form of mentorship. 93% of the successful startups admitted that mentorship or guidance is the instrument to success.

Every sector of business has its own challenges and hurdles. A business incubator’s help or assistance depends on the sector (there are different) of individual startups. Still, there are three aspects on which they are required mostly. Firstly, funding or investment. According to the financial times report published in 2017, 95% of the startups closed down in their first 5 years because of lack of funding. Incubators look for suitable investors in exchange for equity share. Secondly, network or accessibility of the market. Incubators work as a solicitor because usually they are in direct touch with investor firms, venture capitalist & other investors. From getting the office space to technical assistance can be arranged at a low cost resulting in saving a lot of money. Thirdly, Learn and grow. With the help of incubators, the young entrepreneurs can access the network of mentors, experts and coaches from various sectors across the globe. This list may include other entrepreneurs, legal experts, technical gurus, angel investors, marketing heads, researchers, media house owners and many more.

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