In the early days of the dot-com boom, startup success stories were about businesses in garages—bootstrapping, grit, hustle—and maybe a loan or two from a parent to keep you afloat! Fast-forward to the 2020s, and startups have incredible support structures to help entrepreneurs scale their businesses.
With Venture Capitalists and angel investors looking for the next Unicorn (a privately owned startup valued at $1 billion), startups need to be more than just a good idea and an app. Getting a startup to this stage requires an intense investment in skills and capacity.
This is where startup incubators are invaluable. Incubators like Y Combinator are well known for producing some of the world’s biggest companies. Their most notable alums include Airbnb, DoorDash, Reddit, and Coinbase. Let’s take a look at where to find the perfect startup incubator and what they offer:
The right incubator for the right business
When startups are discussed colloquially, people are often referring to tech startups. In reality, a startup refers to any business in the early stage of development—the first part of finding an incubator that matches your business area. There are startup accelerator programs that cater to businesses in various industries, and the first step to finding the right incubator is to align your startup with an industry-associated incubator.
Non-profit incubators:
Social enterprises are businesses that go beyond profit and aim to solve a social problem. Non-profit incubators are typically affiliated with government agencies or community organizations and focus on promoting economic development and supporting local companies.
A great example is Fundación Chile, a non-profit created in 1976 by the Chilean government and an American conglomerate. The incubator drives technological innovation in agriculture, forestry, environment, and information technology.
Academic incubators:
“Mark Zuckerberg dropped out of Harvard” is a justification often used by students pursuing their own startup ventures in lieu of completing their studies. In response, academic incubators have sprung up on campuses, encouraging students to combine and juggle their academic endeavors alongside their entrepreneurial efforts.
These spaces on campus allow students to stay relevant in a changing business landscape and meet fellow entrepreneurs and investors interested in growing innovations.
These incubators also strengthen bonds between academic institutions and industry players like corporations and other startups that students wouldn’t have been able to connect with otherwise. For instance, InnovaUNAM is the National Autonomous University of Mexico (UNAM) incubator. This venture-building network has 17 incubators and eight innovation laboratories that offer students training, startup advice, and mentorship.
Another university incubator affiliated with Stanford University is StartX. This non-profit educational accelerator provides Stanford students, faculty, and alums with resources, networking, and funding to accelerate the development of their startups.
Corporate incubators:
Large companies run corporate incubators and aim to foster in-house innovation. They focus on early-stage ideas to create new businesses, generate revenue, and promote an entrepreneurial mindset. Leading corporates like P&G, LEGO, and Volvo have established incubators to accelerate the growth of out-of-the-box employee ideas that could eventually turn into a new product or spinoff. Google’s Area 120 is an in-house incubator encouraging employees to build innovative projects from AI to advanced creator tools.
Key Factors to Consider When Choosing a Business Incubator
Understanding the range of options available and identifying which type of incubator best aligns with your startup’s goals and industry is crucial. Here’s how to thoroughly research and evaluate different business incubators to find the perfect fit for your venture.
Identify your business type and industry: Certain types of businesses are better suited for specific incubator programs, such as technology startups, social enterprises, creative industries, manufacturing/hardware, healthcare/biotech, food/agriculture, and clean energy/sustainability. Determine which category your business falls under to narrow your search.
Consider location: Certain incubators focus on building startups in a particular region or industry. For instance, the FuturizeU incubator program focuses on early-stage ventures in Africa. Therefore, accessing an incubator’s location and target community is vital to align with your business’s current and future trajectory to ensure an ideal fit.
Explore incubator directories and databases: There are around 7,000 incubators worldwide, so using directories and databases can help you discover relevant programs. Organizations like the National Business Incubation Association (NBIA) maintain listings of incubators. Always review the incubator’s website to gather information like success stories and companies that have grown out of the incubator to get a better idea of startup-incubator fit.
Evaluate incubator services and resources: Well-designed spaces and free snacks can be enticing propositions for incubator spaces. But, as a startup founder, you’d need to dig deeper into specific services and resources your business requires. This may include access to mentors, industry connections, funding sources, prototyping facilities, regulatory guidance, and specialized expertise. An incubator program with a full-time manager can also be highly beneficial.
Check the network of mentors: Accessing the size and quality of the incubator’s mentor network will help you better understand who will guide you if you’re accepted into the program. Evaluate mentors based on whom you would like to learn from or if they are people you admire in the industry. If they are seasoned professionals in the field you’re looking to get into or have established startups in the industry, they will likely have the right experience to help you gain new insights and problem-solve.
Understand investment and equity in startup incubators: The terms of equity and investment in startup incubators can vary, and it’s crucial for entrepreneurs to fully understand these terms before committing. Evaluating whether an incubator offers equity-based or non-equity funding is key, as this will impact the founder’s control and the startup’s future profitability. Entrepreneurs need to ensure that the equity terms align with their long-term business goals and visions, as this choice will significantly influence their autonomy and the growth potential of their venture.
Assess incubator success rates and alumni: Research incubators’ track records by looking at their success rates in helping startups grow and the achievements of their alumni companies. You can also contact entrepreneurs who have graduated from an incubator to better understand their first-hand experience.
Understand application and selection processes: The application and selection processes for incubator programs are competitive, requiring entrepreneurs to understand the criteria and prepare extensively thoroughly. Understanding the eligibility requirements of different incubators, like headcount, entrepreneurial experience, revenue, product-market fit, and specific milestones, is essential. Incubators evaluate not only the business idea and achievements but also the personal traits of founders, such as openness and conscientiousness. Successful applicants often demonstrate a strong fit for the program and readiness to engage in its rigorous environment, which includes detailed reviews and assessments by the incubator. Proper preparation is crucial for increasing the chances of acceptance into these programs.
Application Process for Business Incubators
The application process for business incubators typically involves several vital steps to ensure that startups are well-suited for the program and have the potential for growth and success. While the process frequently varies from program to program, numerous standard steps ensure that startups are a good fit and have strong potential for growth and success.
Here is an overview of the typical application process, along with tips for a successful application and common mistakes to avoid:
Steps to apply to an incubator program
Carefully review each incubator’s application requirements, which may include a business plan, team information, financial projections, and other relevant details.
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Complete and submit the application according to the specified guidelines, ensuring that all necessary information is provided accurately and comprehensively.
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If your application is shortlisted, you may be invited to interview with the incubator’s selection committee to discuss your business idea, goals, and team. At this stage, you can expect questions about your business strategy, ideal customer, and vision.
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Prepare a compelling presentation highlighting your company’s strengths, market potential, and growth strategy to showcase why your startup is a good fit for the program.
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The incubator will evaluate your application, interview performance, and pitch presentation to determine acceptance into the program.
Tips for successfully applying to an incubator
Understand your project: Clearly articulate the problems your products/services solve, how they address them, and why your team is well-equipped to execute the idea.
Establish your business: Before joining an incubator, ensure that your business is legally established, with agreements in place and basic operational structures defined.
Calculate your value: Familiarize yourself with the financial aspects of your project to effectively utilize the incubator’s resources.
Know your key metrics: Familiarize yourself with the metrics used to measure your business’s success. For example, if your business is app-based, the daily active users (DAU) metric is your north star. Be prepared to discuss your current, weekly, or monthly user count and strategies on how you wish to grow them.
Keep it short: Your application must be brief, crisp, and concise. Leading incubator programs like Y Combinator sift through over 10,000 applications per intake, making it easy for the evaluator to read.
Assemble a capable team: Demonstrate that you have a dedicated and competent team capable of executing your ideas and leveraging the incubator’s resources. Make sure you have people with unique perspectives to build ideas and solve the chosen problem.
Network: Build a strong presence on platforms like LinkedIn to establish connections with advisors, mentors, and potential investors.
Common mistakes to avoid while applying to an incubator
Incomplete information: Ensure your application provides all required information accurately and thoroughly.
Lack of preparation: Be well-prepared for the interview and pitch presentation by researching the incubator, understanding their goals, and showcasing your startup effectively.
Ignoring legal aspects: Address all legal requirements and agreements before joining the incubator to focus on growth and mentorship during the program.
Overlooking team dynamics: Emphasize the importance of having a capable and dedicated team to execute your ideas effectively
Conclusion
Selecting the right business incubator can be a game-changer for your startup. It provides not only essential resources and mentorship but also a network that can elevate your business to new heights. By understanding your startup’s specific needs and meticulously researching potential incubators, you can find a program that aligns with your goals and supports your vision for growth and innovation.
