VC GLOSSARY

An incubator is something akin to startup 101. Joining one can be a huge help for budding entrepreneurs who have great business ideas but don't know where to start. Incubators can also provide support to startup founders who lack the resources to grow their ideas into a full-fledged business.

Incubators do this by providing up-and-coming businesses with the networking opportunities, access to funding, and mentorship they need to get on the road to success.

It may prove to be a good idea for a startup to take this route. After all, an estimated 90% of startups fail within ten years. It stands to reason that a solid foundation in the form of business incubation could help to significantly reduce the risk of a startup becoming another failed business to add to the heap.

An incubator is a firm that nurtures businesses, startups, and entrepreneurs in the very early stages. As such, incubators provide a range of resources and invaluable support to help those with a business idea build a business model and prepare to go to market.

Incubators help startups assess the viability of their business throughout the program. They also encourage them to strengthen their ideas over time. In some instances, this means that a startup’s idea may evolve into something different. There isn’t usually a time limit on how long this process takes.

Most incubators are nonprofits funded by a local university, institution, or economic development organization. There are, however, some for-profit incubators that ask for an equity stake in fledgling startups in return for their services, although this is more likely to occur with business accelerators.

Incubators set up everything a new business might need to grow and succeed. In fact, incubators address many of the key reasons startups fail head-on.

The types of support they provide include:

• Mentorship and advice - The opportunity to learn from seasoned professionals and entrepreneurs in the space.
• Office space or co-working space - Incubators may cover the overhead costs of an office or provide an opportunity to work alongside experts in their own offices. This might also include administrative functions, as well as business hardware and software.
• Access to investors or capital - A chance to build relationships with potential investors or financial partners.
• Networking opportunities - A space to collaborate and forge relationships with other small businesses or entrepreneurs.
• Learning opportunities - This might include training or workshops in areas the new business needs.

All incubators have the same goal: to help new companies work on their ideas and prepare for launch.

There are, however, different types of incubators with distinct specialisms. The most common types include:

These offer the same kind of support and resources to startups, but don’t require the new business to be on-site, in a physical space with the incubator. This might be because a new business wishes to maintain their own premises. For example, Hudson Valley AgriBusiness Development Corporation’s Incubator Without Walls is a virtual business incubator.

This kind of incubator fosters socially conscious entrepreneurship. This means offering support to businesses looking to make a social or environmental impact on a local or regional level. Halcyon Incubator is a public incubator, for example.

Also known as culinary incubators, these offer the use of equipment, kitchen space, and further business resources to small food companies hoping to make it in their local marketplace. Chobani Food Incubator is an example of a kitchen incubator.

They specialize in the fields of healthcare, medical devices, and medical technology. Medical incubators are particularly important as startups in the field often have financial difficulties and require access to specialist equipment. Medical Incubator Japan is an example of a medical incubator.

While the above examples represent the main types of incubators, there are further specialized incubators that cater to specific industries, such as green technology, fintech, fashion, and education.

All in all, incubators offer great support to those with innovative ideas and/or entrepreneurial ambitions. They give people who may not have access to the resources of others an opportunity to make it in the business world. Incubators help shape sparks of inspiration into a product or service that previously inexperienced startups are ready to launch.

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