Business incubators support and accelerate the development and growth of entrepreneurial companies by providing resources that include physical office space and shared services, expert mentoring, consulting services, legal counsel, and seed money – anywhere from $18,000 to $150,000. In exchange, the incubators may take a small equity stake in the company.
The incubator idea has been around since the 1950s, when most incubators were attached to universities. Today, start-up incubators are sponsored by private companies, municipal entities, and public institutions, like colleges and universities. Many start-up incubators cater to technology companies. (One of the best-known incubators, Y Combinator, birthed the file hosting company Dropbox, now valued at over 10 billion.
Like top business schools, it’s tough to get accepted into the most prestigious incubator programs. With acceptance rates typically in the low single digits, you might have an easier time getting into the Harvard Business School than one of the premium incubators. But there are literally hundreds of incubators around the globe with varying eligibility and acceptance requirements.
The good news is that incubators have a stellar record of turning out successful companies. According to the PappaJohn Entrepreneurial Center, 60% of new start-ups fail, but 90% of start-ups nurtured by incubators are thriving after three years and 87% are still in business five years after they launch.
One of the most important advantages of incubators is the tight network of advisors and investors you’re exposed to. After your time at an incubator, you may walk away with five to 10 influential people who are deeply engaged with and eager to help your company grow to the next level.