If you’re in the process of launching a startup, you’ve probably thought about applying for a startup incubator. In this guide, we cover all the basics: what they are, what they cost, what the requirements are and so much more. We also cover how they compare to other startup resources, such as accelerators, and we provide an overview of the top startup incubators. Finally, we provide tips on how to select the right incubator for you—let’s dive in!
What is a startup incubator?
A startup incubator, also known as a ‘business incubator’, is a program that provides resources and support to new small businesses and first-time founders. Incubators typically provide access to mentorship, discounted technology, physical workspaces, and networking opportunities. It is designed to help startups test their ideas, hone their business plans, and secure their first customers—which is helpful for getting a new initiative off the ground and securing funding from venture capitalists down the line.
How do startup incubators work?
Startup incubators typically have an application process that entrepreneurs must complete to be considered. Once accepted, entrepreneurs are typically required to participate in a program that lasts anywhere from a few months to a year. During said time, founders are provided with a ton of resources including mentorship, office space, and networking opportunities to help hone their business plan and grow their business. At the end of the program, entrepreneurs present their businesses to potential investors to secure funding.
What are the requirements to get into a startup incubator?
The requirements to get into a startup incubator vary from program to program. Most incubators require founders to have an idea for a startup, a business plan, and a team of at least two people. In addition, some incubators also require that entrepreneurs meet a minimum funding threshold before applying. Outside of the basic requirements, some incubators focus on specific niches, like med tech startups or health tech startups, some have specific requirements for the types of businesses they accept, and some only focus on startups in a particular area, like Silicon Valley.
Why do founders use startup incubators?
Startup incubators are a great way for first-time founders and early-stage startups to get their businesses off the ground quickly and find product market fit. As mentioned above, they provide a ton of key resources to ensure the highest possibility of success. In addition to the resources, incubators may also provide founders with introductions to mentors, investors, and industry experts to help scale their ideas. Finally, startup incubators typically provide entrepreneurs with exposure to investors during the final phase of the program: demo day.
What are the types of startup incubators?
Startup incubators come in a variety of shapes and sizes. They can either be for-profit or non-profit, and they can be focused on specific industries or they can be open to all kinds of businesses. Here are some of the common types of startup incubators:
- For-profit incubators: These incubators make money by taking equity in the businesses they help launch.
- Non-profit incubators: These incubators are typically funded by grants or donations, and they don’t take equity in the businesses they help launch.
- Industry-specific incubators: These incubators are focused on a specific industry such as healthcare, technology, or fashion.
- Geographic incubators: These incubators are focused on a specific geographic area, and they typically offer access to local resources and networking opportunities.
What are the benefits of going through a startup incubator?
There are many benefits to going through a startup incubator. Here are some of the top benefits:
- Access to resources: Incubators typically provide access to resources including physical workspace, discounted software, and potentially even raw materials.
- Guidance and support: Incubators typically provide founders with the guidance and support they need to launch their businesses through introductions to mentors and industry experts.
- Exposure: Incubators typically provide founders with the opportunity to gain exposure to investors to potentially secure funding.
What are the drawbacks of going through a startup incubator?
While there are many benefits to going through a startup incubator, there are a few drawbacks to consider, here are some of the most common:
- Equity: Some incubators charge a percentage of equity in exchange for the resources, guidance, and exposure they provide.
- Time commitment: Incubators typically require founders to participate in a program that lasts anywhere from a few months to a year, which may not work for everyone.
- Restrictions: Some incubators have restrictions such as specific industries or geographic areas they focus on.
What is the difference between startup incubators and startup accelerators?
Startup incubators and accelerator programs are similar in that they both provide resources and support to entrepreneurs. However, there are some key differences between the two.
Startup incubators typically have a longer program that lasts anywhere from a few months to a year. They provide access to resources such as mentorship, workspaces, and networking opportunities. They also provide guidance and support to entrepreneurs to help them develop their business ideas and launch their startups.
Startup accelerators, like YCombinator or 500 startups, on the other hand, are typically shorter programs that last anywhere from a few weeks to a few months. They provide access to similar resources such as mentorship, funding, workspace, and networking opportunities, but they are designed to help founders scale their startups, not launch them, and help prepare them to take on seed funding or venture capital.
What does participating in a startup incubator cost?
The cost of participating in a startup incubator varies depending on the program. Some incubators are free, while others may charge fees or require you to give them equity.
Do startup incubators provide capital to startups?
Some incubators provide access to funding and grants to help startups get off the ground, others do not. It depends on how large the incubator is and what type of incubator it is (for-profit vs not-for-profit).
What are the top startup incubators in the United States?
- Idealab is a technological incubator out of Pasadena, CA that gives start-ups the resources they need to launch new products and services quickly.
- The Batchery is a global incubator situated in Berkeley, CA that focuses on seed-stage firms that are primed for rapid growth.
- Upward is a global incubator based out of New York City that is dedicated to reviving second-tier towns through innovation.
- SteelBridge Laboratories is an incubator based out of Pittsburg, PA for FinTech startups.
- Invenshure is a medical device and imaging incubator based out of Minneapolis, MN that invests in medicines, developing platform technologies, and medical device and imaging startups.
What to look for and how to select a startup incubator?
When selecting a startup incubator, it’s important to do your research and talk to other founders who have graduated from the program. Here are some of the things to look for when deciding between multiple startup incubators:
- Resources: What resources does the incubator provide? Does it provide access to mentors, investors, and industry experts? What about workspace, funding, and other resources?
- Equity: Does the incubator take equity in the businesses they help launch? Am I okay with giving up equity in my business in exchange for the services it provides?
- Time commitment: What is the length of the program? Am I committed to putting in the time required to make the program successful?
- Reviews: What did other founders say about the program, did they think it was worth it? What are some of the critiques other founders had and are you okay with that?
- Track record: What is the historical performance of the companies that have graduated from the program? Are there only one or two stand-out successes or many successes?
Final thoughts on startup incubators
Startup incubators are a great way for founders to initially get their startups off the ground quickly. They provide access to a ton of resources which can be invaluable to founders that are strapped for cash. Before deciding to participate in an incubator, make sure to do your research so you understand exactly what is required of you to graduate. Also, make sure to talk to other founders to ensure the program fits your needs and what you are looking to get out of it.