It can work that way, but it can also end in a mess – for entrepreneurs and incubators alike.
In 1980, only 12 incubators existed in the United States. Today, there are over 1000 in North America and many more across the globe in Africa, Europe, Asia, Australia, and the Middle East. Incubators can benefit communities by creating opportunities for higher-paying jobs and sales of new products and services. When it works, the concept creates a catalyst for all concerned.
Two things make a difference between success and failure for an entrepreneur: a winning idea and a person or team who can take it from concept to reality. My brother Matthew and I have practice in both areas, and we put those skills to use helping others make their entrepreneurial dreams come true. Years of experience makes it easy for us to determine when a plan and a person are likely to succeed. An incubator needs a team in place with entrepreneurial experience that can recognize the potential for success along with understanding what needs to happen to get a business launched.
Les McKeown co-founded an incubation company in West Belfast, Ireland. This was a community that looked like an unlikely place for success: unskilled labor, high unemployment and almost no capital sources, yet the incubator was a success for years.
McKeown credits three reasons for their success: experienced entrepreneurs conceived and ran the program and they were compensated for the success of the operation, local government provided initial funding then left it alone, and the initial companies selected had high potential and the ability to succeed quickly. This approach provided headlines at the start and encouraged the best potential entrepreneurs out there to apply. It also created an excitement that drew experts who wanted a connection with the program as a way to promote their own work.
Five years in, this incubator won the European Inion Job Challenge Award and they repeated the same concept in the UK and other locations.
As an entrepreneur, an incubator can improve your chances of success, or at least speed up the process. Here’s the trick – you have to interview them as much as they interview you. Ask the tough questions. Look into the background of the people running the program. Here are some issues to explore before making the leap into an incubator environment.
- Are the people in charge experienced entrepreneurs? You need to be able to talk to people who’ve been there and understand the challenges and requirements. This is not a place for academic concepts – you need people who have been in the trenches.
- Are the impressive names on the masthead real? Will those people be part of the day-to-day operations or are they there only to be rainmakers for the funding and answer questions from the press? There’s no point in having a rich list of experts if you never see them.
- What is the incubator offering you? Space at discounted rates, services such as accountants and marketing experts, business training, and mentoring are the common features most incubators provide. Ask to sit in on a training session, talk with their marketing and accounting people and compare their rates with what you would pay at an industrial park. Everything sounds good, but you need to be a responsible business owner and do your due diligence.
- What do they want? Sometimes an incubator will take an equity position or determine another way to be rewarded for your success. This is not unreasonable. Just make sure you think that what they offer is worth what you’re giving.
- Look for performance and launching expectations. Some incubators think having the space full constitutes success. You, on the other hand, don’t want to live there forever. Ask about the average length of stay and build a business plan that includes a date to move on.
- Check their track record. How long have they been in operation? How many businesses have successfully launched from their incubation program? If they can’t give you these statistics or their success is limited, this may not be the place for your business.
- Talk to other entrepreneurs who are part of the program. Are they happy with the help they’re getting? Does the culture of the incubator mesh with your company’s culture, or the culture you hope to develop? Do you like and respect them? Do you feel they’re headed for success? Incubators can generate a lot of positive energy… or not.
- Does it feel right for you and, if you have one, your team? The same gut feelings that have helped you so far with your business should be consulted here. Are you enthusiastic or coming up with reasons not to do this? Trust yourself.
While Matthew and I have never been in an incubator program, we’ve been lucky enough to have great mentors and advice over the years, and we’re also smart enough to know that it made all the difference in our success. Every startup has its own version of an incubator, whether organized programs or informal resources such as chatting with colleagues or the guy who owns your favorite restaurant down the street. Incubator space may be discounted, or you may just get the chance to use your aunt’s basement until you can afford office space.
Whatever your choice, just make sure it’s right for you and your business. You’ll know what that looks like better than anyone.