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- iHaveNet.com: Small Business Guide
Business incubators -- organizations that help with the development and commercialization of startups -- have emerged as an important resource for fast-growth businesses seeking financing. Below are answers to some of the most frequently asked questions about business incubation:
What is a business incubator?
Business incubation is a form of business enterprise development.
As the name suggests, business incubators nurture young businesses through their vulnerable startup phase. They do so by providing access to a range of services that include:
- Management assistance
- Access to financing
- Marketing and branding assistance
- Financial/accounting services
- Legal counsel
- Business development assistance
- Recruiting services
- Links to strategic partners
- Networking
- Training
In many cases, a number of incubating companies will operate under the same roof, which lets them share office services, conference rooms, access to equipment, and other necessary services. Once a company is ready to stand on its own feet -- i.e. when it is financially viable -- it leaves the incubator and begins life on its own.
How do business incubators work in the Internet world?
Driven by companies such as Idealab and Divine Interventures, Internet startup incubation has become popular recently. These incubators are based on the concept that turning an idea into dot-com success requires rapid execution. A Web startup that joins an Internet incubator is given access to that group's network of strategic and financial support services.
In many cases, the incubator assigns a management and creative team to the new business in order to get its site up and running in a matter of weeks. In addition, because these incubators focus only on Internet businesses, new startups are able to tap into the skills of more experienced members.
How do incubators choose the businesses they work with?
Like venture capitalists, incubators impose strict selection criteria on their prospects. While some accept a mix of industries, many focus on a single niche like the Internet, technology, or biomedicine. The process for applying to an incubator is similar to getting equity financing.
While each incubator has different requirements, in general they will ask you to send a copy of your business plan's executive summary and a slide presentation (often in Microsoft PowerPoint). Once they review those materials, they will decide if they want to see your entire business plan. If that interests them, several rounds of interviews may begin.
What are the plusses and minuses to business incubators?
Business incubators have a number of obvious benefits. They provide structure for many of a company's most basic needs, allowing entrepreneurs to remain focused on developing their ideas. In addition, business incubators are often able to attract resources that start-ups could not attract independently.
Incubators also often have relationships with venture capital firms, providing a strong entrèe for later rounds of financing.
On the downside, because they provide more services than typical equity outlets, for-profit incubators often demand more in return. This means you may have to give up a greater share of ownership for less funding. In addition, many entrepreneurs -- particularly those with previous startup experience -- feel that the structure of an incubator takes away their freedom to choose their team and outside consultants.
Are incubators and venture capitalists (VCs) the same?
Technically, no. However, there is an increasing amount of overlap between services offered by incubators and VCs in the fast-growth startup arena.
This is because VCs often see startups that need a significant amount of handholding and management assistance. Rather than pass on a potentially profitable venture, the VC may provide limited assistance and resources. Some VCs, in fact, have started specific funds that use an incubation model for seed and first-round financing.
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Starting Up Your Business - Startup Business Incubator FAQ
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