Business Incubation

Business Incubation has received a great deal of attention. Since the first Business Incubator was formed in Batavia, New York, much has been learned. But, also, a lot has been forgotten. With the recent proliferation of Incubators and Accelerators, it may be useful to review what works and what doesn’t.

First, incubation works. NBIA statistics show that Business Incubation increases the chances for success 400%. Additionally, for every $1 invested in Business Incubation, approximately $30 are returned just in incremental tax revenues.

Next, Early Stage businesses are fragile and underfunded. Expecting these Business to advance the full cost of incubation is unrealistic. There must be external funding. Funds for Business Incubation generally come from those who benefit from the growth in the local economy including (a) major land holders, (b) government, other public agencies and corporate social responsibility investments, (c) universities, and (d) private investors. Without external support, the concept of Business Incubation is doomed to failure.

Third, Business Incubation is itself a business. Those involved must be focused on efficient and effective management. Not only does wasteful spending divert funds from more productive uses, it provides an abominable role model for those who Early Stage companies who participate.

Fourth, Accelerators are an interesting development. Since the 1990’s, Business Accelerators have grown. While providing support for Early Stage companies, Accelerators operate with lower operating costs and shorter planning horizons.