An incubator is an organization that helps startup companies through the development phase until they have enough resources to work on their own.
An incubator is an organization that helps startup companies through the development phase until they have enough physical, human, and financial resources to work on their own. The incubator can be either a for-profit or even a non-profit entity, where it offers companies with some of the following things:
- Research and informational resources through the relationships with government entities and local universities.
- Business software or hardware, and physical location access.
- Experienced management-level executives and business consultants access.
- Financial capital access through the relationships with financial partners.
Even though a small fee is charged at times for-profit incubator usually offers help in exchange of equity in the companies that have strong growth prospects. In the beginning, the incubator usually invites the startups to join a “class” that is prepared for the companies selected for the program. Although the length of the classes vary, some programs can last for several months.
When a startup is selected for the program, they would meet with mentors and advisors who would offer them with help about their questions and dilemmas. During the program, the companies are pushed to enhance their ideas and learn how they should share their plans with potential investors and customers.
When the program comes to an end, the startups present their plans at a demo day session. This allows them to attract potential investors and other entrepreneurs who are ready to collaborate with them. Moreover, some incubators also turn into investors to offer the startups with seed capital in exchange for more equity.
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