It was 1956, and Joseph Mancuso had a plan. He purchased a large, abandoned manufacturing building and decided to try something different. What he created became the first business incubator.
Tenants received office space, and they had other professionals to bounce ideas off of. The place offered a unique atmosphere that helped promote startup and growth. He referred to the Batavia Industrial Center as an “incubator” because he saw some newly hatched chicks running around the place one day.
According to The New York Times, the number of “incubators” available to startups has grown tremendously over the years, reaching approximately 1,200.
The following guide breaks down the four most common types of incubator and offers tips on identifying which might be best for you.
The Classic
PROGRAM Like Mr. Mancuso’s original, these incubators operate out of a shared building where tenants have subsidized rent, access to computers, office equipment, staff members and experts.
COST Fee-based, ranging from a few hundred to a few thousand dollars a month, which covers expenses like office space, equipment rental and kitchen access.
EXIT RULES Most programs expect tenants to “graduate” within three to five years.
The University
PROGRAM Offers access to equipment and experienced staff.
COST Typically free (some programs offer grants) but limited to current students or alumni.
EXIT RULES Many programs expect the company to graduate when the student does.
The Niche
PROGRAM Most niche incubators offer facilities and advice at a reduced cost to companies with a specialized focus – for example, food or social entrepreneurship.
COST Typically fee-based although some programs take equity stakes.
EXIT RULES Most operate like the classic model.
The Accelerator
PROGRAM Most accelerators, which are run by groups of experienced business owners and investors, require entrepreneurs to move to a facility for a specified amount of time. Eventually, they are given the opportunity to market their businesses to investors.
COST Typically a 6 percent equity stake in return for about $18,000 in seed financing.
EXIT RULES Programs usually last for 90 days, although companies can continue to use the program’s network of mentors.
Photo by Steve Jurvetson