Learn How Business Incubators are a Good Path to Capital
Business Incubators...a good path to capital Ever heard the
expression to follow the money trail? Well, it is sage advice
but someone forgot to mention where that money trail is located.
One trail short-cut is business incubators. Business incubators
can provide a solid path to capital from angel investors, state
governments, economic-development coalitions and other types of
investors. Many states offer listings of various business
incubator programs but, what exactly is a business incubator and
why should a new business owner consider it?
What is It? Business incubators are designed to house several
businesses under one roof or in a campus-style setting. They
offer resident companies reduced rents, shared services and, in
many instances, formal or informal access to financing. Business
incubators are appropriate for pre-revenue-stage companies to
early-stage companies that are selling products or services.
According to the National Business Incubation Association, there
are approximately 1,000 business incubators in North America.
Most North American business incubators (about 90 percent) are
nonprofit organizations focused on economic development. About
10 percent are for-profit entities, usually set up to obtain
returns on shareholders investments.
What type of funding is available? Incubator programs can
provide access to funding sources for as little as $500 or as
much as $25,000 or greater.
How easy is it to get into one? Gaining entry to an incubator
can be easy or challenging. The simple truth is that even being
in an incubator offers value to potential investors. Incubator
managers are aware of this, and will carefully screen would-be
applicants to see that they match certain criteria. The good
news is that once you are in an incubator, the path to angels or
other investors may be more direct.
Incubators attract sources of capital because they are simply
convenient. Rather than searching for potential deals, investors
can easily find a significant number of investment opportunities
housed under one roof.
How do I find the right one? Like with any other aspect of your
business, you need to do your homework. Start by checking out
the National Business Incubation Association website, for
business incubators in your state and/or community. Once you
created a viable list, start calling and asking questions such
as: