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Business incubator

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Business incubator are organizations that support the entrepreneurial process, helping to increase survival rates for innovative startup companies. Only entrepreneurs with feasible projects are admitted into the incubators, where they are offered a specialized menu of support resources and services. The resources and services open to an entrepreneur include: provision of physical space, management coaching, help in making an effective business plan, administrative services, technical support, business networking, advice on intellectual property and sources of financing. The incubation process is intended to last around 2-5 years.

Business incubators can be private or public. Private incubators are for-profit firms that take equity or receive a fee for the business services they provide to their clients. In essence, they are a consulting firm that is specialized in new firm creation. In the last twenty years, many developed and developing countries have started large systems of public business incubators to encourage and assist entrepreneurship. In many cases, public incubators are designed to stimulate the development of new products and services in technology-related industries. For science-based business incubators, an effective collaboration with universities and research institutions is essential to motivate researchers into taking the risk of initiating a company.

Incubators have many partners in addition to universities. Since new firms require finance to grow, incubators have close relationships with many kinds of investors. Seed capital and venture capital funds, business angels, and banks provide most of the seed and start-up capital for incubated companies. Since business incubators are powerful economic development tools, they collaborate actively with regional and national government agencies, from which they often receive financial grants. In many countries, business incubators have national associations to represent their interests and organize meetings where best practices are disseminated.

Evaluations of business incubators in Europe and the U.S. suggest that 90% of incubated startups were active and growing after three years of operation, which is a much higher success rate than that observed in startups launched without assistance. Science-based business incubators are thought to be particularly useful from a policy perspective because they can simultaneously promote knowledge diffusion, technology transfer and high-tech firm creation.

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