What are the pros and cons of joining a start-up incubator?
Tuesday, February 28, 2012/
Starting a business has both never been easier and harder in the economic times we live in.
An entrepreneur looks at the world and then creates something that can fill a gap, solve a problem, improve a situation or create a benefit for themselves as well as others (be it financial or community based).
The combination of a generation that has grown up with technology (Gen Y) and lived through a global recession (GFC) has now planted the seed in many up and coming entrepreneurial minds on not only how to approach starting their own business, but also how to do it efficiently and quickly.
Seeking inspiration from the likes of Mark Zuckerberg, young entrepreneurs now seek to cultivate their dreams from idea to global multinational by the power of collaboration, cross promotion, social technology and co-working.
Enter stage right, incubators.
In this article, I outline some pros and cons on applying and working within incubators.
Pros of working in incubators
ncubators have everything a start-up needs to hit the ground running at a fraction of the cost. Why rent an entire office, when all you need is a workstation?
Incubators provide meeting rooms, broadband services, VOIP services and a front desk / reception to help any start-up look and feel like they are already operating at a professional level.
A key benefit of working in incubators is that a start-up is exposed to education and mentoring.
This is such an important aspect of any start-up as this advice, knowledge and expertise is passed down and can mean the difference between success and failure for a business.
Incubators provide the perfect location to host/attend meet-ups of other like-minded business folk.
This exposes the start-ups within the incubators to opportunities and threats across their industries and interests, and helps keep up to date with all relevant information from their fields.
Working in an incubator allows start-ups to simply get up, walk over to the cubicle next door and start networking with other start-ups.
This collaborative approach not only helps form strong friendships, but it builds business networks and encourages synergy between businesses. When these start-ups go into the bigger markets, this helps spread good business values and ethics.
One of the best ways to grow your business is by receiving business angel (BA) or venture capital (VC) funding. BA’s and VC’s tend to look favourably towards incubators because of their track record, but also because some will have strategic alliances in place. This exposure helps fast-track start-ups through the process of receiving funding.
The location of your business is very relevant for your customers. Are you reachable via public transport?
Are you in a location that has a good reputation? Are your customers going to be visiting you? Most start-ups begin in a garage or spare room, but these are not ideal places to meet with customers.
As such, incubators provide the perfect location for your customers to meet you.
Being part of an incubator means your start-up will have access to technologies that your business would normally have to pay higher costs for if going it alone.
Pay-by-the-month technology services such as cloud computing, VOIP etc. will help reduce any start-up projected costs.
Working in an incubator will help keep you motivated. Whether it is being motivated to succeed because the guy in the next cubicle just got funded or being energised by the uplifting entrepreneurial atmosphere within the incubator, there will never be a day where you will lose enthusiasm.
Cons of working in incubators
1. Analysis Paralysis
One of the biggest problems for start-ups is that your products and services which are in research stage may have too many opinions, ideas and feedback that keep you in an analysis paralysis.
Whilst other business owners and start-ups mean well, sometimes this influence can delay your products/services just getting out there.
2. Shareholdings in Company
Whilst it may be great to receive funding to get you boosted into the stratosphere, help with growth and pay for all that expensive advertising, this does come at a cost.
You will likely lose some level of ownership of your company as a trade off for BA and VC funding.
Time is as important to any start-up owner as is the value of money. Time can work against you very fast.
Working in an incubator means that some of your time will be used working on providing feedback, ideas and comments to your co-space workers. This is time you will not spend working on your own projects.
4. Clash of Culture
Incubators can bring all walks of life and business into them, and as such you might find it harder to work alongside some entrepreneurs.
Choosing the right incubator is a key aspect for your business. Not every incubator is suited to every business, and it’s a vital and important decision to make, because the wrong incubator will restrict rather than propel your business.
When looking at applications for an incubator ask: Who is in there? Is the location fitting? What benefits do you receive for the costs? Do they provide education/mentoring programs?
Answering these questions will give you a better idea as to which incubator is best suited to your start-up needs.