In both developed and developing countries, Small and Medium Enterprises (SMEs) create employment opportunities and hence, improve the standard of living. Since there has been a lot of studies on business incubators, still there is a need for research to determine the importance of entrepreneurial skills for the development of successful incubators. The role of business incubators in a corporate or a new startup is as crucial as supporting the whole entrepreneurial journey.
Business incubators are essentially organizations that assist to increase the survival rates of innovative start-up companies and support the entrepreneurial process. Earlier most of the incubators focused on IT, but modern incubators work with companies from diverse industries. And we will further learn, the proper meaning of business incubators and business incubation; the role of business incubators, types of incubation services, and the phases of business incubation development.
Business Incubators: Meaning
They act as an organization who are formed to help new startups by providing services such as management training, or coworking space. Business Incubators are perceived to be a mainstay of economic development programs. They create useful values by combining the entrepreneurial drive of a startup with resources generally available to new ventures. These people do a high-level of research before supporting or funding the startups. The primary objectives of business incubators are creating employment opportunities in the local economy and commercializing technologies.
National Business Incubation Association (NBIA) defined Business Incubators as a catalyst tool to Regional and National Development.
The whole purpose of business incubators is to offer a range of business developments services and full-access to small space on flexible terms, to meet the needs of new firms. The package of services offered by a business incubator is designed to enhance the success and growth rates of new enterprises thus maximizing their impact on economic development.
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The number of incubators has grown considerably in recent years. This rise is due to several factors, such as corporate downsizing, increased entrepreneurship, new technologies, economic globalization and the transfer of technology.
What is Business Incubation?
Business Incubation is the name given to the process, wherein an organization supports the establishment and growth of startups, with successful entrepreneurial journey. There is no dearth of startups that work on a brilliant idea with a huge scope of scaling. Business incubators make the process of business incubation, happen. In a nutshell, we can say the goal of incubation is to increase the success chances of business.
Who Are Incubators?
Incubators provide resources and services to entrepreneurs, including working space or physical offices, technical expertise, management mentoring, assistance in compiling an effective business plan, shared administrative services, technical support, business networking, advice on intellectual property and sources of financing, markets as well as strict admission and exit rules. They are designed to ensure that the incubator concentrates its efforts on helping innovative and fast-growth business start-ups that are likely to have a significant impact on the local economy.
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Incubators are usually a collaboration between one more pro-business organization. These organizations can be:
- Economic development organizations
- Local colleges and universities
- For-profit ventures
- Government entities
- Trade associations
Incubators vs. Accelerators
| Business Incubators | Business Accelerators |
|---|---|
| Assist in long term, in addition to short-term growth | Only assist for short-term growth for a short duration |
| Companies can grow at their own pace | Companies are under pressure to grow quickly |
| Most of Incubators are non-profit organisations | They are For-ProfitOrganisations |
| Since, they are non-profit organisations, they may not be able to offer access to funds | They offer access to funds, and they are also known as angel investors. |
| They don’t promise you extensive growth | They promise you with extensive growth |
Role of Business Incubators
- They give proper guidance on how to compete successfully with established industry players.
- They help with business basics
- They provide Networking activities
- They help start-ups save on operating costs.
- They provide Marketing assistance
- Incubators help in Market Research
- They provide High-speed Internet access
- They create long-lasting jobs for new graduates, experienced mid-career personnel, and veteran executives
- Incubators Help with accounting/financial management
- They help in providing access to bank loans, loan funds, and guarantee programs
- Incubators bring credibility to the company. This helps the company to get loans and credit facilities from financial institutions
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- Incubators help with presentation skills
- They have a strong network of influential people, and therefore, they can connect the business with the same to grow.
- They link to higher education resources
- Incubators can tap into their networks of experienced entrepreneurs and retired executives
- They link to strategic partners
- They provide access to angel investors or venture capital
- They organize Comprehensive business training programs
- They act as Advisory boards and mentors
- They help in Management team identification
- They offer marketing and PR assistance to new companies to set up a brand name.
- They help with business etiquette
- They provide Technology commercialization assistance
- They help with regulatory compliance
- They provide Intellectual property management
- They create jobs for mid-career personnel and veteran executives which benefits communities and drives economic growth.
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Phases of Business Incubation
The whole process of business incubation is divided into 3 main categories:
| Physical Facility Support | Networking Facilities | Support Services |
|---|---|---|
| Refers to the incubation service provided within the physical facility | Help the start-up with networking facilities so as to grow the business | Offers various support services to the businesses in order to run the business smoothly |
Types of Business Incubator
There are 4 main types of incubators prevailing in the market today, and few more are discussed below. These are:
1. Corporate Incubators
Their objective is to enhance the entrepreneurial skills and help the startups to keep up with the other industries. Corporate incubators target internal and external projects related to the activity of the company. The common challenge they face is the conflicts between the management regarding the objectives and management-related decisions.
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2. Local Economic Development Incubators
They work on the economic development, supporting SMEs and specific groups for the overall upliftment of the society. These include small, handicraft, locally sourced business companies. Although there is still governance risk, management quality, long hours of negotiation, and conflicts.
3. Private Investors’ Incubators
They assist the potential business model such as Technology-intensive startups and then reap benefits by selling the shares. They lag in the quality and durability of the project.
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4. Academic Incubators
They offer new sources of finance, supporting the entrepreneurial spirit and civic responsibility. They target external projects and the projects internal to the institution before the creation of a company.
Few other Types of Incubators are:
- Seed Accelerator: focusing on early startups
- Public/Social Incubator: focusing on the public good
- Kitchen Incubator: focusing on the food industry
- Medical Incubator: focusing on medical devices & biomaterials
- Virtual Business Incubators: online business incubators
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The entrepreneurial skills that affect the performance of business incubators include limited to lack of entrepreneurial skills namely business management; financial, human resource, interpersonal, and people skills. With regard to the skills required by Business Incubators to be efficient, it was revealed that administration, technical, financial management, marketing, human resource, and interpersonal skills were essential entrepreneurial skills as they were required by SMEs.
Lastly, access to advanced technology-based facilities, self-sustainability, support structures, and funding were found to be the major challenges confronting BIs. It is also recommended that incubation managers, who lack necessary entrepreneurial skills, enroll for business courses at local colleges or universities. Lastly, it also recommended that government agencies should make access to advanced technology-based facilities available.
Author: Avantika Bhardwaj
Source : https://startuptalky.com/role-business-incubator/
Date : 2020-08-30T19:00:29.000Z