Business incubator

A business incubator is an organization that helps startup companies and individual entrepreneurs develop their businesses by providing a wide range of services, starting with management training and office space, and ending with venture capital financing. The National Business Incubation Association defines business incubators as a tool for either regional or national economic development. It categorizes its members' incubators by the following five incubator types: academic institutions; non-profit development corporations; for-profit property development ventures; venture capital firms, and a combination of the above.
Business incubators differ from research and technology parks in their dedication to startup and early-stage companies. Research and technology parks, on the other hand, tend to be large-scale projects that house everything from corporate, government, or university labs to very small companies. Most research and technology parks do not offer business assistance services, which are the hallmark of a business incubation program. However, many research and technology parks house incubation programs.

History

The first business incubator was the Batavia Industrial Center, which opened in 1959 in Batavia, New York. Two years earlier, Massey-Harris had announced the closure of its Batavia farm machinery factory, resulting in a giant vacant building and a local unemployment rate of 18 percent. The Mancuso family, the dominant business family in that area of Western New York, was desperate to resuscitate the regional economy, whose imminent collapse threatened to bring down their various business enterprises. They bought the former harvester factory and placed Joseph Mancuso in charge of finding commercial tenants. It soon became clear that large corporations preferred to build new factories from scratch rather than shoehorn them into someone else's 80-year-old building, thereby forcing Mancuso to subdivide the vast space and lease smaller spaces to smaller tenants.
In Mancuso's frantic search for tenants, he offered creative incentives to anyone willing to sign a lease, such as "short-term leases, shared office supplies and equipment, business advice, and secretarial services", as well as assistance with linking up with local banks to secure financing. One tenant was a nearby chicken hatchery in need of space to house additional chicken coops, which explains the origin of the term "business incubator". In 1963, while giving a tour to a reporter of the various tenants in the Batavia Industrial Center, Mancuso pointed out the coops and remarked, "These guys are incubating chickens...I guess we’re incubating businesses".
Business incubation expanded across the U.S. in the 1980s and spread to the UK and Europe through various related forms.
The U.S.-based International Business Innovation Association estimates that there are about 7,000 incubators worldwide. A study funded by the European Commission in 2002 identified around 900 incubation environments in Western Europe. As of October 2006, there were more than 1,400 incubators in North America, up from only 12 in 1980. Her Majesty's Treasury identified around 25 incubation environments in the UK in 1997; by 2005, UKBI identified around 270 incubation environments across the country. In 2005 alone, North American incubation programs assisted more than 27,000 companies that provided employment for more than 100,000 workers and generated annual revenues of $17 billion.
Incubation activity has not been limited to developed countries; incubation environments are now being implemented in developing countries and raising interest for financial support from organizations such as UNIDO and the World Bank.
Within European Union countries, there are different EU and state funded programs that offer support in form of consulting, mentoring, prototype creation, and other services and co-funding for them.
In India, the business incubators are promoted in a varied fashion: as technology business incubators and as startup incubators—the first deals with technology business and the later deals with promoting startups.
The first high-tech incubator located in Silicon Valley was Catalyst Technologies started by Nolan Bushnell after he left Atari. "My idea was that I would fund with a key," says Bushnell. "And the key would fit a lock in a building. In the building would be a desk and chair, and down the hall would be a Xerox machine. They would sign their name 35 times and the company would be incorporated." All the details would be handled: "They'd have a health care plan, their payroll system would be in place, and the books would be set up. So in 15 minutes, they would be in business working on the project."

Types of services

Since startup companies lack many resources, experience and networks, incubators provide services which helps them get through initial hurdles in starting up a business. These hurdles include space, funding, legal, accounting, computer services and other prerequisites to running the business.
According to the Small Business Administration's website, their mission provides small businesses with four main services. These services are:

Plan your Business: Turn your great idea into a great business plan
Launch your Business: Turn your business plan into a reality
Manage your Business: Master day-to-day operations and prepare for success
Grow your Business: Find new funding, locations, and customers when business is good and it's time to expand

Among the most common incubator services are:

Help with business basics
Networking activities
Marketing assistance
Market Research
High-speed Internet access
Help with accounting/financial management
Access to bank loans, loan funds and guarantee programs
Help with presentation skills
Links to higher education resources
Links to strategic partners
Access to angel investors or venture capital
Comprehensive business training programs
Advisory boards and mentors
Management team identification
Help with business etiquette
Technology commercialization assistance
Help with regulatory compliance
Intellectual property management
Types

Incubators differ from the U.S. Small Business Administration's Small Business Development Centers in that they serve only selected clients. Congress created the Small Business Administration in the Small Business Act of July 30, 1953. Its purpose is to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." In addition, the charter ensures that small businesses receive a "fair proportion" of any government contracts and sales of surplus property. SBDCs work with any small businesses at any stage of development, and not only with startup companies. Many business incubation programs partner with their local SBDC to create a "one-stop shop" for entrepreneurial support.
There are a number of business incubators that have focused on particular industries or on a particular business model, earning them their own name.

Virtual business incubator – online business incubator
*Since the 1950s, an older incubator model required startups to set up at the incubator's site. After the dot-com bubble, the virtual model was born, allowing companies to receive advice on incubators without physically being at the shop. This new virtual business incubator model has been a major step forward for entrepreneurs, and are especially ideal for those who need the advice that an incubator office provides but who want to maintain their own offices, warehouses, etc.
Kitchen incubator – a business incubator focused on the food industry
*Specialty foods are typically high value and low production. Starting a commercial kitchen from scratch is a huge investment. The average food entrepreneur has to invest a lot of money before even making their food product, therefore not making profit for quite some time. Kitchen incubators give culinary entrepreneurs the opportunity to use low-cost kitchen space where they can rent a commercial kitchen space for an hourly or monthly rate. They also help culinary entrepreneurs make a profit by aiding in packaging, marketing, and selling their food products.
Public incubator – a business incubator focused on the public good
*Social incubators' goal, similar to all other business incubators, is to provide social entrepreneurs with the tools they need to expand their business. While some businesses avoid their social responsibility, others such as charities need to have the ability to be more business savvy to survive.
Seed accelerator – a business incubator focused on early startups.
*"Seed accelerators, also known as startup accelerators, are fixed-term, cohort-based programs, that include mentorship and educational components and culminate in a public pitch event or demo day." While traditional business incubators are typically government-funded, accelerators differ in that they can be either privately or publicly funded and focus on a huge variety of industries. Seed accelerators also differ from business incubators in that the application process for seed accelerators is open to anyone, and is highly competitive.
**Corporate accelerator – a program of a larger company that acts akin to a seed accelerator
***A specific type of seed accelerator which is often a subsidiary or program of larger corporations that act like seed accelerators, sponsored by an established for-profit corporation.
Startup studio – a business incubator with interacting portfolio companies
Venture builder: These are similar to a startup studio, but builds companies internally.
*Venture-builders are also called tech studios, startup factories, or venture production studios. Unlike incubators and accelerators, venture builders do not take any applications and are a non-competitive program, but rather build companies using their own ideas and resource and assign internal teams of engineers, advisors, business developers, sales managers, etc. to develop them.
Medical incubator: a business incubator focused on medical devices and biomaterials
*This type of business incubator focuses on start-up advice for medical devices and biomaterials. Medical technologies are always changing and improving, and therefore this type of incubator is ideal for encouraging innovation and entrepreneurship within the medical field.

Technology	Creative industries	Construction
Computer software	eBusiness / eCommerce	Arts
Services/professional	Wireless technology	Aerospace
Manufacturing	Healthcare technology	Kitchen/Food
Internet	Advanced materials	Retail
Biosciences/life sciences	Defense/homeland security	Fashion
Electronics/Microelectronics	Energy/Power	Wood/forestry
Telecommunications	Environment/clean technologies	Tourism
Computer hardware	Logistics/Delivery	Manpower
Medical devices	Nanotechnology	Media

More than half of all business incubation programs are "mixed-use" projects, meaning they work with clients from a variety of industries. Technology incubators account for 39% of incubation programs.
One example of a specialized type of incubator is a bio incubator. Bioincubators specialize in supporting life science-based startup companies. Entrepreneurs with feasible projects in life sciences are selected and admitted to these programs.