In the business world, they all say that ideas backed with proper planning and support have the highest chances of succeeding. And to turn those ideas into successful plans, startup incubators exist. They can be seen as metaphorically related to those devices in hospitals are there to help a newborn in gaining the required immunity to sustain for future life. In the same way, an incubator can help a startup at any stage with mentoring, training and funding.
DIFFERENT TYPES OF INCUBATORS BASED ON OWNERSHIP
Just like any other organization, an incubator is also a kind of organization and its ownership is defined by its shareholding. Based on the ownership and the way they function, there are primarily four types of startup incubator organizations.
- Private Incubators
Incubators in which the majority of shares are owned by an individual or a group of partners is referred to as a private startup incubator. This kind of incubator firm has no affiliation with government authorities and is managed by the employees privately hired by the firm. For instance, Khosla Labs is one of the private incubators in India that focus on financial inclusion and retail solutions for new businesses.
- Government Incubators
The incubators in which the majority of shares are owned by government are called government incubators. This category of incubators are managed by the officials hired by the government in management roles. An example of this kind is Startup India, a government owned incubator in India that provides mentoring and funding to new tech startups.
- University backed Incubators
Incubators for which the majority of shares belong to a university or an educational institute are university backed incubators. This category is generally managed by the students and staff of the university or institution. Centre for Innovation Incubation and Entrepreneurship (CIIE) by IIM Ahmedabad is a university backed incubator in India that makes seed funding and support available to startups in IT, healthcare, education and cleantech.
- Corporate Incubators
If an existent corporate owns more than 50% shares in an incubator, the incubator is referred to as a corporate incubator. Corporate incubator may also be a division of an incumbent firm. These kind of incubators are managed by either experienced employees of the incumbent firm or their newly hired employees. For instance, SAP Labs is a corporate incubator that runs a Startup Accelerator Program to host technology driven startups in India.
FOUR WAYS IN WHICH STARTUP INCUBATORS HELP STARTUPS
A typical incubator functions to help startups turn their ideas into well worked business plans while minimizing the expected errors in the process. However, based on the different kind of needs that a startup may have, different types of incubators exist. The different functions that incubators perform are providing mentoring, seed funding, training and co-working spaces to startups.
A business startup may start with an idea, subsequently followed by the step of rigorous planning and research. The second step is required as research and planning ensures that the idea succeeds in the marketplace. Startup incubators are often well versed with the ways in which research is carried out in different industries and possess the right resources to formulate a business plan. This expertise helps them create the business plans faster and therefore, mentor the startups on how they should proceed by doing the right kind of competitive research and industry research.
- Seed Funding
Some startups have a proper business plan in place, but require funding from investors. In this scenario, the startup incubators can help these startups get funding more easily by helping them network with the investors so they can pitch their idea to the investors. Alternatively, an incubator can also help these startups get funds straightaway by understanding and evaluating their idea and pitching it forward to investors.
One of the needs of startups is to train their staff for the trends and practices followed in the industry and thus, make them agile to the dynamics of industry and practices followed within. In such a scenario, a startup incubator first carries out a thorough research on the trends and practices followed by the industry. This helps them identify the kind of training objectives that should be achieved through training of a startup firm’s employees. Subsequent to this step, a training schedule is planned to impart the training effectively to these employees.
- Co-working Spaces
Businesses in the conception phase may also require office spaces and infrastructure for carrying out their functions. Here, the incubators can help them by providing them working spaces, internet connectivity and required electronic equipment and systems.
Of all the phases in a business life cycle, the conception phase is the most critical as it determines whether a business can succeed in the current market context. Given their expertise and network in the marketplace, startup incubators can provide immense help to these businesses.