Incubators provide a sheltered environment for businesses to begin.
An incubator is a name used to describe certain types of organizations and how they treat small or start-up businesses. The name incubator originally refers to a specialized environment used to hatch or grow young living organisms. The business version works in a similar way. These establishments rose in popularity in the late 1990s.
General Definition
An incubator is technically a system designed to create an artificial environment for raising young. For instance, many farmers use an egg incubator to care for eggs that they intend to hatch at a later date. The incubator keeps the organisms inside warm and safe from outside temperatures or elements. More complicated versions are used for human infants that are born slightly underdeveloped. The business version of the word is derived from these machines.
Business Definition
A business incubator is an organization that specializes in taking ideas or start-up companies and encouraging them until they become full-fledged businesses that are able to produce profits and stand on their own. Typically, incubators are programs sponsored by donations from large corporations or colleges. They take on several start-up companies at once and provide them with the necessary resources to run their business. If they charge rates, they tend to be lower than the market average.
Business Industries
It takes a specialized business to be grown by an incubator. The most common type of business was once the online company, since these require few resources to begin and can easily be run with minimal resources. After the dotcom busts in the early 2000 years, the incubators left began focusing primarily on technology companies offering specific services which seemed to have a higher chance of success. A detailed screening and business plan are usually required in order for this relationship to work.
Resources Shared
Many incubators provide businesses with some of their start-up funding to help them acquire the assets they need to succeed. Others may provide specific transaction services, acting as a go-between for clients or other businesses. Many offer business advice, management strategies and other valuable types of information that the small business can use to its advantage. Occasionally, an incubator will even provide the office space needed for the business to get started.
Fees
Incubators can be either for-profit or nonprofit. Nonprofit incubators usually require only some of the business equity, so that they have some ownership of the business and a stake in its success. For-profit incubators, on the other hand, want to make a profit even if the business fails. They demand a fee paid upfront for their advice and services.
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