Incubation? What`s That? - Decision Tree

Originally posted on www.ciba.org.in

You must have heard of startups being incubated… sounds odd, doesn`t it? Not unlike the little egg incubated by the hen to produce a healthy chicken, startups are incubated in business incubation centres where they get support to develop their business before hatching into the market.

So, what is a business incubation centre?

Usually a nonprofit organization, business incubation centres provide support to startup companies in terms of office space, infrastructure, mentorship and sometimes, even funding.

All business incubators do not admit all companies – a startup that wishes to be incubated must apply to the incubation centre with a viable business plan. Every incubator has a different criterion, and only startups with a workable business plan are usually admitted.

Incubation can be defined as a process of nurturing young startups by providing them infrastructural, management and networking support through incubation centres.

 Here`s how incubation support can help a startup:

Guidance and mentorship – While an idea is the backbone of establishing a startup, guidance and expert management is the key to sustaining it; it is important to leverage knowledge of experts in the industry to avoid pitfalls and develop an effective growth strategy. However, while startups receive guidance from their investors, finding dedicated business mentors can be tough in India. At an incubation centre, startups can benefit from the knowledge and expertise of industry experts through mentorship support provided by the incubation centre.

Networking – Apart from putting a startup in touch with potential investors, startups incubated in the same location often develop close relations, which can come in handy – both financially and otherwise. Apart from providing each other encouragement, startup heads can discuss business strategies and build on best practices and even plan to collaborate or market jointly in the future.

Costs of operation – Being incubated can save a startup significant amount of money in running costs. Startups incubated by the same centre can share rental expenses, Internet expenses and utilize a common secretary to bring down costs. Incubator approved startups also have a better chance of securing funding, as incubation centres can recommend these startups to VCs and investors. An incubation centre can also provide mentorship and help startups develop an effective pitch to present to potential investors.