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Demystifying Business Incubators

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Business Station

Demystifying Business Incubators

The concept of business incubation has attracted considerable attention of small business owners around the world. Understandably, one cannot help but wonder about the ‘mystery’ surrounding the success of business incubators given the gigantic growth of multi-national start-up businesses such as Reddit, Dropbox, and Airbnb who all started their journeys from incubators.

Let’s take a look at how these businesses came to be such huge successes…

Reddit, a social news website, was co-founded by two college roommates, Steve Huffman, and Alexis Ohanian. Disappointed by the failure of their original idea, My Mobile Menu; Steve and Alexis joined the Y Combinator start-up incubator in 2005. During one strategy session in the incubator, the concept of Reddit was perfected and within three weeks, a website created. A year later, Reddit was sold for over US$10 million.

Steve Huffman, left, and Alexis Ohanian, the co-founders of Reddit (Source: The Times)

Like Reddit, Dropbox was started in an incubator by two strangers, Drew Houston and Arash Ferdows. Interestingly, the original idea came from Drew who attempted to join the incubator but was refused entry unless he found a business partner within two weeks. The incubator argued that the success rate for new companies with more than one founder was higher due to the ability to make joint decisions and coping with workload. Fortunately, Drew found Arash within the timeframe and they joined the Y Combinator incubator together.

Through the incubator, the two strangers received tremendous support which saw the value of their company skyrocket. Today, Dropbox market capitalisation is over US$9 billion.

Drew Houston, left, and Arash Ferdowsi before they launched Dropbox (Source: BBC)

Considering these impressive examples, one important question on almost every entrepreneur’s lips is, “What are the benefits of an incubator?” The immediate response to that is, ‘many’.

Affordable Office Space

Business incubators support the growth of a small business in its early stage of development by providing affordable office space. Rents are usually below-market rates thus allowing business owners to focus more on developing their business rather than on paying the next rent bill.

In addition to subsidised rents, these workspaces often have shared furnished meeting rooms and other administration facilities which help to reduce the overhead and operational costs.

Lastly, office spaces for rent in business incubators usually have no requirement of a long-term lease. For example, Business Station leases are highly flexible, with only 30 days required for cancellations.

Business Support

Small business owners are mostly vulnerable during the first few years of starting their businesses. Some owners may not have sound business plans and strategies. To enable growth of these businesses, an incubator supports them with expert advice.

Training and assistance is offered in areas such as:

  • Business strategy, marketing, finance, and human resources management.
  • Access to venture capitalists, business angels, mentors, and strategic partner linkages
  • Help with raising bank finance, grants, seed, and venture capital
  • Shadow advisory boards or mentors

Business owners that join Business Station incubators qualify to be enrolled into the Business Accelerator Program designed to accelerate growth of their businesses. Run by various business experts and executive coaches, small business owners have access to strategy sessions, professional speakers and one-to-one advisory sessions.

Networking Opportunities

Research has proved that business incubators can provide small business owners with critical networking opportunities to stimulate growth of their businesses. These network resources can be used to generate or test ideas, promote innovative technology, discover new markets, or gain access to business finance among other benefits.

In line with this philosophy, Business Station promotes networking opportunities such as business breakfasts, sundowners, and the Business Peer Group Support where incubator members are encouraged to learn from and leverage the expertise of their neighbours in these networking events.

As stated earlier, the benefits of business incubators are vast. Small business owners have better chances of succeeding if they join a business incubator. However, it is important to mention that not all business incubators are the same. One needs to examine the support services offered and see if it is a perfect match for them and their business.

Are you thinking about joining a business incubator?

Call our business incubator offices and ask for a no-obligation interview. Business Station can help you take your business to the next level.

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