Definition Or Explanation: Business incubators are a good path to capital from angel investors, state governments, economic-development coalitions and other investors. Business incubators house several businesses under one roof or in a campus setting, and offer resident companies reduced rents, shared services and, in many instances, formal or informal access financing.
Appropriate For: Pre-revenue-stage companies to early-stage companies that are selling products or services
Supply: More than 550 incubators in North America cater to high- and low-technology businesses. Of these, more than 80 percent report that they provide formal or informal access to capital.
Best Use: Many types of financing may be found through incubators, which may or may not be appropriate for your business. Generally speaking, however, incubators and the kinds of investors they lead a path to work best for companies at the earliest stages of their development.
Cost: There may be many kinds of financing found through incubators, from state-assistance funds based on matching private sector investments, which could be inexpensive, to straight equity investments from angel investors, which could be very expensive.
Ease Of Acquisition: Getting into an incubator can be easy or challenging. Simply being in an incubator offers value to investors. Incubator managers know this, and as a result, many carefully screen would-be tenants to see that they match certain criteria. The good news is that once in an incubator, the path to angels or other investors might be more direct since they tend to hover around easily identified centers of entrepreneurial activity.
Funds Typically Available: $25,000 and greater.
From Where's the Money? Sure-Fire Financing Solutions for Your Small Business, by Art Beroff and Dwayne Moyers. (c) Entrepreneur Press, 1999.