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.
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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.