Definition of Incubator:
A firm engaged in the business of fostering start up companies through preliminary phase until the company could function on its own. It is also called innovation center. The firm can be either profit or non-profit. It provides assistance through following method.
- Access to financial capital through firm’s relationship with financial partner
- Access to experienced business consultants and management-level executives
- Access to physical location space and business hardware or software
- Access to informational and research resources via firm’s relationships with local universities and government entities
Through above method, start up companies could lower its venture capital and start-up costs. At the same time, it increases the start-up companies’ rate of survival and success rate. The survival rate for Start-up Company could achieve 80% after going through incubator firm. In fact, it is so much harder to get into an incubator center than Ivy League.
To whom the investment:
Business incubator companies mainly looking for brains, motivation, and a sense of design. The ideal company would have two or three founders. The firm is not reluctant to accept single person company. Experience is helpful, however, it is not the critical factor. Idea is fundamental, however, good evidences to support the idea is also essential. In order to apply it successfully, the applicants have to convey their ideas efficiently and concisely. Extraordinary and level of insights are considered as important factors in the decision process. The applicant does not have to sell himself; instead, if the idea is promising, the business incubator will sell itself to the applicants. Sometimes, investors are scrambled to fund the desired start-ups. These business incubator companies mostly willing to fund breakthrough technology companies who have a long time horizon. They are looking for companies that have potential to create a million jobs.
Dropbox raised $250 million at a $4 billion valuation.Dropbox is a company that provides file storage service online through cloud computing in order to sync and download the files from any computers. Users are over four million.
Salesforce acquired Heroku in 2010 for $212 million. It develops and deploys apps in the cloud. Heroku supports Ruby, Node.js, Python, Java, and PHP. So it allows user to use the languages they already know to build and deploy apps on Heroku.
Airbnb raised $112 million at a $1 billion valuation last summer. It is a short-term peer-to-peer apartment rental. Airbnb is a website for people to rent out lodging. The listings are over 500,000 in 33,000 cities and 192 countries. The concept is to share economy.
SurveyMonkey acquired Wufoo for $35 million in cash and stock. Wufoo is a web application that helps anybody build amazing online forms. When you design a form with Wufoo, it automatically builds the database and so many cool features.
Google acquired Zenter in 2010 for $25 million. Zenter is a web presentation application. It provides software for creating online slide presentations.
Key to Success:
- Clear Mission Statement
- Ties with a University
- Tenant Entry selection and exit (selection committee)
- Focus on services as opposed to infrastructure
- Strong manager
In summary, there is no universal best practices for success exists. However, business incubators could learn from previous best and worst practices to aim themselves for the future. I still believe in the potential and opportunities exists in the field.
Site Editor: Rachel Pin Tsao