A business in its early stages can often use a leg up, whether in the form of wise words from a mentor or an introduction to a strategic partner. When you’re first starting out, you may not know who to connect with, or indeed how to do it. This is where incubators come in.
Incubators were designed to fill the gap between knowledge and connections. Most of the time, a new business just doesn’t have the know-how or the network that an established business would. Oftentimes, this knowledge and the connections are the things that can help guide a company down the right path. However, a lack of knowledge or connections does not necessarily mean a business will not be successful; it means that the business needs to join a community where their questions can be answered and where they can meet the right people. Incubators provide that very important sense of community.
Hear more about business incubators and Joe Maruschak with Peter and Jonathan on the eighth episode of The Bcast, Bplan’s official podcast:
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Incubators versus accelerators: What’s the difference?
Today, incubators and accelerators are both popular topics, especially for technology startups. They’re similar concepts, though they aren’t the same. To understand the difference, it’s perhaps easiest to begin by looking at their names.
The word incubator usually describes a place in which eggs can safely hatch, or where premature babies can reach independent viability. It’s a safe place to get started. In business, it’s an office community where a startup can get its footing; a shared workspace with mentors and advisors that allows a company to formulate its basic ideas, mission, and plan.
According to The Guardian, “The terms business accelerator and incubator are used interchangeably and the distinction is vague, but broadly speaking accelerators offer funding and incubators mainly mentoring.”
Businesses typically join an accelerator for a shorter period of time than an incubator, and to work out specific kinks in their process, almost like setting up shop with a team of management consultants.
Now that we’ve covered what an incubator is, let’s go over the details of how a startup can benefit from participating in one.
Q&A with Joe Maruschak, co-founder of Fertilab Thinkubator
Joe Maruschak was kind enough to talk with me about his perspective on what incubators are “all about,” if you should join one (spoiler alert: you should), and how to put your best foot forward (hint: it’s not by being arrogant). He co-founded and is on the board of Fertilab Thinkubator, an incubator with a biotech focus.
Can you tell us about your experience with incubators?
We founded an incubator called the FertiLab Thinkubator in Eugene, based on our perception that people in the community didn’t know where to go to get information about doing startups. “I don’t have a business yet. I just have an idea that I’m interested or intrigued in startups. Where do we go?”
We started the incubator to be an easy point of entry, a place where people can go and say, “What’s this all about? Where can I just see and interact in a place that’s comfortable?” Then, there are the actual companies that need a place to go to. These are very, very, very early-stage companies.
The companies we like to bring into the incubator are the ones that get rejected by everyone because they say, “Where’s your business plan? You need your business plan. I’m sorry. If it doesn’t exist, you’re not ready.” What they’re not ready for is a more sophisticated investment or a more sophisticated approach. What they need to do is have a place to get ready. Our incubator is a place to get ready.
Oftentimes, it’s just talking with them to explain what a business plan is, how it works and what people want to see in a business plan; teach them the language of talking business so when they’re talking to business people they can speak the language and answer the questions.
They don’t know what they don’t know.
Is there a particular kind of business that should join an incubator?
Really, anybody who needs a safe place to develop a component of their business should be in some sort of incubator for a certain period of time. They should get out of that incubator once they’ve passed that stage. That’s the big challenge of incubators. You need to leave because the reason you’re in the incubator is to be in a safe place.
Business is not a safe thing. You don’t move your business forward unless you’re interacting with the world.
They’re usually in product-based or idea-based businesses that are high-growth or a good fit for an incubator because the business model is not that clear, or the technology is not developed yet.
Who works at the incubator, helping these businesses?
Usually, the director of an incubator will have a list of contacts, this large Rolodex. The most important person there is the executive director, or someone who is on staff who has enough knowledge about what the problems are, and a deep enough Rolodex to get that person an introduction to someone who has the main specific knowledge to solve their problem.
Then, there are mentors that volunteer. These are people, volunteers from the community, that want to give back. That’s what they do. The challenge is matching the right mentor with the resource need.
How should you go about finding an incubator?
If you’re looking for an incubator, you should be really paying attention to who the executive director is because so much is based on their contacts.
You’re going into a small community. The community is made of people that are going to be supporting you. If you have nothing in common with those people, you’re not going to get a lot out of it.
I would actually talk to people that have been through that incubator to see what their experience was, because not all programs are right for all people. If their company is similar to yours and their experience was a mismatch, your experience is probably going to be a mismatch. If their company is not very similar to yours, their experience mismatch may tell you nothing.
Early-stage companies don’t know what they need. Going there and saying, “I don’t know what I’m doing. Can you help me?” is better than not going.
How can businesses benefit most from this experience?
It’s about contacts and resources. That’s how they benefit the most. And of course from learning what they don’t know.
The value that you get out of that is in the unintended. The unexpected collisions that you get when you’re there. You just run into someone and start having a conversation. You find out they could help solve your problem.
That’s why you’re in an incubator; to learn from these collisions or if you have a quick question, you just go out there and ask it. If you have to formalize an interaction where you have to ask somebody to meet, set up a coffee meet to ask them this question, it’s a simple question that suddenly becomes bigger. It’s like why can’t I ask this person unless I have 15 minutes or half an hour of useful content to ask them about, or I don’t feel comfortable calling this person in the middle of the day to ask them this question. Being in the incubator where you can ask a stupid question, just walk out the door and be like, “Hey, could anybody answer a stupid question for me?” is the point.
What makes the experience a positive one?
Being open; people that do well in incubators and accelerators are people that are coachable. People that are open books, that allow you to fill them with knowledge do really, really well. People who are arrogant that already know what they need to do come into accelerators and incubators and do very, very poorly.
Tell us a little bit about the process and about applying.
An incubator incubates a business, a business that’s started by an individual. It’s not this specific program you go through or it’s not like going to the doctor’s office where you go in and have an interaction, get a prescription and then go off and do your thing. It’s you starting a business.
Other businesses affect your business and suppliers. You’re integrated completely. Probably, if you want to put the best foot forward, it’s actually just being involved in the community, getting involved in doing things.
This idea that if you want to increase your chances, it’s realizing that you’re already in a community to some extent that you improve your chances of succeeding—both getting accepted and succeeding in accelerators and incubator programs by realizing you’re part of a community and not just being this on your own, you against the world. Getting accepted in here is pretty easy. Succeeding in an incubator is a totally different story.
When you say “the community,” do you mean the community within the incubator or the larger industry community?
There’s the microcosm of the incubator—the space that’ll be safe where you can practice interacting with the community. There’s the larger community. You’re part of a larger community.
If you have a tech company, eventually you’re going to be hiring people from the tech community. If no one knows who you are and what you do, and if you don’t have a track record, it’s going to be very hard for you to attract employees. If everyone knows who you are and you have a reputation of being awesome, then it’s very easy to hire employees. This is across the board. It’s very hard to raise money if no one knows who you are. It’s very easy to raise money if everyone knows who you are and everyone thinks you’re awesome.
So in an incubator, you have to be self-motivated, disciplined.
We can teach you how to do project management. We can teach you. We give you resources. We can’t take a person who is unmotivated and turn them into a motivated person.
When someone is leaving an incubator, how does it help them transition to the next stage of their business?
If somebody is leaving an incubator, they’re leaving for a reason. They’ve either outgrown it or they’re moving someplace else.
Ideally, the incubator is helping to connect those people to resources that are going to help them succeed. That’s office space. It’s whatever the next phase for the company is. The incubator is trying to help them get to that phase.
Determining what the appropriate resources are is up to everybody in the incubator, and everyone in the community that can. Ideally, the incubator is trying to help the people get the investment. It’s a dance. If the person is not investable and the person is like, “I need money,” the person running the incubator is like, “You’re not investable.”
If the appropriate next step is to introduce them to a VC, that will happen. If the appropriate next step is to have them go back to their garage, that’s what will happen.
Is there a time limit that the incubator imposes?
I like the idea of time limits. I like the idea of having a plan of what people want to get out of it. I like the idea of kicking people out. Then if there’s a reason for them to stay, you make exceptions to the rule. That’s how I think.
Then again, people can be in an incubator for a year or two if they’re working on a piece of technology, or if it’s a comfortable place to be. You never know how long someone needs to incubate an idea. It’s really dependent on what they’re trying to do. I think it’s appropriate to assess where someone is and say, “Where do you want to be in a year?” and impose that on that company. If the people say, “I don’t know. I still want to start a business,” that’s an appropriate answer. I think at some point, you say, “Okay, you don’t know. You should have a check up in three months to see if you have a better idea of where you want to go and then set up a plan.”
You will get the resources that you need if you’re open to receiving them. That’s the message that I would like to impress upon people. Incubators are places that if they’re being run correctly, will help you to access the resources that you need to succeed, whether they’re in the incubator or outside of the incubator. The people running them will help you. Get involved.
Business Incubation Resources
If you’d like to learn more about incubators or find ones in your area to get involved in, here are some ideas:
- The National Business Incubation Association is a U.S. organization that provides a wealth of information on business incubators, including whitepapers and a bimonthly newsletter. You can see their resources here.
- Entrepreneurship.org has an extensive reading list of books on the subject.
- If you’re in the U.S., your state government or local university will almost certainly have either an in-house incubator or information on where to find one. You can view a directory from Gaebler Ventures here.
Happy hunting! If you have more questions about incubators or want to share your experience, let us know in the comments below.