Incubator

Definition

The term incubator originally comes from medicine and means incubator. In the medical field, an incubator is used to create an ideal climate for premature babies to grow up in. In a figurative sense, this also applies to an incubator in an entrepreneurial environment. Here, an incubator offers young founders the ideal opportunity to set up their company and make a successful start in business life. This always takes place under ideal conditions in the protected environment of the incubator. Incubators therefore offer young founders various services, but the focus is always on the successful development of a business model and an initial idea. This is where the incubator differs from an accelerator. Although the latter is also intended to support young founders, the focus of an accelerator is on accelerating the growth of an existing business idea, while an incubator first works together on a business idea. However, it should be noted here that the boundaries between these two funding programs are often blurred and both are responsible for supporting young company founders.

Functions of an incubator

Since an incubator primarily serves to support young start-ups in their founding phase, the founders in an incubator program mainly receive advice and coaching. In addition, further resources such as rental space, office space or other infrastructural equipment are often provided by the incubator program. The functions and services that an incubator makes available to founders include

Mentoring and support

The primary purpose of an incubator is to support those interested in founding a company in the development of a business model. To this end, participating start-ups are provided with a network of experts and mentors with whom they can develop a business idea together.

Financing

Financing is not the top priority for an incubator. It is often more about support through know-how and advice. However, there are still some incubators, especially those run by large corporations, which provide participating start-ups with a form of start-up financing. Here, the financing amounts usually range between €25,000 and €250,000. For this, founders have to give up between 5-15% of their company shares on average.

Provision of resources

In addition to money and, above all, professional support, participating start-ups are often also provided with a workplace with existing infrastructure and other work equipment. These are often co-working spaces where the start-ups are provided with a workplace in an innovative and creative working environment together with other start-ups within the program.

What is an incubator?

As already mentioned, an incubator is a facility or institution that supports prospective founders on their path to self-employment. To this end, the founders are provided with specialist advice, coaching and the necessary infrastructure. Incubator centers are usually public institutions, business development programs or venture capital companies.

Who is suitable for participating in an incubator?

An incubator is primarily intended for people interested in founding a company who may already have an initial idea of their future business model but do not yet have a fully developed concept. With the help of the incubator, those interested in founding a company then work on developing their business idea. For all those founders who are still at the beginning of their start-up phase and need professional support, participation in an incubator is a good option.

Differentiation from an accelerator

Both incubators and accelerators have set themselves the task of supporting young start-ups and founders. Both do this primarily with know-how, advice and the provision of important resources such as an IT infrastructure or workstations. The boundaries between the two programs can sometimes become blurred. Nevertheless, an incubator differs from an accelerator in some areas:

Company phase:

While an accelerator program is primarily open to companies that already have a business model and are in the growth phase, the start-ups that can seek support from an incubator are still in the pre-foundation phase and have usually not yet developed a business idea.

Funding duration:

The duration of an accelerator program is usually limited to three to six months. The situation is different with an incubator, where the funding period is usually unlimited.

Program costs:

The two supporters also differ slightly in terms of costs. Although there are generally no costs for either, an accelerator often involves the sale of company shares in return for start-up financing. This is rarely the case with an incubator.

Start-up financing:

As mentioned above, some start-up funding is often part of the program with an accelerator, but this only sometimes occurs with an incubator.

Financed by:

While accelerators are often financed by private companies with an industry focus, the initiators of an incubator tend to be public or private sector initiatives or universities and colleges.